Welspun India Ltd Directors Report.

To

The Members,

Welspun India Limited

th

Your Directors have pleasure in presenting the 35 Annual Report of your Company along with the Audited Financial Statements for the financial year ended March 31, 2020.

1. Financial Highlights

Consolidated Standalone
Particulars
FY 19 - 20 FY 18 - 19 FY 19 - 20 FY 18 - 19
Revenue from Operations 67,411 65,266 53,236 53,953
Other Income 951 818 431 830
Total Revenue 68,362 66,084 53,667 54,783
EBITDA 13,098 11,467 10,523 8,779
EBITDA Margin (%) 19 17 20 16
Finance Cost 1,777 1,593 948 925
Depreciation and amortization 4,811 4,358 3,881 4,015
Pro t before exceptional items and tax 6,510 5,516 5,694 3,839
Exceptional items (434) 2,647 (432) 2,080
Pro t before tax 6,944 2,869 6,126 1,758
Tax Expense 1,700 608 1,377 341
Pro t for the year 5,244 2,262 4,749 1,418
Earnings per share (Basic & Diluted) 5.05 2.09 4.73 1.41

2. Performance and Outlook

During the year under review, your Companys total revenue on standalone basis decreased to Rs. 53,667 million, a minor decrease of 2.04% and on consolidated basis it increased to Rs. 68,362 million, a growth of 3.45% over the previous year. The EBITDA on standalone basis was Rs. 10,523 million i.e. 19.87% higher than last year and on consolidated basis was Rs. 13,098 million i.e. 14.22% higher than last year. EBITDA margin was higer due favourable exchange rate and currency hedging strategy. Pro t before exceptional items and tax was Rs. 5,694 million i.e. 48.34% higher than last year on standalone basis and it was Rs. 6,510 million i.e. 18.01% higher than last year on consolidated basis. Exceptional item aggregating to Rs. 432 million for the year ended March 31, 2020, represents gains due to reversal of excess provision related to provenance issue. Pro t after tax (“PAT”) is Rs. 4,749 million i.e. 235% higher than last year on standalone basis and Rs. 5,244 million i.e. 131.84% higher than last year on consolidated basis. You may refer to ‘Management Discussion & Analysis (“MDA”) Section of this Report for further details of your Companys performance.

3. Dividend i. Dividend Distribution Policy:

The Board of Directors approved Dividend Distribution Policy of the Company, as required under Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Regulations 2015”). The Board will endeavor to achieve distribution of 25% of PAT for a financial year, on standalone basis, with equity shareholders (including by way of dividend and Dividend Distribution Tax thereon). The Policy is attached as Annexure 1 to this Report and it is also available on your Companys website and the web link thereto is as given below. https://www.welspunindia.com/uploads/investor_data/1)%20WIL-Dividend%20Distribution%20Policy.pdf

ii. Dividend for Financial Year 2019-20:

During the year, the Board declared interim dividend of Rs. 1 per equity share for the Financial Year (“FY”) 2019-20 which resulted into cash out flow of Rs. 1,211.30 million (including DDT) i.e. 19.77% of standalone PAT.

A snapshot of the dividend track record of your Company for previous financial years is given below.

( in million)

Financial Year Total Dividend (%) Cash Out flow (including DDT)
2018-19 30% 363
2017-18 65% 787
2016-17 65% 786

4. Subsidiaries

During the year, Welspun Advanced Materials (India) Limited, incorporated in India, with an objective to explore undertaking advanced textile project on a greater scale with focused management.

During the year 2019-20, the Company has entered into joint venture with Sense Organics Import & Trading GmbH, Germany (“SOIT”) and has acquired 51% of the share capital, at par, of Pure Sense Organics Myanmar Limited (“PSOML”), a Company incorporated under the Myanmar Companies Act 2018 on January 24, 2018, as a part of the Companys sustainable sourcing strategy. The Company has so far invested US$ 102,100 in share capital of PSOML with combination of equity and preference shares. PSOML being subsidiary of the Company, it is a related party of the Company. SOIT is not related to the Company.

A report on the performance and financial position of each of the subsidiary companies of your Company is included in the consolidated financial statement presented in Form AOC-1 attached as Annexure 2 to this Report. Your Companys policy on Material Subsidiary as approved by the Board is hosted on your Companys website and the web link thereto is as given below.

https://www.welspunindia.com/uploads/investor_data/Policy%20on%20Material%20Subsidiary-13.10.2015.pdf

5. Auditors and Auditors Report i. Statutory Auditors:

Your Companys Auditors, S R B C & CO LLP, who were appointed up to the conclusion of the 37th Annual General Meeting, have given their consent to continue to act as the Statutory Auditors of your Company for the remaining tenure. Members have at the 33rd Annual General Meeting ratified the appointment of the Auditors for the remaining tenure i.e. upto the 37th Annual General Meeting. The Auditors are holding a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

The Auditors observation read with Notes to Accounts are self-explanatory and therefore do not call for any comment.

ii. Cost Auditors:

As per Section 148 and other applicable provisions, if any, of the Act read with Companies (Audit and Auditors) Rules, 2014, the Board of Directors of your Company has reappointed M/s. Kiran J. Mehta & Co., Cost Accountants as the Cost Auditors of your Company for FY 2020-21 on the recommendations made by the Audit Committee.

Members are requested to ratify their remuneration by passing an ordinary resolution in the forthcoming Annual General Meeting.

As required under the Companies (Accounts) Rules, 2014, the cost accounting records as specified by the Central Government under Section 148(1) of the Companies Act, 2013 are made and maintained by the Company.

iii. Secretarial Auditor:

The Secretarial Audit Report for FY 2019-20 is attached herewith as Annexure - 3 to this Report.

Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed Mr. Uday Sohoni, Practicing Company Secretary, as the Secretarial Auditor of your Company for the FY 2019-20.

6. Disclosure of Shares held in suspense account

Aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year

Number of shareholders who approached issuer for transfer of shares from suspense account during the year

Number of shareholders to whom shares were transferred from suspense account during the year

Aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year

Remarks
No of No of holders Shares No of No of holders Shares No of holders No of Shares No of holders No of Shares
1,486 335,020 6 450 6 450 1,480 334,570 450 shares transferred to IEPF- 4 on 07.02.2020. During the year, multiple folio, of 647 no. of holders, were consolidated.

7. Listing with the Stock Exchanges

Your Companys equity shares are listed on The National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). Annual listing fees for the FY 2019-20 have been paid to NSE and BSE.

8. Finance

i. Credit Rating:

During the year, CARE Ratings Limited (‘CARE) has rea rmed your Companys long term credit rating of ‘AA and short term credit rating of ‘A1+. India Ratings & Research, a Fitch Group company, has rea rmed your Companys long-term issuer rating of ‘IND AA-/Stable and short-term credit rating of ‘IND A1+.

ii. Deposits:

Your Company has not accepted any deposit within the meaning of Chapter V of the Act. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the financial year under Report.

9. Board of Directors

Your Companys Board comprises of mix of Executive and Non-Executive Directors with considerable experience and expertise across a range of elds such as finance, accounts, legal, marketing, brand building, general management and strategy. Except the nominee appointed by IDBI Bank and the independent directors, all other directors are liable to retire by rotation as per the provisions of the Act. It is con rmed that, except for Balkrishan Goenka and Ms. Dipali Goenka who are husband and wife, there is no relationship between the directors inter-se. The details of the Directors, their meetings held during the year and the extracts of the Nomination and Remuneration Policy has been given in the Corporate Governance Report, which forms part of this Report.

i. Changes in Directors and Key Managerial Personnel:

During the year, there was no change in Board of Directors.

In accordance with the provisions of Section 152 of the Act and the Articles of Association of your Company, Balkrishan Goenka (holding Director Identi cation Number 00270175) is retiring by rotation at the forthcoming Annual General Meeting and being eligible, has been recommended for his reappointment.

Details about director being appointed or re-appointed are given in the Notice of the forthcoming Annual General Meeting.

ii. Declaration by an Independent Director(s):

Your Company has received declarations from all the Independent Directors as per the provisions of Section 149(7) of the Act confirming that they meet the criteria of independence as prescribed under the provisions of Section 149(6) of the Act and that there is no change in the circumstances as on the date of this Report which may affect their respective status as an Independent Director.

Your Board con rms that in its opinion the independent directors fulfill the conditions prescribed under the SEBI Regulations, 2015 and they are independent of the management. All the independent directors on the Board of the Company are registered with the Indian Institute of Corporate A airs (“IICA”), Manesar, Gurgaon as notified by the Central Government under Section 150(1) of the Companies Act, 2013. Ms. Anisha Motwani successfully qualified Online Pro ciency Self Assessment Test for Independent Directors Databank in May, 2020.

iii. Directors Evaluation:

In compliance with the Act and SEBI Regulations 2015, the Board of Directors, as per the process recommended by the Nomination and Remuneration Committee, has evaluated the effectiveness of the Board, its Committees and Directors. The evaluation process invited graded responses to a structured questionnaire, which was largely in line with the SEBI Guidance Note on Board Evaluation, for each aspect of the evaluation. All the results were satisfactory.

iv. Familiarization program for Independent Director(s):

The familiarization program aims to provide the Independent Directors with the scenario within the textile industry, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, significant development so as to enable them to take well-informed decisions in timely manner. The familiarization programme also seeks to update the Directors on the roles, responsibilities, rights and duties under the Act and other statutes.

The policy on Companys familiarization programme for Independent Directors is hosted on your Companys website and a web link thereto is as given below:

https://www.welspunindia.com/uploads/investor_data/Familiarisation%20program.pdf

v. Committees of the Board of Directors:

Information on the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship, Share Transfer and Investor Grievance Committee, the Corporate Social Responsibility Committee, Risk Management Committee and meetings of those committees held during the year is given in the Corporate Governance Report forming part of this Report.

vi. During the year, the Board did not appoint any independent director.

10.Loans, Guarantees and Investments:

Information of amounts of investments made, loans given, guarantees given and security provided by your

Company as on March 31, 2020 is as given under

Particulars Amount
Investments 13,501.47
Loans / Receivables 95.00
Guarantees 15,462.65
Security -
Total 29,059.12

Corporate guarantees of GBP 4.25 million and GBP 8.51 million were issued, to Bank of Baroda, UK and Barclays Bank respectively, by the Company to secure repayment of working capital facilities availed by CHT Holdings Limited, a subsidiary of your Company.

Similarly, the Company has issued guarantee of Rs. 5 billion in favour of consortium of Bankers led by State Bank of India (“the Consortium”) to secure repayment of working capital facilities extended by the Consortium to Welspun Global Brands Limited (“WGBL”), a subsidiary of your Company. Additionally, the Company has issued guarantee of Rs. 615 million in favour of Citibank N.A. to secure repayment of working capital facilities.

The Company has issued guarantees of Rs. 8.15 billion in favour of the lenders of Welspun Flooring Limited (“WFL”), a wholly owned subsidiary of your Company to secure repayment of facilities extended by those lenders to WFL. Additionally, the Company has issued guarantee of Rs. 500 million in favour of HDFC Bank to secure working capital facilities availed by WFL.

Disclosures pursuant to the Regulation 34(3) read with Para A of Schedule V of SEBI Regulations, 2015 is given at Note No. 38 of the audited financial statements.

11. Particulars of contracts or arrangements with related parties:

All related party transactions that were entered into during the year under report were on an arms length basis and were in the ordinary course of business, to serve mutual needs and mutual interest. Except for contracts with WGBL and WCPGL, subsidiaries of your Company, there were no materially significant related party transactions made by your Company. The Audit Committee has given its omnibus approval which is valid for one financial year. Your Companys policy on Related Party Transactions as approved by the Board is hosted on your Companys website and a web link thereto is as given below:

https://www.welspunindia.com/uploads/investor_data/2)%20WIL%20-%20RPT%20Policy%2002.02.2016.pdf

Disclosures as required under the Act are given in Form AOC-2 as Annexure 4 to this Report.

The details of the related party transactions as required under IND-AS 24 are set out in Note 31(ii) to the Standalone financial statements forming part of this Report.

12. Details of Remuneration to Directors and Key Managerial Personnel: i. Details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: (a) the ratio of the remuneration of each Executive Director and Key Managerial Personnel to the median remuneration of the employees of your Company for FY 2019-20 is as given below:

Name and Designation Remuneration The percentage increase in remuneration The ratio of the remuneration to the median remuneration of the employees (No. of times)
( Rs. million)
Rajesh Mandawewala 78.43 143% 472
Managing Director
Ms. Dipali Goenka 88.17 154% 531
CEO and Joint Managing
Director
Altaf Jiwani 32.75 15% 197
Chief Financial Officer
Shashikant Thorat 4.98 13% 30
Company Secretary

(b) The percentage increase in the median remuneration of employees in FY 2019-20 was 5.74%.

(c) Your Company had 21,798 permanent employees on its payrolls as on March 31, 2020.

(d) Average percentage increase in the salaries of employees other than the managerial personnel in FY 2019-20 was 19%. The managerial remuneration increased by 104.48% as a result of increase in Commission payable to Managing Directors and CEO & Joint Managing Director.

The key parameters for any variable component of remuneration availed by the directors are as per the Nomination and Remuneration Policy. We a rm that the remuneration is as per the Nomination and Remuneration Policy of your Company.

ii. Details of the employees of your Company as required pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

Name, Designation, Age, DOJ, Current CTC ( Rs. million), Quali cation, Previous Company, Nature of Employment, % of Equity Shares held in the Company, Relative of any Director/ Manager of the Company.

Altaf Jiwani, Chief Financial Officer, 52, 02.02.2015, 32.75, B.TECH, MMS, RPG Group, Permanent, 0, No; Amarsinh Dhanwade, Vice President, 43, 20.08.2018, 18.01, MBA, PGDM, LOreal, Permanent, 0, No; Amit Mittal, Senior Vice President Global Sourcing, 44, 18.02.2019, 12.60, MBA, Indo Count Industries Limited, Permanent, 0, No; Ashok Kumar Joshi, Executive Director* & Business Head Operations, 59, 02.07.2013, 26.71 B.TECH, Donear Industries Limited, Permanent, 0, No; Cherian Thomas, President Advanced Textiles, 49, 02.12.2019, 16.00 B.E. (Mechanical), MBA, Frigoglass, Permanent, 0, No; Chintan Thaker, Senior Vice President Corporate A airs and Strategic Planning Cell, 43, 01.04.2003, 10.92, B.Sc., MBA (Marketing), Gujarat Infra Limited, Permanent, 0, No; Dinesh Jain, President Finance & Accounts, 62, 12.06.2004, 10.88, FCA, Bhilwara Spinners Limited, Permanent, 0.05, No (Retired w.e.f. April 30, 2020); Dipali Goenka, CEO & Joint Managing Director, 51, 01.04.2013, 26.88, B.A. (Psychology),N.A., Contractual, 0.07, Yes; Laxmi Narain Kaushik, Director* & Business Head Operations, 53, 16.07.2018, 14.99, M.Tech., Spentex Industries Limited, Permanent, 0, No (Resigned w.e.f. November 22, 2019); Milind Hardikar, Executive Director* Advanced Textile, 59, 24.04.2012, 22.50, BE (Mech), MMS, Arvind Limited, Permanent, 0, No; Rahul Shandilya, President Group IT, 49, 08.04.2019, 17.50, B.E., PGDM, Mahindra Group, Permanent, 0, No; Rajesh Mandawewala, Managing Director, 58, 01.12.1985, 17.14, CA, N.A., Contractual, 0, No; Rajesh Padmanbhan, Director*-HCGA, 58, 01.02.2016, 39.42, MBA

(Finance/HR), Vedanta Group, Permanent, 0, No (Resigned w.e.f. April 20, 2020); Sanjay Kanungo, Senior Vice President Vapi Operations, 52, 23.01.2017, 10.70, B.E. (Mechanical), Trident Limited, Permanent, 0, No.

iii. Ms. Dipali Goenka, CEO & Joint Managing Director, who is receiving remuneration and commission from your Company, receives Rs. 26.88 million as remuneration (including variable pay) and commission of 2% of profits also from WGBL, a subsidiary of your Company.

iv. Details of managerial remuneration and payments to other directors are given in the Corporate Governance Report forming part of this Report.

13. Extract of the Annual Return

An extract of the annual return in Form MGT-9 of the Companies (Management and Administration) Rules, 2014 is annexed as Annexure -5 to this Report and is also available on website of the Company at weblink given below:

https://www.welspunindia.com/uploads/investor_data/Extract_of_Annual_Return.pdf

14. Business Responsibility Report (BRR)

SEBI vide Noti cation No. SEBI/LAD-NRO/GN/2015-16/27 dated December 22, 2015 had mandated top 500 listed entities, based on market capitalization, to include BRR in the annual report. Since the Company is one of the top 500 listed entities, it is pleased to present its 4th BRR for the FY 2019-20 as per SEBI Circular No. CIR/CFD/CMD/10/2015 dated November 04, 2015 which is a part of this Annual Report.

15. Conservation of energy, technology absorption and foreign exchange earnings and outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo required to be disclosed pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is attached as Annexure 6 to this Report.

16. Corporate Social Responsibility (CSR)

The key philosophy of all CSR initiatives of the Company is enshrined in the three Es which have become guiding principles of the CSR initiatives Education, Empowerment (of Women) and Environment & Health.

The CSR Policy of your Company as approved by the Board of Directors, is hosted on your Companys website and a web link thereto is as given as: https://www.welspunindia.com/uploads/investor_data/CSR%20Policy(signed)-07.04.2016.pdf

The initiatives undertaken by your Company during FY 2019-20 in CSR have been detailed in this Report. Disclosures as required under Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 are given in Annexure 7 to this Report.

17. Internal Controls

Your Company has adequate internal control system, which is commensurate with the size, scale and complexity of its operations. Your Company has designed and implemented a process driven framework for Internal Financial Controls (“IFC”) within the meaning of the explanation of Section 134(5) of the Act, SEBI

Regulations, 2015 and other relevant statutes applicable to your Company.

Your Company has well-documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted by business needs. The Internal Auditors continuously monitor the efficiency of the internal controls / compliance with the SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisations risk management, control and governance processes.

For the year ended March 31, 2020, the Board is of the opinion that your Company has sound IFC commensurate with the nature of its business operations; wherein adequate controls are in place and operating effectively and no material weakness exists. Your Company has a process in place to continuously monitor existing controls and identify gaps and implement new and / or improved controls wherever the effect of such gaps would have a material effect on your Companys operation.

18. Risk Management

Your Company is exposed to risks across all levels and functions of the organisation. The Board has approved Enterprise Risk Management Policy (ERMP) to effectively address nancial, operational, business, compliance and strategic risk. A structured enterprise risk management program has been formulated and implemented. Refer to the MDA Section in this Report for risks and threats applicable to your Company.

19. Corporate Governance

The Company is committed to maintain the highest standards of corporate governance requirements as set out by SEBI. The Report on Corporate Governance as stipulated under SEBI Regulations, 2015 forms an integral part of this Report. The requisite Compliance Certificate is obtained from Uday Sohoni, Practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Part E of Schedule V of SEBI Regulations 2015, is annexed to the Corporate Governance Report.

20. Management Discussion and Analysis Report

The MDA Report on the operation of the Company as required under the SEBI Regulations, 2015, is provided in a separate section and forms part of this Report.

21. Vigil Mechanism

Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors has formulated Whistle Blower Policy and Vigil Mechanism for its directors and employees and any director or employee may make protected disclosures to the Chairman of the Audit Committee. No personnel have been denied access to the Audit Committee.

22. Directors Responsibility Statement

Pursuant to Sections 134(3)[c] & 134(5) of the Act, your Directors hereby con rm that:

a. in the preparation of the annual accounts for the financial year ended March 31, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of a airs of the Company at the end of the financial year and of the profit and loss of the Company for the FY 2019-20;

c. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the directors have prepared the annual accounts on a going concern basis;

e. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

23. Miscellaneous

During the year, there was no change in the general nature of business of your Company. No material change or commitment has occurred which would have affected the financial position of your Company between the end of the financial year to which the financial statements relate and the date of the report. No significant and material order was passed by the regulators or courts or tribunals which would have impacted the going concern status and your Companys operations in future. No amount was required to be transferred to General Reserve. No share with differential rights was issued by your Company nor did your Company issue any equity share as sweat equity share. There were no stock options outstanding during the FY 2019-20. The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Further, based on the Policy on Prevention, Prohibition and Redressal of Sexual Harassment of women at workplace, the Internal Complaints Committee for each location of your Company informed that 4 cases of sexual harassments were reported during the year under review and all 4 have been resolved. Your Company has not made any provision of money for the purchase of, or subscription for, shares of your Company or its holding company, to be held by or for the benefit of the employees of your Company and hence the disclosure as required under Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 is not required. No fraud took place in the Company during the year and hence, no such reporting was made to the Audit Committee and the Board under Section 143(12) of the Companies Act, 2013 read with Rule 13 of the Companies (Audit and Auditors) Rules, 2014 .

24. Acknowledgements

Your Directors thank the government authorities, financial institutions, banks, customers, suppliers, members, employees and other business associates of your Company, who through their continued support and co-operation, have helped as partners in your Companys progress and achievement of its objectives.

For and on behalf of the Board of Directors
Balkrishan Goenka
June 29, 2020 Chairman
Mumbai DIN 00270175