The Board of Directors are pleased to present the Seventy-third Annual Report of theCompany for the financial year ended 31st March 2019.
The Company's financial performance for the year ended 31st March 2019 issummarized below:
| ||Standalone ||Consolidated |
| ||Year ended 31.03.2019 ||Year ended 31.03.2018 ||Growth (%) ||Year ended 31.03.2019 ||Year ended 31.03.2018 ||Growth (%) |
|Revenue from Operations* ||16391.78 ||14153.71 ||15.8% ||19349.84 ||16843.76 ||14.9% |
|Earning Before Interest Taxes Depreciation and ||3586.76 ||3198.00 ||12.2% ||3751.58 ||3418.23 ||9.8% |
|Amortisation || || || || || || |
|Less : Finance Cost ||30.01 ||21.06 ||- ||51.00 ||35.07 ||- |
|Less : Depreciation and Amortisation Expense ||382.18 ||311.11 ||- ||430.67 ||360.47 ||- |
|Profit for the period before share of profit of ||3174.57 ||2865.83 ||10.8% ||3269.91 ||3022.69 ||8.2% |
|associate || || || || || || |
|Share of profit of Associate ||- ||- ||- ||40.82 ||45.79 ||- |
|Profit Before Tax ||3174.57 ||2865.83 ||10.8% ||3310.73 ||3068.48 ||7.9% |
|Less : Tax Expense ||1039.81 ||971.03 ||- ||1098.82 ||1040.96 ||- |
|Profit for the period from continuing operations ||2134.76 ||1894.80 ||12.7% ||2211.91 ||2027.52 ||9.1% |
|Profit before tax from discontinued operations ||- ||- ||- ||- ||70.59 ||- |
|Tax expense of discontinued operations ||- ||- ||- ||- ||0.59 ||- |
|Profit for the period from discontinued operations ||- ||- ||- ||- ||70.00 ||- |
|Profit for the period ||2134.76 ||1894.80 ||12.7% ||2211.91 ||2097.52 ||5.5% |
|Attributable to: || || || || || || |
|Shareholders of the Company ||2134.76 ||1894.80 ||12.7% ||2159.49 ||2038.93 ||5.9% |
|Non Controlling Interest ||- ||- ||- ||52.42 ||58.59 ||- |
|Other Comprehensive Income (net of tax) ||(18.18) ||(3.97) ||- ||(13.60) ||(34.80) ||- |
|Total Comprehensive Income ||2116.58 ||1890.83 ||11.9% ||2198.31 ||2062.72 ||6.6% |
|Attributable to: || || || || || || |
|Shareholders of the company ||2116.58 ||1890.83 ||11.9% ||2136.64 ||2009.48 ||6.3% |
|Non-Controlling Interest ||- ||- ||- ||61.67 ||53.24 ||- |
|Opening balance in Retained Earnings ||3387.91 ||2672.53 ||- ||3547.78 ||2688.71 ||- |
|Amount available for Appropriation ||5496.31 ||4575.33 ||- ||5681.56 ||4736.24 ||- |
|Dividend Interim - FY 2018-19 ||273.37 ||- ||- ||273.37 ||- ||- |
|Interim - FY 2017-18 ||- ||254.19 ||- ||- ||254.19 ||- |
|Final - FY 2017-18 ||580.31 ||- ||- ||580.31 ||- ||- |
|Final - FY 2016-17 ||- ||733.79 ||- ||- ||733.79 ||- |
|Tax on Dividend ||173.50 ||199.44 ||- ||173.50 ||199.44 ||- |
|Transfer to Other Reserve ||- ||- ||- ||0.74 ||1.04 ||- |
|Closing balance in Retained Earnings ||4469.13 ||3387.91 ||- ||4653.64 ||3547.78 ||- |
* Figures for Revenue from Operations are comparable numbers i.e. Excise Duty has beenremoved as the same does not form part of Revenue post GST implementation.
Company's Performance Review
During the financial year 2018-19:
Revenue from operations on standalone basis increased to Rs. 16391.78 crores asagainst Rs. 14153.71 crores in the previous year a growth of 15.8%.
Cost of goods sold as a percentage to revenue from operations increased to 57.4%as against 56.4% in the previous year.
Employee cost as a percentage to revenue from operations decreased to 5.5%(Rs. 902.79 crores) against 5.6% (Rs. 791.08 crores) in the previous year.
Other expense as a percentage to revenue from operations decreased to 16.9% (Rs.2770.42 crores) as against 17.4% (Rs. 2459.43 crores) in the previous year.
The Profit after Tax for the current year is Rs. 2134.76 crores against Rs.1894.80 crores in the previous year a growth of 12.7%.
On a consolidated basis the Company its subsidiaries and joint venturecompanies achieved revenue of Rs. 19349.84 crores as against Rs. 16843.76 crores a growth of 14.9%. Net profit after non-controlling interest for the group for the currentyear is Rs. 2159.49 crores as against Rs. 2038.93 crores in the previous year agrowth of 5.9%.
During the year under review the Company paid to the shareholders an interim dividendof Rs. 2.85 (Rupees two and paise eighty five only) per equity share of the face value ofRs. 1 (Rupee one only) each in the month of November 2018. In addition the Board ofDirectors have recommended payment of Rs. 7.65 (Rupees seven and paise sixty fifty only)per equity share of the face value of Rs. 1 (Rupee one only) each as final dividend forthe financial year 2018-19 for the approval of the shareholders at the ensuing AnnualGeneral Meeting ('AGM') of the Company. If approved the total dividend (interim and finaldividend) for the financial year 2018-19 will be Rs. 10.50 (Rupees ten and paise fiftyonly) per equity share of the face value of Rs. 1 (Rupee one only) each as against thetotal dividend of Rs. 8.70 (Rupees eight and paise seventy only) per equity share of theface value of Rs. 1 each (Rupee one only) paid for the previous financial year 2017-18.The dividend declared and/or paid by the Company for the financial year 2018-19 is incompliance with the Dividend Distribution Policy.
The Dividend Distribution Policy of the Company is set out as Annexure [A] andis also uploaded on the Company's website https://www.asianpaints.com/more/investors/policies-programs.html.
Investor Education and Protection Fund (IEPF)
In accordance with the applicable provisions of Companies Act 2013 read with InvestorEducation and Protection Fund (Accounting Audit Transfer and Refund) Rules 2016("IEPF Rules") all unclaimed dividends are required to be transferred by theCompany to the IEPF after completion of seven (7) years. Further according to IEPFRules the shares on which dividend has not been claimed by the shareholders for seven (7)consecutive years or more shall be transferred to the demat account of the IEPF Authority.The details relating to amount of dividend transferred to the IEPF and correspondingshares on which dividends were unclaimed for seven (7) consecutive years are provided inthe General Shareholders Information section of this Annual Report.
Material Changes Affecting the Company
There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year 2018-19 and the date ofthis report. There has been no change in the nature of business of the Company.
Consolidated Financial Statements
In accordance with the provisions of Companies Act 2013 (hereinafter referred to as"the Act") Regulation 33 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as"Listing Regulations") and applicable Accounting Standards the AuditedConsolidated Financial Statements of the Company for the financial year 2018-19 togetherwith the Auditors' Report form part of this Annual Report.
Subsidiaries & Associate Companies
A statement containing the salient features of financial statements ofsubsidiaries/joint venture companies of the Company in the prescribed Form AOC 1forms a part of Consolidated Financial Statements (CFS) in compliance with Section 129 (3)and other applicable provisions if any of the Act read with Rule 5 of the Companies(Accounts) Rules 2014.
The said Form also highlights the financial performance of each of the subsidiaries andjoint venture companies included in the CFS of the Company pursuant to Rule 8(1) of theCompanies (Accounts) Rules 2014.
In accordance with Section 136 of the Act the financial statements of the subsidiaryand associate companies are available for inspection by the members at the RegisteredOffice of the Company during business hours on all days except Saturdays Sundays andpublic holidays upto the date of the AGM. Any member desirous of obtaining a copy of thesaid financial statements may write to the Company Secretary at the Registered Office ofthe Company. The financial statements including the CFS and all other documents requiredto be attached to this report have been uploaded on the website of the Company atwww.asianpaints.com.
The Company has in accordance with the amendments to Listing Regulations revised thePolicy for determining material subsidiaries. The said policy may be accessed on thewebsite of the Company at https://www.asianpaints.com/more/investors/policies-programs.html. The Company has no material subsidiary company.
The Board of Directors at their meeting held on 9th May 2019 have interalia approved the following investments approximately in accordance with the applicableprovisions of law:
(i) Rs. 300 crores by way of subscription of equity shares of Asian PaintsInternational Private Limited (APIPL) Singapore wholly owned subsidiary of the Companyfor the purpose of meeting funding requirements of its step down operating subsidiaries;and
(ii) Rs. 80 crores by way of subscription of equity shares of Sleek InternationalPrivate Limited (Sleek) wholly owned subsidiary of the Company to meet its requirementstowards capital expenditure and working capital.
The aforementioned infusion in the equity shares of APIPL and Sleek is for furtheranceof their business objectives.
Directors and Key Managerial Personnel
Sad Demise of Mr. Ashwin Choksi erstwhile Chairman of the Company
Mr. Ashwin Choksi erstwhile Non-Executive Chairman of the Company left for heavenlyabode on 19th September 2018 after a brief illness. Late Mr. Ashwin Choksiwas associated with the Company since 1965. He became the Managing Director of the Companyin 1984. As an Executive Chairman for more than a decade he pioneered to imbibe the bestgovernance standards with entrepreneurship in the Company. He stepped down as ExecutiveChairman of the Company in 2009 and continued to hold the position of Non Executive Chairman since then. Late Mr. Ashwin Choksi was the Chairman of theCompany for more than two decades and the Company immensely benefitted from his vision andleadership. He was a humble and down to earth individual who led the Company without beingin limelight. His sad demise is an irreparable loss to the Company. The Board of Directorsof the Company express their deep condolences and pay tribute to late Mr. Ashwin Choksi agreat visionary leader.
Appointment of Mr. Ashwin Dani as the Chairman of the Company
The Board of Directors of the Company at their meeting held on 5th November2018 elected Mr. Ashwin Dani as the Non-Executive Chairman of the Board andCompany till the Annual General Meeting of the Company for the financial year 2020-21.
Change in Directorate
(i) Appointment of Mr. Manish Choksi on the Board of Directors of the Company The Boardof Directors of the Company at their meeting held on 22nd October 2018 basedon the recommendations of the Nomination & Remuneration Committee approved theappointment of Mr. Manish Choksi as a Non Executive Promoter Director to fill thecasual vacancy created on the Board on account of the sad demise of Mr. Ashwin Choksi. Theshareholders subsequently approved his appointment in casual vacancy by way of postalballot with requisite majority. The Board of Directors at their meeting held on 5thNovember 2018 appointed Mr. Manish Choksi as the Non-Executive Vice-Chairman of theBoard and the Company. Mr. Manish Choksi joined the Company in the year 1992 as anExecutive and had grown in ranks by holding various positions across Sales EngineeringMarketing in the Decorative and Industrial paint businesses. He transformed theInformation Technology function of the Company and has been instrumental in leveraging theIT solutions across the extended enterprise and achieving improved business performance.He also headed the International Business of the Company and spearheaded the Company'sefforts in expansion of its emerging markets portfolio. He had been a catalyst for theCompany's foray into home improvement.
Before being inducted as the Non-Executive Director he held the position of President International Business IT HR & Chemicals in the Company. He was also a memberof the Executive Council of the Company.
(ii) The Board of Directors at their meeting held on 21st December 2018 onrecommendations of the Nomination & Remuneration Committee inter alia approved thefollowing changes to the Board of Directors of the Company subject to approval ofshareholders of the Company. The shareholders have since approved their appointments/re appointments with requisite majority by way of postal ballot the results of whichwere declared on 26th February 2019:
(a) Continuation of Mr. Ashwin Dani (76 years) as a Non Executive PromoterDirector (liable to retire by rotation) of the Company after 31st March 2019in compliance with the Regulation 17(1A) of Listing Regulations
Regulation 17(1A) of the Listing Regulations provides that listed entities shall notappoint any person or continue the directorship of any person who has attained the age of75 years unless approval of shareholders have been obtained by way of special resolution.Accordingly approval of the shareholders was obtained for continuation of Mr. AshwinDani's directorship.
Mr. Ashwin Dani has been associated with the Company since 1968. He joined the Companyas a Senior Executive and moved through successive senior positions like Director -R&D Works Director Whole-time Director and served as Vice-Chairman and ManagingDirector from December 1997 to March 2009. He continued to hold the position ofNon-Executive Vice Chairman of the Company until he was appointed as the Non- ExecutiveChairman of the Company on 5th November 2018.
Mr. Ashwin Dani is a technocrat and drives strong focus on Research and Developmentinitiatives within the Company. His knowledge of the business environment and vastexperience in general management has been an asset to the Company.
(b) Appointment of Mr. Suresh Narayanan as an Independent Director on the Board ofDirectors of the Company for a period of 5 years w.e.f. 1st April 2019 to 31stMarch 2024 pursuant to applicable provisions of the Act read with the Rules issuedthereunder and the Listing Regulations
Mr. Suresh Narayanan is currently the Chairman & MD of Nestle India Limited. Hejoined Nestle in the year 1999 and has been associated with the Company since then. He hasgrown across ranks in the Sales & Marketing Department and held various positions inNestle India and other countries. He was the Chairman and CEO of Nestle Philippines Inc.prior to joining Nestle India.
(c) Appointment of Mrs. Pallavi Shroff as an Independent Director on the Board ofDirectors of the Company for a period of 5 years w.e.f. 1st April 2019 to 31stMarch 2024 pursuant to applicable provisions of the Act read with the Rules issuedthereunder and the Listing Regulations
Mrs. Pallavi Shroff is the Managing Partner of M/s. Shardul Amarchand Mangaldas withextensive experience of over 37 years. Her broad and varied representation of public andprivate corporations and other entities before legal institutions has earned her nationaland international acclaim. Mrs. Shroff has always been active in public policy relatedwork. She appears regularly in the Supreme Court and High Courts of India and inarbitrations mediations and international legal disputes.
(d) Re-appointment of the following Independent Directors not liable to retire byrotation (whose tenure came to an end on 31st March 2019) for a second termpursuant to applicable provisions of the Act read with the Rules issued thereunder andListing Regulations:
Dr. S. Sivaram (72 years) re-appointed upto 30th September 2021;
Mr. M. K. Sharma (72 years) re-appointed upto 31st March 2022;
Mr. Deepak Satwalekar (70 years) re-appointed upto 30th September2023; and
Mrs. Vibha Paul Rishi (59 years) re-appointed upto 31st March 2024.
The aforementioned appointments were based on outcome of performance evaluationexercise experience and contributions made by Dr. S. Sivaram Mr. M. K. Sharma Mr.Deepak Satwalekar and Mrs. Vibha Paul Rishi in their previous tenure.
The respective tenure(s) of Dr. S Sivaram Mr. M. K. Sharma and Mr. Deepak Satwalekarwere decided considering the year in which each of them will attain the age of 75 years.
(iii) Cessation of directorship of Mr. Mahendra Choksi Non-Executive Director
Mr. Mahendra Choksi Non Executive Director of the Company informed the Board ofDirectors at its meeting held on 21st December 2018 of his desire to stepdown from directorship in view of his age and in order to comply with Regulation 17(1A) ofthe Listing Regulations.
Mr. Mahendra Choksi had joined the Board in the year 1992 and since then has been anintegral part of the Board and its Committees where he was a member. He has contributedimmensely to the functioning of the Board and the management has also benefitted from hisadvice and directions. The Board places on record gratitude for his advice and guidance.
(iv) Retirement of Non Executive Directors
Mr. Mahendra Shah and Mr. S Ramadorai Independent Director(s) of the Company informedthe Board of Directors at its Meeting held on 21st December 2018 that theywould not be seeking re-appointment in view of their age and in compliance with Regulation17(1A) of the Listing Regulations.
Mr. Mahendra Shah joined the Board as an Independent Director in the year 2001 and theCompany has immensely benefitted from his guidance. The Board places on recordappreciation for his thoroughness dedication and commitment.
Mr. S Ramadorai joined the Board in the year 2009 and since then has significantlycontributed to the functioning of the Board. The Board places on record appreciation forhis perspective and thought leadership towards overall functioning of the Company.
(v) Appointment of Mr. Jigish Choksi as an Additional/Non Executive PromoterDirector of the Company
The Board of Directors of the Company at their meeting held on 29th March2019 based on the recommendation of the Nomination and Remuneration Committee hadapproved the appointment of Mr. Jigish Choksi as an Additional/Non-Executive Director witheffect from 1st April 2019 subject to approval of shareholders of theCompany.
Mr. Jigish Choksi has worked in the Sales & Marketing function of the Company forfive years and is well versed with the functioning of the Company. He is also activelyinvolved in his family businesses.
Approval of the shareholders is sought at the ensuing AGM for the appointment of Mr.Jigish Choksi as the Non-Executive Director of the Company liable to retire byrotation. The Board and Nomination & Remuneration Committee recommend hisappointment.
(vi) Retirement by rotation and subsequent re-appointment In accordance with theprovisions of Section 152 and other applicable provisions if any of the Act read withthe Companies (Appointment and Qualification of Directors) Rules 2014 (including anystatutory modification(s) or re-enactment(s) thereof for the time being in force)and the Articles of Association of the Company Mr. Abhay Vakil and Mr. Malav DaniNon-Executive Directors are liable to retire by rotation at the ensuing AGM and beingeligible have offered themselves for re-appointment.
In accordance with the provisions of the Act read with the Rules issued thereunder theListing Regulations and the Articles of Association of the Company Additional DirectorIndependent Directors and the Managing Director of the Company are not liable to retire byrotation.
Board of Directors
Declaration of independence from Independent Directors:
The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under the provisions of the Actread with the Schedules and Rules issued thereunder as well as clause (b) of sub-regulation(1) of Regulation 16 of the Listing Regulations (including any statutory modification(s)or re-enactment(s) thereof for the time being in force). In terms of Regulation 25(8) ofthe Listing Regulations the Independent Directors have confirmed that they are not awareof any circumstance or situation which exist or may be reasonably anticipated that couldimpair or impact their ability to discharge their duties.
Number of meetings of the Board:
7 (seven) meetings of the Board of Directors were held during the financial year 2018 19. The details of the meetings of the Board of Directors of the Company convenedduring the financial year 2018-19 are given in the Corporate Governance Report which formspart of this Annual Report.
Nomination and Remuneration Policy
During the year under review the Company has revised the Nomination and RemunerationPolicy in accordance with the amendments to Section 178 of the Act and ListingRegulations. The salient features of the Policy and changes therein are set out in theCorporate Governance Report which forms part of this Annual Report.
The said Policy of the Company inter alia provides that the Nomination andRemuneration Committee shall formulate the criteria for appointment of Directors on theBoard of the Company and persons holding Senior Management positions in the Companyincluding their remuneration and other matters as provided under Section 178 of the Actand Listing Regulations.
The Policy is also available on the website of the Company https://www.asianpaints.com/more/investors/policies-programs.html.
Remuneration of Directors Key Managerial Personnel and particulars of employees:
The remuneration paid to the Directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Act and Regulation 19of the Listing Regulations (including any statutory modification(s) or re-enactment(s)thereof for the time being in force).
The information required under Section 197 of the Act read with Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 (including any statutorymodification(s) or re-enactment(s) thereof for the time being in force) in respectof Directors/employees of the Company is set out in the Annexure [B] to this reportand is also available on the website of the Company (www.asianpaints.com).
The Nomination and Remuneration Policy of the Company empowers the Nomination andRemuneration Committee to formulate a process for evaluating the performance of IndividualDirectors Committees of the Board and the Board as a whole.
The parameters for the performance evaluation of the Board inter alia includeperformance of the Board on deciding long term strategy rating the composition and mix ofBoard members discharging of governance and fiduciary duties handling critical anddissenting suggestions etc.
The parameters for the performance evaluation of the Directors include attendanceeffective participation in meetings of the Board domain knowledge vision strategy etc.
The Chairperson(s) of the respective Committees based on feedback received from theCommittee members on the outcome of performance evaluation exercise of the Committeeshares a report to the Board.
The details of the evaluation process are set out in the Corporate Governance Reportwhich forms a part of this Annual Report.
Directors' Responsibility Statement
Pursuant to Section 134 of the Act (including any statutory modification(s) orre-enactment(s) thereof for the time being in force) the Directors of the Company statethat: a. in the preparation of the annual accounts for the financial year ended 31stMarch 2019 the applicable Accounting Standards and Schedule III of the Companies Act2013 have been followed and there are no material departures from the same; b. theDirectors have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2019 and of theprofits of the Company for the financial year ended 31st March 2019; c. properand sufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; d. the annual accounts havebeen prepared on a going concern' basis; e. proper internal financial controls laiddown by the Directors were followed by the Company and that such internal financialcontrols are adequate and operating effectively; and f. proper systems to ensurecompliance with the provisions of all applicable laws were in place and that such systemsare adequate and operating effectively.
Management Discussion and Analysis
Management Discussion and Analysis as stipulated under the Listing Regulations ispresented in a separate section forming part of this Annual Report. It provides detailsabout the overall industry structure global and domestic economic scenarios developmentsin business operations/ performance of the Company's various businesses viz. decorativebusiness international operations industrial and home improvement business internalcontrols and their adequacy risk management systems and other material developmentsduring the financial year 2018-19.
Auditors and Auditors' Report
M/s. Deloitte Haskins & Sells LLP Chartered Accountants (Firm Registration No.117366W/W-100018) were appointed as Statutory Auditors of the Company at the 70thAGM held on 28th June 2016 to hold office till the conclusion of the 75thAGM.
M/s. Deloitte Haskins & Sells LLP have confirmed that they are not disqualifiedfrom continuing as Auditors of the Company.
The Auditors have issued an unmodified opinion on the Financial Statements for thefinancial year ended 31st March 2019. During the financial year ended 31stMarch 2019 there had been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund other than two instances of delays aggregatingto Rs. 3.52 lakhs on account of unclaimed sales proceeds of fractional shares arising outof sale of bonus shares in earlier years.
The Auditors' Report for the financial year ended 31st March 2019 on thefinancial statements of the Company is a part of this Annual Report.
The Company is required to maintain cost records for certain products as specified bythe Central Government under sub-section (1) of Section 148 of the Act and accordinglysuch accounts and records are made and maintained in the prescribed manner.
TheBoardofDirectorsoftheCompanyontherecommendations made by the Audit Committee hasappointed M/s. RA & Co. Cost Accountants (Firm Registration No. 000242) as the CostAuditor of the Company to conduct the audit of cost records of certain products for thefinancial year 2019 - 20.
The remuneration proposed to be paid to the Cost Auditor subject to ratification bythe members of the Company at the ensuing 73rd AGM would not exceed Rs. 6.75lakhs (Rupees six lakhs and seventy five thousand only) excluding taxes and out of pocketexpenses if any.
The Company has received consent from M/s. RA & Co. Cost Accountants to act asthe Cost Auditor for conducting audit of the cost records for the financial year 2019-20along with a certificate confirming their independence and arm's length relationship.
The Board of Directors of the Company has appointed Dr. K R Chandratre PracticingCompany Secretary (Certificate of Practice No. 5144) as the Secretarial Auditor toconduct an audit of the secretarial records for the financial year 2019 - 20. The Companyhas received consent from Dr. K. R. Chandratre to act as the auditor for conducting auditof the secretarial records for the financial year ending 31st March 2019. TheSecretarial Audit Report for the financial year ended 31st March 2019 underCompanies Act 2013 read with Rules made thereunder and Regulation 24A of the ListingRegulations (including any statutory modification(s) or re-enactment(s) thereof forthe time being in force) is set out in the Annexure [C-1] to this report.
The Secretarial Compliance Report for the financial year ended 31st March2019 in relation to compliance of all applicable SEBI Regulations/circulars/ guidelinesissued thereunder pursuant to requirement of Regulation 24A of Listing Regulations is setout in Annexure [C-2] to this report. The Secretarial Compliance Report has beenvoluntarily disclosed as part of Annual Report as good disclosure practice.
The Secretarial Audit Report and/or Secretarial Compliance Report does not contain anyqualification reservation or adverse remark.
As on 1st April 2019 the Audit Committee comprises of Mr. M. K.Sharma (Chairman) Mr. Abhay Vakil Mr. R Seshasayee and Mr. Suresh Narayanan. TheBoard of Directors at their meeting held on 29th March 2019 appointed Mr.Suresh Narayanan Independent Director as a member of the Committee in place of Mr.Mahendra Shah who retired as a Director on 31st March 2019. Mr. JayeshMerchant acts as Secretary to the Audit Committee.
All members of the Audit Committee are financially literate and have experience infinancial management.
All the recommendations made by the Audit Committee were accepted by the Board ofDirectors of the Company.
Corporate Social Responsibility (CSR)
Ason1stApril2019theCSRCommitteecomprisesofMr.Malav Dani (Chairman) Mrs.Vibha Paul Rishi Mr. KBS Anand and Ms. Amrita Vakil. The Board of Directors attheir meeting held on 29th March 2019 appointed Ms. Amrita Vakil as a memberof the Committee and Mr. Mahendra Choksi and Mr. S Ramadorai ceased to be members of theCommittee consequent to their ceasing to be Directors of the Company. Mr. Jayesh Merchantacts as Secretary to the CSR Committee.
During the financial year ended 31st March 2019 the Company incurred CSRExpenditure of Rs. 52.70 crores (Rupees fifty two crores and seventy lakhs only). The CSRinitiatives of the Company were under the thrust area of health & hygiene educationwater management and vocational training. The CSR Policy of the Company is available onthe website of the Company at https://www.asianpaints.com/more/about-us. html.
The Company's CSR Policy statement and annual report on the CSR activities undertakenduring the financial year ended 31st March 2019 in accordance with Section135 of the Act and Companies (Corporate Social Responsibility Policy) Rules 2014(including any statutory modification(s) or re-enactment(s) thereof for the time being inforce) is set out in Annexure [D] to this report.
Corporate Governance Report
In compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance along with a certificate from the Auditors on its compliance forms anintegral part of this Annual Report.
Business Responsibility Report
A Business Responsibility Report as per Regulation 34 of the Listing Regulationsdetailing the various initiatives taken by the Company on the environmental social andgovernance front forms an integral part of this Annual Report.
Extract of Annual Return
The extract of the Annual Return of the Company as on 31st March 2019 inForm MGT - 9 in accordance with Section 92 (3) of the Act read with Companies (Managementand Administration) Rules 2014 is available on the website of the Company athttps://www.asianpaints.com/more/investors/ financial-results.html and is set out in Annexure[E] to this Report.
Related Party Transactions
During the year under review the Company revised its Policy on dealing with andMateriality of Related Party Transactions in accordance with the amendments to theapplicable provisions of the Listing Regulations. The Policy is also available on thewebsite of the Company at https://www.asianpaints.com/more/investors/policies-programs.html.
All contracts/arrangements/transactions entered into by the Company with RelatedParties were in ordinary course of business and on arm's length basis.
The Company has not entered into any contracts/ arrangements/transactions with relatedparties which qualify as material in accordance with the Policy of the Company onmateriality of related party transactions.
All transactions with related parties were reviewed and approved by the Audit Committeeand are in accordance with the Policy on dealing with and Materiality of Related PartyTransactions formulated by the Company.
There are no materially significant related party transactions that may have potentialconflict with interest of the Company at large. There are no person(s) or entities formingpart of the Promoter(s)/Promoter(s) Group which individually hold 10% or more shareholdingin the Company.
The details of the related party transactions as per Indian Accounting Standards (INDAS) - 24 are set out in Note 42 to the Standalone Financial Statements of the Company.
Form AOC - 2 pursuant to Section 134 (3) (h) of the Companies Act 2013 read with Rule8(2) of the Companies (Accounts) Rules 2014 is set out in the Annexure [F] to thisreport.
Loans and Investments
Details of loans guarantees and investments under the provisions of Section 186 of theAct read with the Companies (Meetings of Board and its Powers) Rules 2014 as on 31stMarch 2019 are set out in Note 37(B) to the Standalone Financial Statements of theCompany.
Manufacturing Capacity Expansion
During the year under review the Company commenced commercial production of waterbased paints and intermediaries at its following manufacturing facilities in India: i.Mysuru Plant situated in the state of Karnataka with an initial capacity of 3 (three)lakh KL p.a. having ultimate capacity of 6(six) lakh KL p.a.
ii. Vishakhapatnam Plant situated in the state of Andhra Pradesh with an initialcapacity of 3 (three) lakh KL p.a. having ultimate capacity of 5(five) lakh KL p.a.
The said expansion will give the Company the ability to ensure it has sufficientcapacity to meet future needs.
The Company has a well-defined process in place to ensure appropriate identificationand mitigation of risks. Risk identification exercise is inter-woven with the annualplanning cycle which ensures both regularity and comprehensiveness. The Risk ManagementCommittee of the Company has been entrusted by the Board with the responsibility ofidentification of risks at strategic business operational and process levelsformulating mitigation plan and actions for the identified risks which are driven bysenior leadership.
The key strategic business and operational risks which are significant in terms oftheir impact to the overall objectives of the Company along with status of the mitigationplans are periodically presented and discussed in the Risk Management Committee meetings.Inputs from the Risk Management Committee are duly incorporated in the action plans. Allsignificant risks mitigation plans are well integrated with functional and business plansand are reviewed on a regular basis by the senior leadership.
The Company through its risk management process aims to contain the risks within itsrisk appetite. There are no risks which in the opinion of the Board threaten the existenceof the Company. However some of the risks which may pose challenges are set out in theManagement Discussion and Analysis which forms part of this Annual Report.
The Company has a robust vigil mechanism through its Whistle Blower Policy approved andadopted by Board of Directors of the Company in compliance with the provisions of Section177 (10) of the Act and Regulation 22 of the Listing Regulations.
The Company has engaged an agency for managing an 'Ethics Hotline' which can be usedto inter alia report any instances of financial irregularities breach of code ofconduct abuse of authority disclosure of financial / price sensitive informationunethical / unfair actions concerning company vendors / suppliers mala-fide manipulationof Company records discrimination to the Code of Conduct in an anonymous manner.
The Policy also provides protection to the employees and business associates who reportunethical practices and irregularities.
Any incidents that are reported are investigated and suitable action is taken in linewith the Whistle Blower Policy.
The Whistle Blower Policy of the Company can be accessed at website of the Company athttps://www.asianpaints.com/more/ investors/policies-programs.html.
Policy on Prevention of Sexual Harassment at Workplace
The Company has formulated a Policy on Prevention of Sexual Harassment at Workplace forprevention prohibition and redressal of sexual harassment at workplace in accordance withthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013 (hereinafter referred to as "Prevention of Sexual Harassment Act").Internal Complaints Committees have also been set up to redress any such complaintsreceived.
The Company is committed to providing a safe and conducive work environment to all ofits employees and associates. The Company periodically conducts sessions for employeesacross the organization to build awareness about the Policy and the provisions ofPrevention of Sexual Harassment Act. Complaints of sexual harassment received during thefinancial year 2018-19 by the Company were investigated in accordance with the proceduresprescribed and adequate steps were taken to resolve them.
Internal Financial Controls Related to Financial Statements
The Company has sound internal financial controls commensurate to the size and natureof its business. The Company periodically reviews the internal financial controls in thelight of new statutes changes in business models adoption of new technology solutionsand suggestions for improvements received from employees.
During the year the Company upgraded its core ERP system to the latest SAP S/4 HANAversion. All key internal controls over financial reporting identified as part of the riskand control matrix were thoroughly tested along with the core functionalities beforemigrating to the new system.
The shared services center (SSC) deployed automation to read digitally signed invoicesfrom select vendors and after necessary validations parks the document in the SAP system.This has increased efficiency and also works towards eliminating manual errors. TheCompany is in the process of extending this to other vendors in the coming year.
The Company has workflows to ensure adherence to the delegation of authority manual.This manual specifies the limits at a grade level for approval of various expensesincluding capital expenditure. For the ones where workflows have not been deployed theSSC verifies the same before clearing the payments.
For all amendments to Accounting Standards and the new standards notified the Companycarries out a detailed analysis and presents the impact on accounting policies of theGroup the impact on financial results including revised disclosures to the AuditCommittee. The approach and changes in policies are also validated with the statutoryauditors. The Company takes steps to make these amendments as part of the underlying ERPsystems to the extent possible.
All key controls are periodically tested by the management and few of them arecritically tested for adequacy in design and operating effectiveness by the internalauditors of the Company.
The Company has a stated process and periodicity for physical verification of itsinventory and fixed assets. Any variances are analysed and accounted post necessaryapprovals.
Estimates and judgements made in the preparation of financial statements are reviewedclosely by the corporate accounts team. Past trends and variances are analysed by themanagement and verified by the Statutory auditors.
The Company gets its Standalone financial statements audited every quarter by itsStatutory Auditors. The policies to ensure uniform accounting treatment are prescribed tothe subsidiary companies as well. The accounts of the subsidiary and joint venturecompanies are audited and certified by their respective Statutory Auditors forconsolidation.
Other Disclosures a. DuringtheyearunderreviewtheCompanyhasnotaccepted any depositwithin the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance ofDeposits) Rules 2014 (including any statutory modification(s) or re- enactment(s)thereof for the time being in force); b. The Company has complied with SecretarialStandards issued by the Institute of Company Secretaries of India on Meetings of the Boardof Directors and General Meetings; c. There are no significant material orders passed bythe Regulators or Courts or Tribunals impacting the going concern status of the Companyand its operations in future; d. The information on conservation of energy technologyabsorption and foreign exchange earnings and outgo as stipulated under Section 134 of theAct read with the Companies (Accounts) Rules 2014 is set out in the Annexure [G]to this report; e. The Managing Director & CEO of the Company has not received anyremuneration or commission from any of the subsidiary companies; f. None of the Auditorsof the Company have reported any fraud as specified under the second proviso of Section143 (12) of the Companies Act 2013 (including any statutory modification(s) orre-enactment(s) thereof for the time being in force); g. The Company does not have anyscheme or provision of money for the purchase of its own shares by employees/ Directors orby trustees for the benefit of employees/ Directors; and h. The Company has not issuedequity shares with differential rights as to dividend voting or otherwise.
The Board of Directors place on record sincere gratitude and appreciation for all theemployees at all levels for their hard work solidarity cooperation and dedication duringthe year.
The Board conveys its appreciation for its customers shareholders suppliers as wellas vendors bankers business associates regulatory and government authorities for theircontinued support.
For and on behalf of the Board of Directors
Place : Mumbai
Date : 9th May 2019