THE MEMBERS OF
RALLIS INDIA LIMITED
The Directors hereby present their Seventy First (71st) Annual Report on the businessand operations of the Company and the financial statements for the year ended 31stMarch 2019.
| || ||(र in crores) |
|Particulars ||Standalone ||Consolidated |
| ||2018-2019 ||2017-2018 ||2018-2019 ||2017-2018 |
|Revenue from operations ||1671.50 ||1515.94 ||1983.96 ||1808.46 |
|Other Income ||25.72 ||8.93 ||30.65 ||13.18 |
| ||1697.22 ||1524.87 ||2014.61 ||1821.64 |
|Profit/ (Loss) before Finance cost Depreciation and Tax ||232.02 ||235.12 ||271.59 ||277.65 |
|Finance Costs ||(4.86) ||(3.29) ||(5.25) ||(4.31) |
|Depreciation ||(39.28) ||(40.57) ||(46.08) ||(46.31) |
|Profit before exceptional items and tax ||187.88 ||191.26 ||220.26 ||227.03 |
|Exceptional items ||- ||- ||- ||- |
|Profit before Tax ||187.88 ||191.26 ||220.26 ||227.03 |
|Provision for Tax ||(61.25) ||(58.95) ||(68.76) ||(66.32) |
|Deferred Tax ||2.35 ||9.18 ||3.28 ||6.31 |
|Profit for the year ||128.98 ||141.49 ||154.78 ||167.02 |
|Profit for the year attributable to: || || || || |
|- Owners of the Company ||128.98 ||141.49 ||155.38 ||167.62 |
|- Non-controlling interests ||- ||- ||(0.60) ||(0.60) |
|Other comprehensive income (OCI') ||(0.86) ||(0.16) ||(1.48) ||(0.33) |
|Total comprehensive income ||128.12 ||141.33 ||153.30 ||166.69 |
|Profit for the year ||128.12 ||141.33 ||153.93 ||167.39 |
|Balance of Profit brought forward from previous year ||801.01 ||747.56 ||812.84 ||733.33 |
| ||929.13 ||888.89 ||966.77 ||900.72 |
|Appropriations || || || || |
|Transfer from equity instruments through OCI ||(1.41) ||(1.97) ||(1.41) ||(1.97) |
|Others || || ||0.06 || |
|Dividend on Equity Shares ||(48.62) ||(72.93) ||(48.62) ||(72.93) |
|Dividend Distribution Tax ||(9.99) ||(14.95) ||(9.99) ||(14.95) |
|Transfer to Reserve for equity instruments through OCI ||1.41 ||1.97 ||1.41 ||1.97 |
|Balance Profit carried forward to Balance Sheet ||870.52 ||801.01 ||908.22 ||812.84 |
TRANSFER TO RESERVES
The Board of Directors have decided to retain the entire amount of profits forFY 2018-19 in the profit and loss account.
The Directors are pleased to recommend a dividend of र2.50 per share (250%) onthe Equity Shares of the Company (previous year र2.50 per share). If the dividend asrecommended above is declared by the Members at the Annual General Meeting the totaloutflow towards dividend on Equity Shares for the year would be र58.61 crores (includingdividend distribution tax) (previous year र58.61 crores).
DIVIDEND DISTRIBUTION POLICY
Regulation 43A of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 (Listing Regulations') requires the top500 listed entities based on market capitalisation calculated as on 31st March of everyfinancial year to formulate a Dividend Distribution Policy and disclose the same in theAnnual Report and on the website of the Company.
Accordingly the Board of Directors of the Company has adopted a Dividend DistributionPolicy (Policy') which aims to ensure fairness sustainability and consistency indistributing profits to the Members. During the year under review the Company amended thePolicy to provide a target range of total dividend pay-out. The Policy is attached as AnnexureA to this report and is also available on the website of the Company under the"Investor Relations" section at the link http://www.rallis.co.in/ DDPolicy.htm.
The paid up Equity Share Capital as on 31st March 2019 was र19.45 crores. During theyear under review the Company has not issued any shares. The Company has not issuedshares with differential voting rights. It has neither issued employee stock options norsweat equity shares and does not have any scheme to fund its employees to purchase theshares of the Company.
The Company's consolidated revenue from operations for Financial Year(FY') 2018-19 was र1983.96 crores compared to र1808.46 crores in the previousyear an increase by 9.7% over the previous year. The Company's profit before exceptionalitems and tax on a consolidated basis was र220.26 crores during the year comparedto र227.03 crores in the previous year a decrease of 2.98% over the previous year. TheCompany earned a net profit of र154.78 crores lower by 7.3% as against a netprofit of र167.02 crores in the previous year on a consolidated basis.
The Company's standalone revenue from operations for FY 2018-19 was र1671.50crores an increase of 10.3% over the previous year's revenue of र1515.94crores. Increase in cost and pressure on margin resulted in 8.8% lower net profit ofर128.98 crores compared to र141.49 crores in the previous year.
1. CROP PROTECTION
Indian Agriculture in FY 2018-19 started on an optimistic note reflecting a forecastof normal monsoon and commencing with good initial rainfall. Forecast of monsoon onsetover Kerala for this year was very accurate as both the forecasted and realised date ofonset of monsoon over Kerala was 29th May 2018. After a strong start monsoonstopped advancing for 12 days till 3rd week of June which affected the initialsowings.
The season (June 2018 to September 2018) rainfall over the country as a whole was 91%of its Long Period Average (LPA). Out of the total 36 meteorological sub divisions 23 subdivisions constituting 68% of the total area of the country received normal seasonrainfall 1 sub division received excess rainfall and the balance 12 sub divisionsreceived deficient rainfall. Monthly rainfall over the country as a whole was 95% of LPAin June 94% of LPA in July 92% of LPA in August and 76% of LPA in September.
The monsoon has been a mixed bag this year swinging erratically from long dry patchesto torrential rains and on the whole it has not been well distributed. The monsoonwithdrew from most parts of northwest India and adjoining central India by 1st Octoberand by 6th October the withdrawal was completed from major parts of India.
As per 2nd advance estimate released by the Department of Agriculture Cooperation andFarmers Welfare India will have a food grain production of 281.37 Metric Tonne (MT)against 284.83 MT in the previous year (as per 4th advance estimate). Agriculture andallied sector's Gross Value Added (GVA) at constant FY 2011-12 price grew at a CAGR of2.75% between FY 2012 to FY 2018.
The year also saw reduced crop pest pressure in many areas impacting the insecticidessegment to a great extent. Inventory levels of crop protection products in the industryremained high due to poor liquidation. Chilli acreage reduced due to Gemini virusinfestation and poor output price.
Pest incidence in major crop pest segments like Brown Plant Hopper (BPH) and Blast onRice caterpillar on Pulses and Soybean Powdery and Downey mildew of Grapes were lowduring the active infestation period. Hence consumption of many important molecules camedown. Pink bollworm infestation on Cotton had a major impact affecting not onlyproductivity but also impacting cash flow in the market. Paddy and Cotton prices improvedfrom the lows during the crop harvest.
The total storage in 91 important reservoirs in different parts of the country on weekending 14th February 2019 was 66.260 Billion Cubic Metre (BCM) (41% of the storagecapacity at full reservoir level) against 63.957 BCM during the corresponding date of theprevious year and 69.169 which is the average storage of the last 10 years.
Despite the irregular monsoon pattern and constrained acreages of few key crops inimportant geographies the Company managed to grow in Herbicides portfolio. The Companyregistered a growth of 31% in herbicides segment with good performance in Tata MetriPreet Mark Cylo and Panida Grande.
The Company has also gained market share in cotton. Even in areas where the industryfaced regulatory issues the Company has managed to maintain its business due toacceptance of Rallis Samrudh Krishi at both channel and farmer level. In Paddymarket share improved through focused approach inspite of low pest pressure in segmentslike BPH and Paddy blast. New products introduced in the previous year have received goodresponse from farmers and will be growth drivers in the next few years. During the yearunder review the Company introduced one new product Oliver for post emergencecontrol of grasses which causes significant losses to commercial crops. Oliver hasstrengthened the Company's herbicides portfolio.
The Company aims to bring meaningful contribution for farm productivity through higheryields better quality produce at optimised costs leveraging Rallis Samrudh Krishi(RSK). To this effect the Company has been working on several crops such as paddypulses grapes chilli etc. over last few years.
International Business Division (IBD):
The preliminary view of global crop protection market is estimated to have increased by5.0% to reach a total value of US$ 56.50 billion during calendar year 2018 comparedto US$ 54.21 billion during calendar year 2017. Overall consumption of Agrochemicalsincreased across the globe during 2018 mainly on account of good weather conditionsin South East Asia Australia North America and Africa. An improved inventorylevel in Latin America particularly in Brazil has led to increase in sales.
Stringent environmental norms continue to impact production in China leading to rawmaterial scarcity and significant price increase for both intermediates and activeingredients. Pressure to display improved profitability by listed companies in China hasalso impacted price escalation process.
Commodity prices recorded some improvement in the first six months. However Juneonwards prices of major commodities experienced a drop. This is largely attributable tothe ongoing US China trade relations.
IBD has achieved a revenue growth of 36% over the previous year growing to र650crores as against र479 crores during FY 2017-18. Significant growth is recordedin North America Latin America particularly Brazil and Asia.
During the year under review the Company has gained 11 new registrations in strategicoverseas markets. Partnership models with strategic customers that were adopted duringthe year helped the Company in its growth journey through leveraging each others'strengths. IBD continues its focus on developmental activities in key geographiesin Latin America South East Asia Europe and African markets.
2. NON-PESTICIDE PORTFOLIO (NPP')
NPP is an important focus area for the Company.
It serves the emerging needs of the farming community through an end-to-end solutionsbased approach. This creates value for farmers and enables them to look at the Company asa solution provider for all their agriculture related needs. NPP sales during the yearwere 33% of the total revenue.
Plant Growth Nutrients (PGNs'):
PGNs consists of Biologicals Bio-stimulants Micronutrients and Water solublefertilizers which are gaining farmer level acceptance as part of Integrated CropManagement. During FY 2018-19 the Company registered 51% growth in its bio-stimulantTata Bahaar and 57% growth in its micronutrient Surplus.
As one of the branding initiatives to reflect the image and value perception theCompany has in FY 2018-19 launched new packs of Tata Bahaar and Solubor which are wellappreciated by the customers. The Company will launch Aquafert brand Water solublefertilizers business in FY 2019-20 to actively participate and service the growingneeds of specialty fertilizers in farming.
The Company performed as per the seeds revenue plans for the year and generated 3%higher Gross Contribution over the previous year. The Company has alsosupported growth of Metahelix through seed brands of Rallis all these years. The Companywill henceforth focus on building and growing the Seeds portfolio through theMetahelix entity.
There will be an uninterrupted supply of the Seeds products to the market andinternally the Company will ensure a coordinated supply chain to make this happen. TheCompany exited from Rallis brand seeds promotion and sales without any exitcost.
Agri Services portfolio comprises the organic manure product GeoGreen Grapes SamrudhKrishi (Grapes SK') initiative and MoPu (More Pulses) programme.
During the year under review GeoGreen sales increased by about 14% over the previousyear with a significant reduction in quality related complaints andimprovement in supply lead time. Production units and warehouses were properly alignedwith targeted geographies. Overall a strong base is built for a substantial growthin future.
Grapes SK initiative continued its good performance with substantial increase infarmers seeking this service.
A few additional modules for water management and pest management were added to make itmore valuable for the farmers.
MoPu initiative continued in Maharashtra as well as in Karnataka State for PulsesProductivity Improvement Program under Public Private Partnership Integrated AgriculturalDevelopement (PPP IAD') initiative supported by the Central Government.
During the year under review 3 Blocks (Afzalpur Bijapur and Bhalki) from 3 Districts(Gulbarga Bijapur and Bidar) in Karnataka were covered under PPP IAD Project withKarnataka Government for Pulses Productivity improvement for Red Gram (Pigeon Pea) andBengal Gram (Chick Pea) which are saviour crops for farmers apart from major crops in thatarea. Increase in productivity and quality helps farmers for additional income generationand fetching better prices for their produce.
Productivity of Pulses increased by 18% to 20% and savings in cost of the inputs whichis more than 25% is a direct benefit to the farmers.
A Memorandum of Understanding was signed with Government of Maharashtra for SMARTProject to support FPO's (Farmers Producers Organisations) in Vidarbha and Marathwadaareas for productivity improvement through extensive field level guidance and value chainsupport.
The Government is planning to provide warehouse facilities and other support forpermanent structures at village levels to support large number of farmers.
SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company and its subsidiaries prepared inaccordance with Indian Accounting Standards notified under the Companies (IndianAccounting Standards) Rules 2015 (Ind AS') form part of the Annual Report and arereflected in the Consolidated Financial Statements of the Company.
The Annual Financial Statements of the subsidiaries and related detailed informationwill be kept at the registered office of the Company as also at the registered offices ofthe respective subsidiary companies and will be available to Members seeking informationat any time. They are also available on the website of the Company athttp://www.rallis.co.in/SFS.htm.
The Consolidated Financial Statements reflect the operations of the followingsubsidiaries: Metahelix Life Sciences Limited PT Metahelix Lifesciences Indonesia(subsidiary of Metahelix) Zero Waste Agro Organics Limited and Rallis Chemistry ExportsLimited.
The Company has adopted a Policy for determining Material Subsidiaries in terms ofRegulation 16(1)(c) of the Listing Regulations. The Policy as approved by the Board isuploaded on the Company's website at the weblink: http://www.rallis.co.in/Material_SubsidiariesPolicy.htm.
During the year under review no Company has become or ceased to be a subsidiary of theCompany. The Company does not have any associate or joint venture companies. A report onthe financial position of each of the subsidiary companies as per the Companies Act 2013(the Act') is provided in Form AOC-1 attached to the financial statements.
PERFORMANCE OF SUBSIDIARIES
(1) Metahelix Life Sciences Limited (Metahelix')
The consolidated revenue of Metahelix for FY 2018-19 increased from र319.42 crores toर336.57 crores an increase of 5.4% over the previous year. Profit for the yearattributable to equity shareholders of Metahelix increased marginally from र23.57crores to र23.86 crores.
Metahelix achieved a growth of 5.4% in revenues under difficult conditions. In Paddyit has significantly improved its position with a value growth of 11%.
There was a growth of 50% in Cotton sales volumes over the previous year.
In addition to strong business performance Metahelix continued its focus onstrengthening its structured brand building approach in the market to realise betterprices in the market. Its price realisations have improved across crops.
The increased focus on collections resulted in year end receivables being below thelast year level despite a growth in revenues.
On the seed production front it has strengthened its production and supplycapabilities. Volume production increased in FY 2018-19 as against the previous year.
(2) PT Metahelix Lifesciences Indonesia (PT Metahelix')
During the year under review Metahelix has invested US$ 183750 for 183750 Equityshares of US$ 1 each with 65.77% shareholding in its Indonesian Joint Venture (JV')Company PT Metahelix as per the commitment in the JV Agreement.
The JV partner has also invested his share of US$ 191250 for 95625 Equity Shares ofUS$ 2 each with 34.23% shareholding. The total equity of PT Metahelix stands at US$1000000 as on 31st March 2019.
PT Metahelix continued to have difficulties in the Seed production operations during FY2018-19 due to lower yield levels.
In the second year of launch of commercial activities in FY 2018-19 PT Metahelixachieved revenue from operations of र1.23 crores during FY 2018-19 as against र0.48 crore during FY 2017-18.
(3) Zero Waste Agro Organics Ltd. (ZWAOL')
ZWAOL achieved revenues of र10.05 crores in FY 2018-19 compared to र9.98crores in the previous year. ZWAOL's profit before tax was र2.34 crores for the yearcompared to a profit before tax of र2.54 crores in the previous year. The netprofit for the year was र1.68 crores as against a net profit of र1.94 croresin the previous year.
During the year under review ZWAOL continued to build on cost reduction initiativesundertaken in the previous year by modifying its business model. It also initiated theprocess of identifying most cost effective sites to reduce overall cost of the product. Ithas also put in place a new quality control system for better control.
ZWAOL continued with a third party quality audit at production and storage sites for anindependent feedback and corrective actions which resulted in a sharp reduction in qualitycomplaints. For an effective logistics an alignment was done for production units andstorage locations to cater Zonal requirements and reduction of supply lead time observedas an outcome.
As a result of these actions ZWAOL could record good margins with slight volumegrowth.
(4) Rallis Chemistry Exports Limited (RCEL')
As RCEL had not commenced any commercial activities it has in March 2019 made anapplication under Section 248(2) of the Act read with the Companies (Removal of Name ofCompanies from the Register of Companies) Rules 2016 for removal of its name from theRegister of Companies. Approval of the Ministry of Corporate Affairs for the same isawaited.
SCHEME OF AMALGAMATION
Amalgamation of Metahelix with the Company
During the year under review the Board of Directors of the Company approved theproposal for the merger of Metahelix a wholly owned subsidiary of the Company with theCompany and their shareholders and creditors pursuant to Sections 230 to 232 of the Actand as per the terms and conditions mentioned in the Scheme of Amalgamation. The merger issubject to the necessary approvals/ sanctions from the jurisdictional National Company LawTribunal(s) or such other competent authority and shareholders and creditors of Metahelixand the Company as applicable.
Amalgamation of ZWAOL with the Company
The Board of Directors of the Company have approved the Scheme of Amalgamation(Scheme') for merger of ZWAOL with the Company under Sections 230 to 232 ofthe Act and as per the terms and conditions mentioned in the Scheme subject toreceipt of all requisite statutory and regulatory approvals including approval of theNational Company Law Tribunal (NCLT'). Petition for sanctioning the Scheme ispending for hearing before the NCLT.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year under review the Company has made an investment of र19.60 lakhs inRallis Chemistry Exports Limited wholly owned subsidiary of the Company by way of equityshares.
The Company has not given any loans or corporate guarantee or provided any securityduring the year.
Details of loans guarantees and investments covered under the provisions of Section186 of the Act are given in the notes to the financial statements.
The Company has not accepted any deposits from the public during the year under review.No amount on account of principal or interest on deposits from public was outstanding ason 31st March 2019.
RELATED PARTY TRANSACTIONS
All Related Party Transactions that were entered into during the financial year were onan arm's length basis in the ordinary course of business and were in compliance with theapplicable provisions of the Act and the Listing Regulations.
No material Related Party Transactions were entered during the financial year by theCompany. Accordingly the disclosure of Related Party Transactions as required underSection 134(3)(h) of the Act in Form AOC-2 is not applicable to the Company and hence notprovided.
All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained for the transactions which areplanned/repetitive in nature and omnibus approvals are taken as per the policy laid downfor unforseen transactions. Related Party Transactions entered into pursuant to omnibusapproval so granted are placed before the Audit Committee for its review on a quarterlybasis specifying the nature value and terms and conditions of the transactions.
During the year under review the Company has amended the policy on Related PartyTransactions in line with the revised Listing Regulations and the same is uploaded on theCompany's website at the link http:// www.rallis.co.in/Related_Party_TransactionsPolicy.htm.
Further details on the transactions with related parties are provided in theaccompanying financial statements.
The Company has a comprehensive Risk Management framework that seeks to minimiseadverse impact on business objectives and capitalise on opportunities. Our success as anorganisation depends on the ability to identify such opportunities and leverage them whilemitigating the risks that arise while conducting our business.
The Company has implemented a mechanism for risk management and formulated a RiskManagement Policy. The said policy provides for creation of a Risk Registeridentification of risks and formulating mitigation plans. Major risks identified by thebusinesses and functions are systematically addressed through mitigating actions on acontinuing basis.
The Company has set up a Risk Management Committee which is chaired by Dr. C. V.Natraj Independent Director to monitor the risks and their mitigating actions as well asformulating strategies towards identifying new and emergent risks.
The major risks forming part of the Enterprise Risk Management process are linked tothe audit universe and are also covered as part of the annual risk based audit plan.
INTERNAL FINANCIAL CONTROLS
The Company's internal financial control systems comprising Corporate GovernancePolicies roles responsibilities and authorities standard operating procedures and ERPare reviewed by the Management.
The Internal Controls over Financial Reporting are routinely tested and certified byStatutory as well as Internal Auditors to cover all offices factories and key businessareas. Two external firms were engaged to cover the internal audit reviews and the reviewswere performed based on the risk-based internal audit plan approved by the AuditCommittee. Significant audit observations and follow up actions thereon were reported tothe Audit Committee.
The Audit Committee reviews the adequacy and effectiveness of the Company'sinternal control environment and monitors the implementation of audit recommendationsincluding those relating to strengthening of the Company's risk management policies andsystems. The ultimate objective being a Zero Surprise Risk controlledOrganisation.
Further details of the internal controls system are given in the Management Discussionand Analysis Report which forms part of this Annual Report.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Appointment and Cessation:
Mr. John Mulhall was appointed as a Director of the Company with effect from 1st April2018 in accordance with the approval of the Members obtained at the Annual General Meeting(AGM') held on 2nd July 2018.
At the meeting of the Board of Directors held on 3rd December 2018 the Boardaccepted the request of Mr. V. Shankar Managing Director & CEO for an earlyretirement from the services of the Company with effect from 31st March 2019 to pursuehis interest in setting up of the Company's proposed Centre for SustainableAgriculture and Farm Excellence' (C-SAFE) an initiative commemorating the 150 years ofthe Tata Group as a significant contribution to nation building. The Board of Directorsplaced on record their sincere appreciation for Mr. Shankar's contribution duringhis tenure as the Managing Director & CEO of the Company.
At the same meeting in order to provide continuity of leadership to the Company theBoard on the recommendation of the Nomination and Remuneration Committee (NRC')appointed Mr. R. Mukundan as the Managing Director & CEO of the Company for a periodcommencing from 3rd December 2018 to 31st March 2021 subject to the approval ofMembers.
At the meeting of the Board of Directors held on 9th February 2019 the Boardon the recommendation of the NRC appointed Mr. Sanjiv Lal as an Additional Director ofthe Company with effect from 1st April 2019 in accordance with Article 116 of theCompany's Articles of Association and Section 161(1) of the Act. He was alsoappointed as the Managing Director & CEO of the Company for a period of five yearswith effect from 1st April 2019 to 31st March 2024 subject to the approval of Members atthe ensuing AGM. He holds office upto the date of the ensuing AGM and a Notice underSection 160(1) of the Act has been received from a Member signifying the intention topropose his appointment as Director.
Consequent to the appointment of Mr. Sanjiv Lal as Managing Director & CEO Mr. R.Mukundan stepped down as the Managing Director & CEO effective close of business hoursof 31st March 2019. However he continues as a Non-Executive Director on the Boardof the Company and will continue to offer his support and guidance to the Company.Accordingly approval of the Members is being sought at the ensuing AGM for hisappointment as the Managing Director & CEO for the period commencing from 3rdDecember 2018 to 31st March 2019.
Pursuant to the provisions of the Act the Members at the AGM of the Company held on30th June 2014 had appointed Dr. Punita Kumar-Sinha as Independent Director to holdoffice for five consecutive years for a term upto 29th June 2019. Dr. Kumar-Sinhais eligible for re-appointment as an Independent Director for a second term.
Based on the recommendation of the Nomination NRC her re-appointment for asecond term commencing from 30th June 2019 upto 25th March 2024 is proposed at theensuing AGM for the approval of the Members by way of special resolution.
Mr. P. R. Rastogi and Dr. Y. S. P. Thorat were appointed as Independent Directors atthe AGM of the Company held on 30th June 2014 to hold office for five consecutive yearsfor a term upto 29th June 2019. The Board of Directors placed on record their sincereappreciation for the contributions made by Mr. Rastogi and Dr. Thorat during theirtenure as Independent Directors of the Company.
In accordance with the provisions of Section 152 of the Act and in terms of Article112(2) of the Articles of Association of the Company Mr. Bhaskar Bhat retires by rotationat the ensuing AGM and being eligible offers himself for re-appointment. A resolutionseeking Members' approval for his re-appointment forms part of the Notice.
Dr. C. V. Natraj and Ms. Padmini Khare Kaicker Independent Directors hold office fora term of five years or until completion of 75 years whichever is earlier. Theyare not liable to retire by rotation in terms of Section 149(13) of the Act.
Dr. Natraj and Ms. Kaicker have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Act and Regulation 16(1)(b) of theListing Regulations. In the opinion of the Board they fulfill the conditions ofindependence as specified in the Act and the Rules made thereunder and areindependent of the management.
Key Managerial Personnel (KMP'):
Mrs. P. S. Meherhomji resigned as the Company Secretary and Compliance Officer witheffect from 28th February 2019. The Board on the recommendation of the NRCappointed Mr. Yashaswin Sheth as the Company Secretary and Compliance Officer witheffect from 1st March 2019.
In terms of Section 203 of the Act the following are the KMPs of the Company:Mr. V. Shankar Managing Director & CEO (upto 31st March 2019) Mr. R. MukundanManaging Director & CEO (w.e.f. 3rd December 2018 upto 31st March 2019) Mr.Sanjiv Lal Managing Director & CEO (w.e.f. 1st April 2019) Mr. Ashish Mehta ChiefFinancial Officer Mr. Yashaswin Sheth Company Secretary
The Board of the Company has adopted Governance Guidelines on BoardEffectiveness. The Guidelines cover aspects related to composition and role of the BoardChairman and Directors Board diversity definition of independence Director termretirement age and Committees of the Board. It also covers aspects relating to nominationappointment induction and development of Directors Director remuneration Subsidiaryoversight Code of Conduct Board Effectiveness Review and Mandates of Board Committees.
Procedure for Nomination and Appointment of Directors:
The NRC is responsible for developing competency requirements for the Board based onthe industry and strategy of the Company. The Board composition analysis reflects in-depthunderstanding of the Company including its strategies environment operations financialcondition and compliance requirements.
The NRC conducts a gap analysis to refresh the Board on a periodic basis includingeach time a Director's appointment or re-appointment is required. The Committee is alsoresponsible for reviewing the profiles of potential candidates vis--vis the requiredcompetencies and meeting potential candidates prior to making recommendations of theirnomination to the Board. At the time of appointment specific requirements for theposition including expert knowledge expected is communicated to the appointee.
Criteria for Determining Qualifications Positive Attributes and Independence of aDirector:
The NRC has formulated the criteria for determining qualifications positive attributesand independence of Directors in terms of provisions of Section 178(3) of the Act andRegulation 19 read with Part D of Schedule II of the Listing Regulations.
Independence: In accordance with the above criteria a Director will be consideredas an Independent Director' if he/she meets with the criteria for IndependentDirector' as laid down in the Act and Rules framed thereunder and Regulation16(1)(b) of the Listing Regulations.
Qualifications: A transparent Board nomination process is in place that encouragesdiversity of thought experience knowledge perspective age and gender. It is alsoensured that the Board has an appropriate blend of functional and industry expertise.While recommending the appointment of a Director the NRC considers the manner in whichthe function and domain expertise of the individual will contribute to the overallskill-domain mix of the Board.
Positive Attributes: In addition to the duties as prescribed under the Act theDirectors on the Board of the Company are also expected to demonstrate high standards ofethical behaviour strong interpersonal and communication skills and soundness ofjudgement. Independent Directors are also expected to abide by the Code forIndependent Directors' as outlined in Schedule IV to the Act.
Annual Evaluation of Board Performance and Performance of its Committees and ofDirectors:
Pursuant to the applicable provisions of the Act and the Listing Regulations the Boardhas carried out an annual evaluation of its own performance performance of the Directorsas well as the evaluation of the working of its Committees.
The NRC has defined the evaluation criteria procedure and time schedule for thePerformance Evaluation process for the Board its Committees and Directors.
The performance of the Board and individual Directors was evaluated by the Boardafter seeking inputs from all the Directors. The performance of the Committees wasevaluated by the Board after seeking inputs from the Committee Members. Thecriteria for performance evaluation of the Board included aspects such as Boardcomposition and structure effectiveness of Board processes contribution in thelong term strategic planning etc.
The criteria for performance evaluation of the Committees included aspects such asstructure and composition of Committees effectiveness of Committee meetings etc. Theabove criteria for evaluation was based on the Guidance Note issued by SEBI.
ln a separate meeting the lndependent Directors evaluated the performance ofNon-Independent Directors and performance of the Board as a whole. They also evaluatedthe performance of the Chairman taking into account the views of Executive Directors andNon-Executive Directors. The NRC reviewed the performance of the Board its Committeesand of the Directors. The same was discussed in the Board Meeting that followed themeeting of the lndependent Directors and NRC at which the feedback received from theDirectors on the performance of the Board and its Committees was also discussed.
Significant highlights learning and action points with respect to the evaluation werediscussed by the Board.
The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel and other employees pursuant to the provisions of the Act and the ListingRegulations. The Remuneration Policy is attached as Annexure B which forms part ofthis Report.
BOARD AND COMMITTEE MEETINGS
A calendar of Board and Committee Meetings to be held during the year wascirculated in advance to the Directors.
1. Details of Board Meetings
During the year under review 8 (eight) Board Meetings were held details ofwhich are provided in the Corporate Governance Report.
2. Composition of Audit Committee
During the year under review the Audit Committee comprised 4 (four) Members out ofwhich 3 (three) were Independent Directors and 1 (one) was a Non-Executive Non-IndependentDirector. During the year 6 (six) Audit Committee Meetings were held details of whichare provided in the Corporate Governance Report.
There have been no instances during the year when recommendations of the AuditCommittee were not accepted by the Board.
3. Composition of Corporate Social Responsibility (CSR) Committee
As on 31st March 2019 the Committee comprised 3 (three) Members out of which 2 (two)were Independent Directors and 1 (one) was a Non-Executive Director. During the year underreview 2 (two) CSR Committee meetings were held details of which are provided in theCorporate Governance Report. Mr. Sanjiv Lal Managing Director & CEO was inducted asa Member of the CSR Committee effective 1st April 2019.
DIRECTORS' RESPONSIBILITY STATEMENT
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the Internal Statutory Costand Secretarial Auditors including audit of the internal financial controls overfinancial reporting by the Statutory Auditors and the reviews performed by Management andthe relevant Board Committees including the Audit Committee the Board is of the opinionthat the Company's internal financial controls were adequate and effective during FY2018-19.
Accordingly pursuant to Section 134(3)(c) and 134(5) of the Act the Board ofDirectors to the best of their knowledge and ability confirm that:
(i) in the preparation of the annual accounts the applicable accounting standards havebeen followed and that there are no material departures;
(ii) they have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period;
(iii) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(iv) they have prepared the annual accounts on a going concern basis;
(v) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively;
(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR') and Affirmative Action (AA') is avery important part of the business journey of the Company. The Company has developed itsown Sustainability Model focusing on CSR and AA initiatives. The leadership team at Rallishas been very supportive sensitive and encourages the team to work for inclusive growththrough its CSR initiatives.
The Company's CSR initiatives are driven by its CSR team in support with key strategicpartners having domain expertise. For achieving a greater and sustainable impactCSR project implementation is done in partnership with concerned stakeholders.
The Company's CSR initiatives are woven around the Company's focus areas which includeNatural Resource Management (NRM') Education including Farmer safety awareness andModel Tribal Village under AA.
Employees are one of the key stakeholders and support the CSR and AA initiatives byactive participation through volunteering. During the year under review theCompany was able to achieve more than 5044 hours' volunteering through various events inwhich 319 employees actively participated.
In NRM focus is on water conservation through rain water harvesting (Jal Dhan')recharging ground water and soil conservation. Under soil conservation focus is onGreening' principally through afforestation and tree plantation drives. More than80000 trees have been planted and sustained by the Company in the last five years.
In Education focus is on Science English and Information Technology along withsupport for infrastructure and capacity building. Educational interventions are branded asRUBY' (Rallis Ujjwal Bhavishya Yojana).
In You are Safe' focus is on educating farmers and students from rural schoolson farmer safety. During the year under review the Company spread the awareness amongmore than 23000 farmers and more than 10400 students from 2 districts ofMaharashtra which are spread across 16 Tehsils and 553 villages.
The Company under its AA programme focuses on converting a backward Tribal villageinto a Model Tribal village. This initiative is focused in tribal areas around Mumbai inMaharashtra.
The above projects are in accordance with Schedule VII of the Act. The Annual Report onCSR activities is attached as Annexure C which is forming part of this Report.
The Company has adopted a Corporate Social Responsibility (CSR') Policy incompliance with the provisions of the Act and the same is available on the website of theCompany at http://www.rallis. co.in/CSR_Policy.htm.
Salient features of the CSR Policy:
The Company's CSR Policy (Policy') provides guidelines which helps indesigning implementing and monitoring the CSR programmes across the Company.
Leveraging our presence pan India the Policy lays emphasis on providing engagementopportunities through volunteering to employees customers and partners. The Policyfocuses on various sections and issues as under:
1. Natural Resource Management: This section focuses on two themes:
(a) Jal Dhan
(b) Rural development
2. Employability: With focus on:
(a) Skill development: Tara Women empowerment and (b) RUBY Educational initiatives
3. The Company will respond to disaster as and when required
4. Geography and target communities:
a. Due to its significant presence in Gujarat and Maharashtra currently the focus is onthese two States.
b. The Company focuses on underprivileged schools underprivileged and marginalisedcommunities socially and economically disadvantaged groups.
5. Implementation and Monitoring:
a. Will be done by the In-house CSR team with the help from experts as may be required.b. Programmes will have clearly defined output outcome and process indicators.
c. CSR Committee will receive quarterly progress report of all activities.
POLICY ON PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE
The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on Prevention Prohibition and Redressal of Sexual Harassment at workplace. Thisis in line with provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 (POSH Act') and the Rules made thereunder.
With the objective of providing a safe working environment all employees (permanentcontractual temporary trainees) are covered under this Policy. The policy is availableon the website at http://www. rallis.co.in/POSH.htm
As per the requirement of the POSH Act and Rules made thereunder the Company hasconstituted an Internal Committee at all its locations known as the Prevention of SexualHarassment (POSH) Committees to inquire and redress complaints received regarding sexualharassment.
During the year under review the Company received one complaint of alleged sexualharassment that was investigated and dealt with by taking appropriate action as perthe provisions of the POSH Act. There are no pending complaints as on the end of thefinancial year.
VIGIL MECHANISM/ WHISTLEBLOWER POLICY
Pursuant to Section 177(9) of the Act a vigil mechanism has been establishedfor Directors and employees to report to the management instances of unethical behaviouractual or suspected fraud or violation of the Company's code of conduct or ethicspolicy.
The Company believes in the conduct of the affairs of its constituents by adopting thehighest standards of professionalism honesty integrity and ethical behaviour in linewith the Tata Code of Conduct (TCoC'). The role of the employees in pointing outsuch violations of the TCoC cannot be undermined.
Further the Policy provides for adequate safeguards against victimisation ofemployees who avail of the mechanism and also provides for direct access to theChairperson of the Audit Committee. During the year under review the Companyamended the Whistleblower Policy to provide a clause wherein all employees of the Companyare eligible to report any instance of leak of Unpublished Price Sensitive Information.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
No significant material orders have been passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company and its futureoperations.
AUDIT AND AUDITORS
(1) Statutory Auditors:
At the AGM of the Company held in 2017 pursuant to the provisions of the Act and theRules made thereunder B S R & Co. LLP Chartered Accountants (BSR') (FirmRegistration No. 101248W/W-100022) were appointed as Statutory Auditors of theCompany from the conclusion of the 69th AGM held on 23rd June 2017 till theconclusion of the 74th AGM to be held in the year 2022. BSR have submitted acertificate confirming that their appointment is in accordance with Section 139 read withSection 141 of the Act.
The Audit Report of BSR on the Financial Statements of the Company for FY2018-19 is a part of the Annual Report. The Report does not contain any qualificationreservation adverse remark or disclaimer.
(2) Cost Auditors:
The Company is required to maintain cost records as specified by the Central Governmentunder sub-section (1) of Section 148 of the Act and the rules framed thereunder andaccordingly the Company has made and maintained such cost accounts and records.
In terms of Section 148 of the Act read with Companies (Cost Records and Audits) Rules2014 the Audit Committee recommended and the Board of Directors appointed D. C. Dave& Co. Cost Accountants (Firm Registration No. 000611) to conduct Cost Audits relatingto Insecticides (Liquid Solid and Technical Grade) Fertilizers Chemicals (Plastics andPolymers) and Drugs and Pharmaceuticals of the Company for the year ending 31st March2020. The Company has received their written consent that the appointment will be inaccordance with the applicable provisions of the Act and rules framed thereunder.
Members are requested to consider the ratification of the remuneration payable to D. C.Dave & Co. as has been set out in the Notice of the 71st AGM of the Company.
(3) Internal Auditors:
Pursuant to the provisions of Section 138 of the Act and the Companies (Accounts)Rules 2014 on the recommendation of the Audit Committee Ernst & Young LLPand Mahajan & Aibara LLP were appointed by the Board of Directors to conduct internalaudit reviews for the Company.
(4) Secretarial Auditors:
In terms of Section 204 of the Act and the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 Parikh & Associates a firm of Company Secretariesin Practice have been appointed as Secretarial Auditors of the Company. The report of theSecretarial Auditors is enclosed as Annexure D.
There has been no qualification reservation adverse remark or disclaimer given by theSecretarial Auditors in their Report.
REPORTING OF FRAUDS BY AUDITORS
During the year under review the Statutory Auditors Cost Auditors and SecretarialAuditors have not reported any instances of frauds committed in the Company by itsOfficers or Employees to the Audit Committee under Section 143(12) of the Companies Act2013 details of which needs to be mentioned in this Report.
Pursuant to Sections 92 and 134(3) of the Act and Rule 12 of the Companies (Managementand Administration) Rules 2014 the extract of Annual Return in Form MGT-9 is attached asAnnexure E.
The extract of the Annual Return of the Company can also be accessed on the website ofthe Company at http://www.rallis.co.in/ MGT2019.htm.
SECRETARIAL STANDARDS OF ICSI
The Directors have devised proper systems and processes for complying with therequirements of applicable Secretarial Standards issued by the Institute of CompanySecretaries of India and that such systems were adequate and operating effectively.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Act read with Rule 8of The Companies (Accounts) Rules 2014 is attached as Annexure F.
PARTICULARS OF EMPLOYEES AND REMUNERATION
The information required under Section 197(12) of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is attachedas Annexure G.
The information required under Rule 5(2) and (3) of The Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is provided in the Annexure forming partof the Report. In terms of the first proviso to Section 136 of the Act the Report andAccounts are being sent to the Members excluding the aforesaid Annexure.
Any Members interested in obtaining the same may write to the Company Secretary at theregistered office of the Company. None of the employees listed in the said Annexure isrelated to any Director of the Company.
MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS RESPONSIBILITY AND CORPORATE GOVERNANCEREPORT
The Management Discussion and Analysis Report the Business Responsibility Report andthe Report on Corporate Governance as required under the Listing Regulations forms partof the Annual Report.
The Directors acknowledge the dedicated service of the employees of the Company duringthe year. They would also like to place on record their appreciation for the continuedco-operation and support received by the Company during the year from bankers financialinstitutions Government authorities business partners and other stakeholders.
| ||On behalf of the Board of Directors |
| ||BHASKAR BHAT |
|Mumbai 25th April 2019 ||Chairman |