DIRECTORS' REPORT Dear Members, 1. Your Directors have great pleasure in presenting the Twentieth Annual Report of the Company on the business and operations together with the Audited Financial Statements for the Financial Year ended 31st March, 2016. 2. Company's Performance During the Financial Year 2015-16, the Company has registered net revenue from operations of Rs.1,862 crores, as compared to Rs.1,746 crores in the previous year, an increase of 7% year-on-year. Profit Before Tax for the year under review was Rs.161 crores, higher by 59%, as compared to Rs.101 crores in the previous year. Profit After Tax for the year under review was Rs.112 crores, grown by 58% over Rs.71 crores of the previous year. Segment wise performance of products of the Company is detailed under the Section Management Discussion and Analysis which forms part of this Annual Report 3. Details of New Projects During the year under review, the Company has set up a production unit to manufacture Electronic Voltage Stabilizers at Rangpo in Sikkim, mainly to cater to the requirements of Non-South markets. The said unit is eligible for tax exemption under North East Industrial & Investment Promotion Policy (NEIIPP). Considering the increased demand for House Wiring Cable, especially in South markets, the Company is expanding the production capacity of the product at its facility at Chavady, Coimbatore. As part of backward integration, the Company has initiated steps for setting up a facility for PVC compounding at Chavady, Coimbatore. 4. Changes to the Share Capital During the year under review, the Company has vested 55,507 and 1,80,294 number of options of Rs.10/- and Rs.485/- respectively to eligible employees under ESOS 2013. The employees have exercised 48,942 and 63,161 number of options of Rs.10/- and Rs.485/- respectively. The options exercised were allotted and the paid-up capital of the Company as on 31st March, 2016 has increased to Rs.30,08,52,440/-. 5. Appropriations made from the profits a) Transfer to Reserves Your Directors proposes to transfer an amount of X 10.00 crores to the General Reserve out of the profits available for appropriation during the year. b) Interim and Final Dividend Considering the improved profits, your Directors had declared an interim dividend of Rs.4.50 per share (45% on par value of Rs.10/- per share) on 09th March, 2016 and the amount was paid before 31st March, 2016 to all those shareholders whose name appeared in the Register of Members on 19th March, 2016. Outflow on account of payment of interim dividend was Rs.13.53 crores and corporate dividend tax paid on the interim dividend was Rs.2.75 crores. In addition to the interim dividend, the Board of Directors are pleased to recommend a final dividend of Rs.2.50 per share (25% on par value of Rs.10/- per share). The final dividend, if declared as recommended, would involve an outflow of Rs.7.52 crores and corporate dividend tax of Rs.1.53 crores towards dividend tax, resulting in a total outflow of Rs.9.05 crores. If approved by the shareholders at the ensuing Annual General Meeting, the dividend would be payable to all the shareholders / beneficial owners whose names appear in the Register of Members as on 19th July, 2016. The Register of Members and Share Transfer Books will remain closed from 20th July, 2016 to 26th July, 2016 (both days inclusive). 6. Transfer of Unpaid Dividend to Investor Education Protection Fund (IEPF) Pursuant to the provisions of Section 205C of the Companies Act, 1956, your Company has transferred an amount of Rs.3,68,705/-, during the year under review to IEPF. The said amount was lying unclaimed or unpaid in Dividend Account for a period of seven years after declaration of dividend for the Financial Year 2007-08. 7. Fixed Deposit The Company has not accepted any fixed deposits during the year under review. 8. Material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report. No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate and the date of report. 9. Change in the Nature of Business, if any There was no change in the nature of business of the Company during the Financial Year 2015-16. 10. Significant or Material Orders passed by Regulators / Courts / Tribunals During the year under review, there were no significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. 11. Board of Directors and its Committees A. Composition of the Board of Directors The Board of Directors of the Company comprises eight Directors, of which three are Executive and five are Non-Executive Directors, which include, four Independent Directors. The composition of the Board of Directors is in compliance with the provisions of Regulation 17 of Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations) and Section 149 of the Companies Act, 2013. B. Change in Office of Directors and Key Managerial Personnel of the Company during the year under review and details of Directors seeking appointment / re-appointment in the 20th Annual General Meeting The members of the Company in their 19th Annual General Meeting held on 03rd August, 2015, approved the re-appointment of Mr. Kochouseph Chittilappilly and Mr. Mithun K Chittilappilly, to the offices of Chairman and Managing Director of the Company respectively, for a period of three years with effect from 01st April, 2015. In the said meeting, the members also approved the re-appointment of Mr. Ramachandran Venkataraman, as a Director, liable to retire by rotation. The Board of Directors in their meeting held on 04th May, 2016, have re-appointed Mr. Ramachandran Venkataraman, as Whole-time Director of the Company, under the designation Director and Chief Operating Officer, for a period of four years, effective from 01st June, 2016, subject to the approval of the members in the ensuing Annual General Meeting. Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mrs. Joshna Johnson Thomas, Non-Executive Director, is liable to retire by rotation in the ensuing Annual General Meeting and being eligible offers for re-appointment. The Notice dated 27th June, 2016 of the ensuing Annual General Meeting includes the proposals for re-appointment of the Directors and their brief resume and also specific information about the nature of their expertise and the names of the Companies in which they hold directorship and membership / chairmanship of the Board Committees, as stipulated in Listing Regulations. C. Declaration by Independent Directors The Company has received necessary declarations from the Independent Directors stating that they meet the criteria of independence as specified in Section 149(6) of the Companies Act, 2013 and qualify to act as Independent Director of the Company. D. Number of Meetings of the Board of Directors During the Financial Year 2015-16, the Board of Directors of the Company, met seven times, on 04th May, 2015, 03rd August, 2015, 15th October, 2015, 04th November, 2015, 29th January, 2016, 09th March, 2016 and 22nd March, 2016. A separate meeting of the Independent Directors of the Company was also held on 22nd March, 2016, and the Directors reviewed and assessed the matters enumerated under Schedule IV(VII)(3) to the Companies Act, 2013 and Regulation 25(4) of the Listing Regulations. All the Independent Directors of the Company attended the said meeting. E. Committees of the Board The Sub-Committees of the Board comprises of Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship and Share Transfer Committee and Corporate Social Responsibility (CSR) Committee. The terms of reference of Audit Committee, Nomination and Remuneration Committee and Stakeholders' Relationship and Share Transfer Committee were aligned with the requirements of the Companies Act, 2013 and Listing Regulations. A detailed note on the said Committees of the Board of Directors is given in the section, 'Corporate Governance Report' forming part of this Annual Report. The CSR Committee of the Company comprises of three members, Mr. Kochouseph Chittilappilly, Mr. Cherian N Punnoose and Mr. Mithun K Chittilappilly. Mr. Kochouseph Chittilappilly, is the Chairman of the Committee and the members of the Committee met three times during the year under review, on 04th May, 2015, 03rd August, 2015 and 22nd March, 2016. The Committee recommended to the Board, the various CSR programs / activities to be carried out by the Company, for its consideration and approval. F. Performance Evaluation Pursuant to the provisions of Companies Act, 2013 and Listing Regulations, the Board of Directors, have carried out an annual performance evaluation of Board, Sub-Committees of Board and individual directors, based on the criteria laid down in the Nomination Remuneration and Evaluation Policy of the Company. The performance evaluation of the Board was carried out on a questionnaire template on the basis of criteria such as effective role played by the Board in decision making, evaluating strategic proposals, discussing annual budgets, assessing the adequacy of internal controls, review of risk management procedures etc. The performance evaluation of various SubCommittees of the Board were carried out on the basis of criteria such as constitution of the SubCommittees in accordance with the provisions of the Companies Act, 2013 and Listing Regulations, effective functioning of the committees as per the terms of reference, periodical suggestions and recommendations given by the Sub-Committees to the Board etc. The performance evaluation of individual Directors was carried out both by the Nomination and Remuneration Committee and the Board on the basis of criteria such as active participation in the Board deliberations, role played in evaluation of strategic proposals, contributions made for adoption of better corporate governance practices by the Company etc. A separate meeting of Independent Directors of the Company was held during the year under review, in which the members evaluated the performance of the Chairman on the basis of criteria such as giving guidance to the Board and ensuring the independence of the Board etc. The performance of the Non-Independent Directors was also evaluated on the basis of their contribution made to the growth of the Company, strategic initiatives and Board deliberations. G. Directors' Responsibility Statement In terms of the requirements of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, Board of Directors of the Company, hereby state and confirm that: i) in the preparation of the annual accounts, the applicable accounting standards had been followed. Proper explanation relating to material departures, if any, is provided wherever applicable; ii) such accounting policies were selected and applied consistently and had made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period; iii) proper and sufficient care were taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) the annual accounts were prepared on a going concern basis; v) the internal financial controls to be followed by the Company were laid down and such internal financial controls were adequate and were operating effectively; and vi) proper systems to ensure compliance with the provisions of all applicable laws were devised and such systems were adequate and operating effectively. 12. Audit Related Matters A. Statutory Auditors M/s. S R Batliboi & Associates LLP, Chartered Accountants, Kochi, with firm registration number - 101049W/E300004, were appointed as Statutory Auditors of the Company, by the members in the 19th An nual General Meeting to hold office till the conclusion of 21st Annual General Meeting. In terms of provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors shall be placed at every Annual General Meeting convened during the tenure of appointment for ratification. Accordingly, the appointment of M/s. S R Batliboi & Associates LLP, Chartered Accountants, as Statutory Auditors of the Company is placed for ratification by the members. B. Cost Auditors M/s. Ajeesh & Associates, Cost Accountants, Ernakulam, were appointed as the Cost Auditors of the Company for the Financial Year 2015-16 and the Audit Report will be considered by the Board of Directors. The Board of Directors in their meeting held on 04th May, 2016, have approved the appointment of M/s. Ajeesh & Associates, Cost Accountants, Ernakulam, as the Cost Auditors of the Company for the Financial Year 2016-17 and also fixed the audit fee payable to them. As per the provisions of the Section 148 of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, audit fee payable to the Cost Auditors is to be ratified by the members of the Company. Your Directors have proposed a resolution in item no. 7 of the Notice dated 27th June, 2016 for the ensuing Annual General Meeting, for approval of the audit fee. C. Secretarial Auditors The Board of Directors, pursuant to the provisions of Section 204 of the Companies Act, 2013, appointed M/s. Keyul M Dedhia & Associates, Company Secretaries, Mumbai, as the Secretarial Auditor of the Company, to carry out the Secretarial Audit of the Company for the Financial Year 2015-16. Secretarial Audit Report Secretarial Audit Report, issued by M/s. Keyul M Dedhia & Associates, Auditors in Form No. MR -3 forms part of this Board Report and is annexed herewith as Annexure 1. While confirming that the company has complied with the provisions of applicable acts, rules, etc., the auditors made an observation. Board's clarifications for the same are as follows. Delay in submitting the disclosures received under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 from designated employees of the Company at some instances: The delay in filing was due to oversight and Company has filed requisite disclosures to the Stock Exchanges subsequently. 13. Policy Matters A. Nomination Remuneration and Evaluation Policy Pursuant to the provisions of Section 178(3) of the Companies Act, 2013, the Nomination and Remuneration Committee of the Company has formulated and recommended to the Board a policy containing the criteria for determining qualifications, positive attributes and independence of a director and it highlights the remuneration for the Directors, Key Managerial Personnel and other employees, ensuring that it covers the matters mentioned in Section 178(4) of the Act. Nomination Remuneration and Evaluation Policy approved by the Board is given in Annexure 2 to this Report. B. Vigil Mechanism / Whistle Blower Policy Your Company had, before coming into force of Companies Act, 2013, voluntarily adopted a Whistle Blower Policy, to enable its employees and Directors to report any genuine grievances, illegal or unethical behavior, suspected fraud or violation of laws, rules and regulations, conduct, to the Ombudsman or Vigil Officer. The Whistle blower also has access to the Audit Committee Chairman. The policy has been circulated among the employees of the Company working at various locations, divisions / units. During the year under review, the Company has not received any instances of genuine concerns from Directors or employees. The said policy has been amended in line with the provisions of Companies Act, 2013 and Listing Regulations and it provides for adequate protection to the whistle blower against victimization or discriminatory practices. The Policy is available on the website of the Company at www.vguard.in in the page 'Investor Relations'. C. Corporate Social Responsibility Policy The Board of Directors of the Company has adopted a policy on Corporate Social Responsibility, pursuant to the provisions of Section 135 of the Companies Act, 2013, read with The Companies (Corporate Social Responsibility Policy) Rules, 2014. The said policy is posted on the web site of the Company www.vguard.in. In terms of Section 135 of the Companies Act, 2013 read with The Companies (Corporate Social Responsibility Policy) Rules, 2014, the annual report on Corporate Social Responsibility activities of the Company is given in Annexure 3 to this report. D. Risk Management Policy The Company has developed and implemented a risk management framework detailing various risks associated with the business of the Company, the process of identification, monitoring and mitigation of risks etc. As per the risk profile, the various risks associated with the Company are classified as marketing risks, product risks, inventory risks, compliance risks, financial risks, project risks and organizational risks. The Board has constituted a Risk Management Committee to review the risks identified by various product risk groups and also suggest/ monitor measures to mitigate the risks identified. A detailed note on Risk Management is given under the section Management Discussion and Analysis, which forms part of this Annual Report. 14. Other Matters A. Internal Controls The Company has Internal Control Systems commensurate with the nature of its business, size and complexities. The Audit committee from time to time reviews its adequacy and effectiveness and monitors the implementation of the audit recommendations. During the year under review, the Internal Audit Division of the Company, has tested the key controls towards assurance for compliance with the policies and standard operating procedures etc. and no significant weaknesses/ deviations were identified in design or operations of the controls. Further, the Statutory Auditors of the Company also carried out audit of the Internal Financial Controls over Financial Reporting of the Company as of 31st March, 2016 and issued their report which forms part of the Independent Auditor's report. B. Financial Position and Performance of Subsidiaries, Joint Ventures and Associates The Company has no subsidiary, associate or has not entered into any joint venture and hence not required to disclose any information. C. Any revision made in the Financial Statements or Board's Report The Company has not revised the Financial Statements or Board's Report in respect of any of the three preceding financial years. D. Employee Stock Option Scheme 2013 The Company had, during the Financial Year 201314, granted 9,17,322 options to eligible employees to be vested over a period of three years in accordance with the Employee Stock Option Scheme (ESOS) 2013. Out of the total number of options granted, 1,55,263 number of options were cancelled till Financial Year 2015-16. During the year under review, taking into account the parameters for vesting of options, 2,35,801 number of options were vested during the second year to eligible employees. The employees have exercised 1,12,103 numbers of options during the year under review. The Nomination and Remuneration Committee in their meeting held on 4th May, 2015, had granted 90,628 number of options to eligible employees. Details of options movement during the year under review are given in the Annexure 4, which forms part of this Report. E. Code of Conduct As prescribed under Regulation 26(3) of the Listing Regulations, a declaration signed by the Managing Director affirming compliance with the Code of Conduct by the Directors and Senior Management of the Company for the Financial Year 2015-16 forms part of the Corporate Governance Report. F. Extract of Annual Return Extract of the Annual Return in Form No. MGT-9 forms part of the Board's Report and is annexed herewith as Annexure - 5 G. Management Discussion and Analysis Report As per requirements of Listing Regulations, a detailed review of the developments in the industry, performance of the Company, opportunities and risks, internal control systems, outlook etc. of the Company is given under the head Management Discussion and Analysis Report, which forms part of this Annual Report. H. Particulars of Loans, Guarantees and Investments During the year under review, the Company has not given any loan or guarantee or made any investments in securities of other body corporate. I. Corporate Governance Your Company has complied with the Corporate Governance norms as stipulated under the Listing Regulations. A detailed report on Corporate Governance forms part of this Annual Report. A certificate of Statutory Auditor confirming compliance of the Corporate Governance requirements by the Company is attached to the Report on Corporate Governance. J. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The information pertaining to conversation of energy, technology absorption, foreign exchange earnings and outgo as required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is furnished in Annexure 6 and forms part of this Report. K. Remuneration Details of Directors, Key Managerial Personnel and Employees The details of remuneration of Directors, Key Managerial Personnel and the Statement of employees in receipt of remuneration exceeding the limits prescribed under Section 134 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been provided in Annexure 7 to this Report. L. Related Party Transactions During the year under review, the Company has not entered into any contract or arrangements with related parties as per the provisions of Section 188(1) of the Companies Act, 2013. Form No. AOC-2 which forms part of the Board's Report is annexed herewith as Annexure - 8. M. Disclosure as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company is committed in providing and promoting a safe and healthy work environment for all its employees. It has zero tolerance towards sexual harassment at the workplace and has adopted a policy for 'Prevention and Redressal of Sexual Harassment at the Workplace' in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder for prevention and redressal of complaints of sexual harassment at workplace, along with a structured reporting and redressal mechanism. The Company has also constituted an Internal Complaints Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The policy has been circulated among the employees of the Company and the same is exhibited in the notice Board of all the business locations / divisions of the Company. During the year under review, the Company has not received any complaint of sexual harassment. 15. Acknowledgement The Board wishes to place on record its sincere appreciation to the Company's customers, vendors, central and state government bodies, auditors, legal advisors, consultants, registrar and bankers for their continued support to the Company during the year under review. The Directors also wish to place on record their appreciation for the dedicated efforts of the employees at all levels. Finally, the Board expresses its gratitude to the members for their continued trust, co-operation and support. For and on behalf of the Board of Directors Sd/- Kochouseph Chittilappilly Chairman (DIN: 00020512) Sd/- Mithun K Chittilappilly Managing Director (DIN: 00027610) Place: Kochi Date : 04th May, 2016 |