REPORT ON CORPORATE GOVERNANCE
[Pursuant to Part C of Schedule V the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 "Listing Regulations"]
1. Brief Statement on Company's Philosophy on Code of Governance
Good governance practices stem from the value system and philosophy of the organisation and at Castrol we are committed to optimise shareholder returns, governance processes and an entrepreneurial, performance focused conducive work environment.
The Board is collectively responsible to ensure that Corporate Governance processes are structured to direct the Company's actions, assets and agents to achieve this purpose, while complying with the Code of Governance. The Company's policies covers aspects such as ethical conduct, health, safety and the environment; control and finance; commitment to employees; and relationships as rooted in the BP's Governance Principle. Key aspects of the Company's Governance Processes are:
• Clear statements of Board Processes and the Board's relationship with Executive Management.
• A framework of prudent and effective controls which enable risks to be assessed and mitigated.
• Set the Company's values and standards and ensure that obligations to shareholders and others are understood and fulfilled. The Board recognises that in conducting its business, the Company should be responsive to other relevant constituencies.
• Review and where appropriate determine the long term strategy and the annual plan for the Company based on proposals made by the Management, for achieving the Company's purpose.
The values of the Company i.e. Safety, Respect, Excellence, Courage and One Team have been embedded in its way of working. These values are fundamental drivers of sustainable business performance.
2. Board of Directors Composition and Category
The Board of Directors of the Company comprises of an optimum combination of Executive and Non-Executive Directors, which is in conformity with the SEBI (Listing Obligations and Disclosure Requirement) Regulation, 2015. As of the year ended 31st December 2015, the Board consisted of 10 Directors comprising of Four Executive Directors, Three Non-Executive Directors nominated by Castrol Limited, UK as provided under the Articles of Association of the Company and Three Independent Directors. The increase in number of Directors on the Board is due to succession plan for the position of the Managing Director. The Chairman of the Board is a Non-Executive Independent Director. None of the Directors of your Company is related to each other.
During the year, Mr. Ravi Kirpalani, stepped down as the Managing Director with effect from 11th October 2015 and as a Whole-time Director with effect from 31 st December 2015 and as such he has ceased to be Director of the Company.
Appointment and Tenure
The Directors of the Company are appointed by members at the General Meetings and two-third directors, other than Independent Directors retire by rotation pursuant to the provisions of the Companies Act, 2013. The Executive Directors on the Board serve in accordance with the terms of their contract of service with the Company.
Based on the confirmation/disclosures received from the Directors and on evaluation of the relationships disclosed, all the Non-Executive -Independent Directors including the Chairman are independent in terms of Listing Agreement/SEBI (Listing and Obligation Disclosure Requirement), Regulation, 2015.
Board Meetings Process
The notice of Board Meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The Agenda and Pre-reads are circulated well in advance before each meeting to all the Directors for facilitating effective discussion and decision making. Considerable time is spent by the Directors on discussion and deliberations at the Board Meetings.
The Company Secretary is responsible for collation, review and distribution of all papers submitted to the Board and Committees thereof for consideration. The Company Secretary is also responsible for preparation of the Agenda and convening of the Board and Committee meetings. The Company Secretary attends all the Meetings of the Board and its Committees, advises/assures the Board on Compliance and Governance principles and ensures appropriate recording of minutes of the meetings.
During the year, the Independent Directors of the Company met separately without the presence of other Directors or management representatives on 5th November 2015 to review the performance of Non-Independent Directors; the Board & the Chairperson of the Company and to assess the quality, quantity and timeliness of flow of information between the Company management and the Board. All the Independent Directors attended the meeting.
In addition to these formal meetings, interactions outside the Board meetings also take place between the Chairman and Independent Directors.
Directors' Induction and Familiarization
The Board members are provided with necessary documents/brochures, reports and internal policies to enable them to familiarise with the Company's procedures and practices. Periodic presentations are made at the Board and Committee Meetings, on business and performance updates of the Company, global business environment, business strategy and risks involved.
Independent Directors and Executive Directors are issued Letters of Appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. The induction process for Non-Executive Independent Directors include interactive sessions with Management Committee members, Business and Functional Heads, visit to market/plant, etc.
The Independent Directors, from time to time request management to provide detailed understanding of any specific project, activity or process of the Company. The management provides such information and training either at the meeting of Board of Directors or otherwise.
Web link giving the details of familiarization programme imparted to independent directors http//www.castrol com/en_in/india/about-us/financials/other-financials-document-policies.html
The Nomination and Remuneration Committee specified down the evaluation criteria for performance evaluation of Directors, Board and its Committees. The Board is committed for evaluating its own performance as a Board and individual performance of Directors, in order to identify strengths and areas in which it may improve functioning. Further, overall effectiveness of the Board shall be measured to decide the appointments, re-appointments of directors. The details of annual Board Evaluation process for Directors have been provided in the Board's Report.
Following are the major criteria applied for performance evaluation —
1. Attendance and contribution at Board and Committee meetings and application of his/her expertise, leadership qualities and knowledge to give overall strategic direction for enhancing the shareholder value.
2. His/her ability to create a performance culture that drives value creation and a high quality of debate with robust and probing discussions.
3. His/her ability to monitor the performance of management and satisfy himself/herself with integrity of the financial controls and systems in place, etc.
4. Independent Directors performance is evaluated also based on his/her help in bringing an independent judgment to bear on the Board's deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct and his/her ability to bring an objective view in the evaluation of the performance of the board and management.
3. Committees of the Board
The Board Committees are set up to carry out clearly defined roles which are considered to be performed by members of the Board, as a part of good governance practice. Minutes of proceedings of Committee meetings are circulated to the Directors and placed before Board Meetings for noting. The Board has currently established the following statutory and non-statutory Committees:
(A) Audit Committee
The members of the Audit Committee have wide exposure and knowledge in area of finance and accounting. The terms of reference of the Audit Committee have been in line with Regulation 18 of SEBI Listing Obligations and Disclosure Requirement, Regulations, 2015 and Section 177 of the Companies Act, 2013. The Audit Committee, inter alia, provides reassurance to the Board on the existence of an effective internal control environment.
(a) The terms of reference of the Committee are briefly described below:
1. Oversight of the Company's financial reporting process and the disclosure of its financial information.
2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees.
3. Reviewing and monitoring the auditor's independence and performance.
4. Recommending to the Board, the appointment and remuneration of Cost Auditor.
5. Approval of payment to statutory auditors for any other services rendered by the statutory auditors
6. Reviewing, with the management, the annual financial statements and quarterly financial statements
7. Reviewing with the management, performance of internal auditors and adequacy of the internal control systems.
8. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and frequency of internal audit.
9. Discussing with internal auditors any significant findings and follow-up thereon.
10. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.
11. Discussion with statutory auditors before the audit commences.
12. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors.
13. To review the functioning of the Whistle Blower mechanism.
14. Approval or any subsequent modification of transactions of the Company with related parties.
15. To evaluate internal financial controls and risk managements systems.
16. Approval of appointment of CFO.
(b) The Audit Committee comprises of four (4) members viz. Mr. S. M. Datta, Mr. R. Gopalakrishnan, Mr. Uday Khanna and Mr. Ralph Hewins. Mr. Uday Khanna, is the Chairman of the Committee.
(c) The meetings of Audit Committee are also attended by Managing Director, CFO, Managing Counsel, Statutory Auditors and Internal Auditors as special invitees. The cost auditors attend the Audit Committee Meeting where cost audit reports are discussed. The Company Secretary of the Company acts as the Secretary to the Committee.
During the financial year ended 31st December 2015 total of five (5) Audit Committee meetings were held on 25th February 2015, 14th May 2015, 29th July 2015, 17th August 2015 and 5th November 2015. The Attendance of each member of the Committee is given below:
) Nomination and Remuneration Committee
In terms of Section 178(1) of the Companies Act, 2013 and Regulation 19 of SEBI Listing Obligation and Disclosure Requirement), Regulation, 2015, the Nomination and Remuneration Committee ("NRC").
The role of Nomination and Remuneration Committee in brief is as follows:
1. Identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment/ removal.
2. Carry out evaluation of every director's performance.
3. Devising a policy on Board diversity.
4. Formulate criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to the remuneration for the directors, key managerial personnel and other employees.
NRC comprises of the following members viz. Mr. R. Gopalakrishnan, Independent Director; Mr. S. M. Datta, Independent Director; Mr. Ralph Hewins Non-Executive Director; and Mr. Peter Weidner, NonExecutive Director. The Nomination and Remuneration Committee is chaired by Mr. R. Gopalakrishnan.
The Company has adopted Nomination and Remuneration Policy. The Nomination and Remuneration Policy is in compliance with all applicable provisions of the Companies Act, 2013, particularly Section 178 read together with the applicable rules thereto and Regulation 19(4) of SEBI (Listing Obligation and Disclosure Requirement), Regulation, 2015. The Policy is designed to attract and retain best talent, who has the potential to drive the growth and enhance shareholder value, it is essential to adopt comprehensive compensation policy which is in synchronisation with the industry trends. The Remuneration Policy is annexed to the Board's Report.
The Company has also adopted a Board Diversity Policy which is based on the principle that the Company's Board of Directors should have a balance of skills, experience and diversity of perspectives appropriate to the Company's business. The Company recognizes that a Board composed of appropriately qualified people with a broad spectrum of experience relevant to the business is important for effective corporate governance and sustained commercial success of the Company. The Company aims to achieve a sustainable and balanced development by building a diverse and inclusive culture. The Board Diversity Policy is annexed to the Board's Report.
Four (4) Committee meetings were held during the year ended 31st December 2015 on 25th February 2015, 29th July 2015, 17th August 2015 and 5th November 2015. The Chairperson of the Committee attended the Annual General Meeting.
Remuneration of Directors
(a) Pecuniary Relationship of Non-Executive Directors
The Company has no pecuniary relationship or transaction with its Non-Executive & IndependentDirectors other than payment of sitting fees to them for attending Board and Committee meetings and Commission as approved by members for their invaluable services to the Company.
(b) Details of Remuneration paid to Directors
The Executive Directors are paid Salary and Performance Linked Bonus, which is calculated, based on pre-determined parameters of performance. The Independent Directors are paid sitting fees and commission as determined by the Board from time to time. Other Non-Executive Directors do not receive any remuneration including sitting fees. Sitting fees to the Independent Directors is being paid as permissible under Rule 4 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014. Criteria of making payments to Non-Executive Directors is disclosed in the Policy-Payment Non-Executive Director and the same is available on <http://www.castrol>. com/en_in/india/about-us/financials/other-financial-documents-policies.html
(C) Stakeholders' Relationship Committee
(a) Stakeholders' Relationship Committee has been constituted to monitor and review investors' grievances. It comprises of Mr. S. M. Datta, Mr. Omer Dormen and Ms. Rashmi Joshi. Mr. S. M. Datta is the Chairman of the Committee. Mr. Ravi Kirpalani ceased to be a member of the Committee and Mr. Omer Dormen was appointed as a member of the Committee with effect from 6th November 2015.
(b) Mr. Sandeep Deshmukh, Company Secretary, is the Compliance Officer for redressal of Shareholder's/ Investor's complaints.
During the year ended 31 st December 2015 Four (4) Committee meetings were held on 25th February 2015, 14th May 2015 29th July 2015 and 5th November 2015 and all members attended the Meeting.
(c) to (e) Details of Shareholders' / Investors' Complaints.
During the Financial Year ended 31st December 2015, 20 complaints were received from the shareholders. All except three complaints have been redressed to the satisfaction of the shareholders as on 31 st December 2015. The complaints relate to non-receipt of annual report, dividend, share transfers, etc.
(D) Corporate Social Responsibility (CSR) Committee
The Corporate Social Responsibility Committee comprises of Mr. R. Gopalakrishnan as Chairman, Mr. Sashi Mukundan, Mr. Omer Dormen, Ms. Rashmi Joshi and Mr. Jayanta Chatterjee as members. The Company Secretary acts as the Secretary to the Committee. Mr. Ravi Kirpalani ceased to be a member of the Committee with effect from 5th November 2015. Mr. Omer Dormen and Mr. Jayanta Chatterjee were appointed as members of the Committee with effect from 6th November 2015.
During the year ended 31 st December 2015 Four (4) meetings of the Committee were held on 25th February 2015, 29th July 2015, 17th August 2015and 5th November 2015
E) Risk Management Committee
The Risk Management Committee comprises of Mr. Omer Dormen, as the Chairman of the Committee and other members viz. Ms. Rashmi Joshi, Director, Mr. Jayanta Chatterjee, Director, Mr. Pawan Sabharwal and Mr. Siddharth Shetty. Mr. Ravi Kirpalani ceased to be a member of the Committee with effect from 5th November 2015. Mr. Omer Dormen was appointed as Chairman of the Committee with effect from 6th November 2015. The Company Secretary acts as the Secretary to the Committee.
During the year ended 31 st December 2015 Four (4) meetings of the Committee were held on 11th February 2015, 4th May 2015, 21st July 2015 and 15th October 2015.
Internal Controls and Risk Management
The Company has laid down internal financial controls framework through a combination of Entity level controls, Process level controls and IT General controls
inter-alia to ensure orderly and efficient conduct of business, including adherence to the Company's policies and procedures, accuracy and completeness of accounting records and timely preparation and reporting of reliable financial statements/ information, safeguarding of assets, prevention and detection of frauds and errors.
The evaluation of these internal financial controls was done through the internal audit process, established within the Company and also through appointing professional firm to carry out such tests by way of systematic annual internal audit program. Based on the review of these reported evaluations, the directors confirm that, for the preparation of financial accounts for the year ended December 2015, the applicable Accounting Standards have been followed and the design of the internal financial controls were found to be adequate & that no significant deficiencies were noticed.
During the year, on the recommendation of the Audit Committee, the Board of Directors appointed KPMG as the Internal Auditor of the Company.
4. Affirmation and Disclosure
• There were no materially financial or commercial transaction, between the Company and members of the Management Committee that may have a potential conflict with the interest of the Company at large.
• All details relating to financial and commercial transactions where Directors may have a pecuniary interest are provided to the Board and the interested Directors neither participate in the discussion nor vote on such matters.
Code of Conduct
The Company is governed by BP Code of Conduct which sets the standard we all work to. It is aligned with our values, group standards and legal requirements, and clarifies the ethics and compliance expectations for everyone who works with the Company. The Code reflects a value-based approach, where rules are not stated explicitly and everyday business decisions will be guided by our values. The Code was simplified during the last year for ease of understanding and application.
The Code, covers health, safety and the environment; our people, our partners and suppliers, governments and communities; and protecting Company's assets. Each section contains key principles, basic rules and advice on where to find further information. A new section, 'Living our Code', is designed to help people make decisions when faced with dilemmas where there are no clear rules to follow. The Code also includes key points from new BP standards related to anti-bribery and corruption, anti-money laundering, competition and antitrust law and trade sanctions. BP Code of Conduct is available on Company's website at <http://www.castrol>. com/content/dam/castrolcountry/en_in/About%20Us/ Financials/Code-of-Conduct.pdf
7. General Shareholder Information
(a) Annual General Meeting
Date : Thursday, 5th May 2016 Time 3.30 p.m.
Venue : Birla Matushri Sabhagar, Marine Lines, Mumbai 400 020
Book Closure Dates: Friday, 29th April 2016 to Thursday, 5th May 2016 (both days inclusive). The said book closure is for payment of dividend.
(b) Financial Year:- Calendar year 1st January to 31st December. The Company has obtained the approval from the Company Law Board vide Order No.19 of 2015 dated 23rd April 2015 to follow different financial i.e. other than April to March financial year.
Tentative calendar for financial year ending 31st December 2016
The tentative dates of meeting of Board of Directors for consideration of quarterly financial results for the financial year ending 31st December, 2016 are as follows:
First Quarter Results : May 2016
Second Quarter and Half Yearly Result : July 2016
Third Qaurter Results : October 2016
Fourth Quarter and Annual Results : February 2017
(c) Dividend Payment Date:
The Board of Directors at their meeting held on 24th February 2016, recommended a Final Dividend of Rs. 5.00 per equity share of face value of Rs. 5/-each, for the financial year ended 31st December 2015. Together with the Interim Dividend of Rs. 4.00 per equity share paid on 20th August 2015, the total dividend for the year works out to Rs. 9.00 per equity share of face value of Rs. 5/- each. Final Dividend, if approved by Members, will be paid on or after 25th May 2016.
Payment of Listing Fees
Annual listing fee for the year 2015-16 has been paid by the Company to BSE and NSE.
(e) Stock Code
BSE Limited 500870
National Stock Exchange of India Limited CASTROLIND ISIN INE172A01027
Listing on Stock Exchanges — Equity Shares BSE Limited (BSE) Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001
National Stock Exchange of India Limited (NSE) ''Exchange Plaza", Bandra-Kurla Complex, Bandra (E), Mumbai 400 051
(h) The Registrar and Share Transfer Agents of the Company is TSR Darashaw Limited.
Address for Correspondence (Registrar and Share Transfer Agent)
TSR Darashaw Limited 6-10 Haji Moosa Patrawala Industrial Estate, 20 Dr. E. Moses Road, Mahalakshmi, Mumbai 400 011 Tel: +91-22-6656 8484 Fax: +91-22-6656 8494 Email: firstname.lastname@example.org
(i) Share Transfer System
All Shares sent for transfer in the physical form are registered by the Registrar and Share Transfer Agents as per the terms of the Listing Agreements. Request for transfer and transmissions are approved by the Share Transfer Agent under the authority granted by the Board. Shares under objection are returned within two weeks.
All requests for dematerialisation of shares are processed and the confirmation is given to the respective depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) within 15 days.
(l) Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equity
The Company has not issued any GDRs/ADRs/ Warrants or any convertible instruments.
(m) Plant Locations
The Company's plants are located at Patalganga in Maharashtra; Paharpur in West Bengal and at Silvassa (Union Territory).
(n) Address for Correspondence (other than queries relating to shares)
Castrol India Limited Technopolis Knowledge Park, Mahakali Caves Road, Andheri (East), Mumbai 400 093
8. Other Disclosures
(a) Disclosures on materially significant related party transactions having potential conflict.
In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is also available on Company's website at <http://> www.castrol.com/en_in/india/about-us/financials/other- financial-documents-policies.html. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. There were no related party transactions that may have potential conflict with the interest of the Company at large.
(b) Disclosure of Pending Cases/Instances of Non-Compliance
There were no non-compliances by the Company and no instances of penalties and strictures imposed on the Company by the Stock Exchanges or SEBI or any other statutory authority on any matter related to the capital market during the last three years.
(c) Whistle Blower Policy/Vigil Mechanism
The Company has a robust whistle-blower which also apply to all group of companies of the BP Group, worldwide, which is called "Open Talk''. The employees are encouraged to raise any of their concerns by way of whistle-blowing and the employees have access to the Audit Committee Chairman.
(d) The Company has complied with all mandatory items of the clause 49 of the Listing Agreement as applicable till 30th November 2015 and Listing Regulations from 1-12-2015 onwards. The Company has executed the fresh agreement with the BSE and NSE as required under the newly enacted Listing Regulation.
9. Non-Mandatory Requirements
A. The Board
The Chairman of the Board does not maintain a Chairman's office at the Company's expense. However, the Company from time to time reimburses the expenses in relation to the Chairman's office in connection with performance of his duties as the Chairman of the Company.
B. Shareholder Rights - Half yearly results
As the Company's half yearly results are published in English newspapers having a circulation all over India and in a Marathi newspaper (having a circulation in Mumbai), the same are not sent to the shareholders of the Company but hosted on the website of the Company.
C. Audit Qualification
There are no qualifications contained in the Audit Report.
D. Separate Posts of Chairman and CEO/Managing Director
The Posts of Chairman and Managing Director are separate.
E. Reporting of Internal Auditors
The Internal Auditors of the Company report to the Audit Committee and make detailed presentation at quarterly meetings.
F. The Company has no subsidiary and hence there is no need to frame any policy for determining "material" subsidiary.
G. The Company is not dealing in commodity and hence disclosure relating to commodity price risks and commodity hedging activities.
H. There is no Non-Compliance of any requirement of Corporate Governance Report of sub-para (2) to (10) of the Part C of Schedule V of the Listing Regulations