REPORT ON CORPORATE GOVERNANCE
As per Clause 49 of the Listing Agreement, the Directors present the Company's Report on Corporate Governance
1. COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE
The Corporate Governance initiatives of the Company are dedicated towards achieving basic objective of wealth creation for the benefit of all its stakeholders i.e. shareholders, employees, business associates and the society at large. The Company believes in giving its managerial personnel ample freedom to operate and secure the Company's objectives by putting in their best efforts. It aims to offer superior value to consumers by meeting their specific preferences with quality products and services delivered at competitive prices by using best in class systems and processes. A good corporate governance is, therefore, a key to sustainable growth of the business.
The Board of Directors of the Company is primarily responsible for protecting and enhancing shareholders' value besides fulfilling the Company's obligations towards other stakeholders. The role of the Board of Directors is to provide strategic superintendence over the Company's management. The day to day management of the Company is vested in the managerial personnel and sufficient authority is delegated at different operating levels. Delegation of authority in the operating people helps generation of creativity and innovation. This also helps in harnessing potential of employees to the best advantage of the Company. Thus, there is a robust system of structures, rights, duties and obligations by which the Company is directed and controlled.
The Company is in compliance with the norms and disclosures stipulated under clause 49 of the Listing Agreements entered with the Stock Exchanges with regard to Corporate Governance.
2. BOARD OF DIRECTORS
i) Composition of the Board
The Board consists of an optimal combination of Executive and Non-Executive Directors, including Independent Non-executive Directors, representing a judicious mix of business acumenship, professionalism, knowledge and experience.
The Directors bring in expertise in the fields of strategy, management, finance and law, among others. They provide leadership, strategic guidance, objective and independent view to the Company's management while discharging their fiduciary responsibilities, thereby ensuring that the management adheres to high standards of ethics, transparency and compliance.
As at 31st March, 2015, the Board comprised of three independent directors, three executive directors and two non-executive & non-independent directors (including a woman director).
The Chairman of the Board is a non-executive and independent director and the minimum requirement of one-third of the Board consisting of independent directors is duly complied with.
The independent directors of the Company, have already submitted their declarations affirming their status as independent directors as on March 31, 2015.
During the year under report, Mr. C.M. Maniar ceased to be the Director in view of his demise on 29th June, 2014.
Mr. Lalit Kumar Modi has vacated his office as a Director with effect from 28th May, 2015 by virue of the provisions of Section 167(1)(b) of the Companies Act, 2013.
In the meeting of the Board of Directors held on 20th June, 2015, Mr. Atul Kumar Gupta was appointed as an Additional Director being non-executive and independent and holds office until conclusion of the ensuing AGM.
iii) Board Meetings held during the year
7 (Seven) Board Meetings were held during the financial year 2014-15. They were held on April 7, 2014, May 28, 2014, July 5, 2014, August 2, 2014, September 23, 2014, November 9, 2014 and February 5, 2015. The necessary quorum was present at all the meetings.
v) Brief resume, experience and other directorships/board committee memberships of the Directors being re-appointed
Mr. Atul Kumar Gupta was appointed as an Additional Director on the Board of your Company w.e.f. June 20, 2015 in terms of Section 161 of the Companies Act, 2013 and holds office up to the date of the ensuing Annual General Meeting. The Board of Directors has recommended his appointment as Director to hold office for a term of 5 (five) consecutive years up to the conclusion of the 83 rd Annual General Meeting of the Company to be held in the calendar year 2020. His appointment will be in line with the provisions of Section 149 of the Companies Act, 2013.
Mr. Samir Kumar Modi and Mr. R. Ramamurthy, both being non-independent directors, shall be retiring by rotation and being eligible, have offered themselves for reappointment in the ensuing AGM in accordance with the provisions of Section 152(6) of the Companies Act, 2013.
vi) Legal Compliances
The Board periodically reviews compliance reports of applicable laws prepared by the Company as well as steps taken by it to rectify the instances of non-compliance.
vii) Familiarisation Programme for Directors
The Company encourages and supports its Directors to update themselves with the rapidly changing regulatory environment.
In case of newly appointed Directors, the Chairman of the Board and Managing Director of the Company have one to one discussion with them in order to familiarize the new inductees, with the Company's business operations. Upon appointment, Directors also receive a formal letter of appointment describing their roles, functions, duties and responsibilities as a Director and the same is uploaded on the Company's web-site at <http://reports.godfreyphillips.com/Letter-of-appointment-of->Independent-Director.pdf
From time to time the Senior Management personnel make Presentations at the Board/Committee meetings about the Company's business and performance updates, strategy, operations, products, regulatory changes, opportunities, threats etc.
viii) Code of Conduct
The Company has laid down a Code of Conduct applicable to the directors and senior management team of the Company. The said Code has been communicated to the directors and senior management team personnel and is also posted on the website of the Company, www.godfreyphillips.com
All directors and senior management team personnel who are associated with the Company as on date of report, have affirmed compliance with the Code of Conduct for the financial year ended 31st March, 2015. A declaration to this effect signed by Mr. K.K. Modi, Managing Director as the Chief Executive Officer of the Company is annexed to this report.
3. AUDIT COMMITTEE
i) Composition and Terms of Reference
The Audit Committee of the company has been constituted in line with the provisions of Clause 49 of the Listing Agreement and Section 177 of the Companies Act, 2013.
The terms of reference of the Audit Committee cover all the areas specified in Section 177 of the Companies Act, 2013 as well as those specified in clause 49 of the Listing Agreement, as amended from time to time and inter-alia include overseeing financial reporting process, reviewing the financial statements before submission to the Board for approval, reviewing internal control systems and procedures, approval or any subsequent modification of transactions of the Company with related parties, etc. The Audit Committee also reviews from time to time the information relating to management discussion and analysis of financial condition and result of operations, letters of internal control weaknesses, if any, issued by the statutory auditors and the reports issued by the internal auditors of the Company.
All the members of the Audit Committee are financially literate and the Chairman Dr. Lalit Bhasin, possesses the required accounting and financial management expertise. Mr. Sanjay Gupta, the Company Secretary acts as the Secretary to the Committee.
During the year under report, Mr. R.A. Shah was co-opted as fourth member of the Committee.
Dr. Lalit Bhasin, Chairman of the Committee, was present at the Annual General Meeting held on 23rd September, 2014 to answer the shareholders' queries.
Audit Committee meetings are also attended by the Managing Director, being the director-in-charge of finance, Chief Financial Officer, the Internal Auditors and the Statutory Auditors, as permanent invitees.
Due to certain other professional commitments, one out of two of the Independent directors, namely, Dr. Lalit Bhasin and Mr. Anup N Kothari, could not attend Audit Committee Meetings held on 28th May, 2014 and 9th November, 2014, respectively. However, both the directors had reviewed the minutes of previous Audit Committee Meetings as well as the agenda items including recommending approval of the quarterly financial results proposed to be considered in such meetings and had provided their confirmation to this effect to the Secretary of the Audit Committee.
4. subsidiary companies
i) The Company has formulated the Policy on material subsidiary company and updated the same on the website of the Company with web link: <http://www.godfreyphillips.com/policy-for-determining->material-subsidiary-company
ii) Since the Company does not have any material unlisted Indian subsidiary company, the requirement for appointment of an independent director on the Board of such subsidiary company is not applicable.
iii) The Audit Committee of the Company has reviewed the financial statements in respect of the investments made by its unlisted subsidiary companies at its meeting held on May 30, 2015.
iv) Copies of the minutes of the board meetings of all the unlisted subsidiary companies held during the year 2014-15 were placed at the board meeting of the Company held on May 30, 2015.
v) The requirement relating to significant transactions and arrangements entered into between the Company and its unlisted subsidiary companies is not applicable to the Company since none of its subsidiaries is material.
(A) Basis of related party transactions
i) Transactions with related parties in the ordinary course of business:
Transactions with the related parties disclosed in note 41 to the financial statements for the year ended March 31, 2015 are in the ordinary course of business. Details of these transactions were placed at the Audit Committee meetings held on February 5, 2015 and May 30, 2015. The said transactions have no potential conflict with the interests of the Company at large. All details of such transactions are provided to the Audit Committee and Board, if required. It is also ensured that interested directors neither participate in the discussion nor do they vote on such matters.
ii) Transactions with related parties not in the normal course of business:
There are no transactions entered into by the Company with the related parties during the financial year ended March 31, 2015, whose terms and conditions are not in the ordinary course of business.
iii) Transactions with related parties not on arm's length basis:
There are no transactions entered into by the Company with the related parties during the financial year ended March 31, 2015, whose terms and conditions are not on an arm's length basis.
iv) Policy on dealing with related party transactions:
The Company has formulated a policy on dealing with related party transactions and the same is available on the website of the Company at web link :<http://www.godfreyphillips.com/policy-on->related-party-transactions
(B) Disclosure of accounting treatment
The financial statements for the year ended March 31, 2015 comply with the accounting principles generally accepted in India, including Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7of the Companies (Accounts) Rules, 2014 and there have been no deviations from the treatment prescribed in the Accounting Standards.
(C) Risk management
The Company being an old established organization, has in place built-in internal control systems for assessing the risk environment and taking the necessary steps to effectively mitigate the identified risks. The functional heads are reasonably alive to this aspect in their day to day functioning. However, with a view to apprise the Board of Directors of the risk management procedures and the steps initiated to shift/reduce/eliminate the same in a structured manner, the Company has formulated a Risk Profile and Risk Register for listing out various risks, risk mitigating factors and risk mitigation plans and the same is periodically reviewed by the Board.
The Company is not required to constitute a separate Risk Management Committee in terms of SEBI circular No.CIR/CFD/POLICY CELL/2/2014 dated 17th April, 2014.
D) Whistle Blower Policy
The Company has formulated and communicated the Whistle Blower Policy to all its Directors and employees and the same is posted on the Company's Website <http://reports.godfreyphillips.com/> whistle-blower-policy.pdf. It provides opportunities to the directors and employees to report in good faith to the management about the unethical and improper practices, fraud or violation of Company's Code of Conduct. The vigil mechanism under the Policy provides for adequate safeguard against victimization of employees and Directors who use such mechanism and makes provision for direct access to the Chairperson of the Audit Committee in exceptional cases. The Company affirms that none of the personnel of the Company has been denied access to the Audit Committee.
(E) Proceeds from public issues, right issues, preferential issues, etc.
The Company did not raise any funds through public, rights, preferential issues, etc. during the year under report.
i) There has been no instance of non-compliance by the Company on any matter related to capital markets during the last three years and hence no penalties or strictures have been imposed by the Stock Exchanges, SEBI or any other statutory authority on the Company.
ii) The Company has complied with all applicable mandatory requirements of Clause 49 of the Listing Agreement during the year under report. The Company has not adopted any non-mandatory requirements.
6. REMUNERATION TO DIRECTORS
i) Remuneration policy
The appointment and remuneration of Executive Directors including Managing Director is governed by the recommendation of Nomination and Remuneration Committee and then decided by the Board subject to approval of the shareholders.
In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, sitting fees @ Rs. 1,00,000 per meeting is paid to the directors of the Company for attending any meeting of the Board or of any Committee thereof.
iii) Details of service contract, notice period, severance fees, etc. of directors
1 The Company has service contract with Mr. K.K. Modi, President & Managing Director for a period of three years with effect from August 14, 2012, which has been extended by another term of three years by the Board of Directors, subject to approval of the shareholders. The notice period is six calendar months by either party. No severance fees is payable to him.
2 The Company has service contract with Mr. R. Ramamurthy, Whole-time Director for a period of three years with effect from August 14, 2012, which has been extended by another term of three years by the Board of Directors, subject to approval of the shareholders. The notice period is three months by either party. However, the Company has the right to terminate appointment forthwith upon payment of three months' salary in lieu of notice and in that case he will not be entitled to any perquisites or other benefits in respect of such three months period.
3 In pursuance of the resolution passed by the shareholders of the Company at the Annual General Meeting held on September 19, 2013, Mr. Lalit Kumar Modi is entitled to remuneration by way of commission under Section 309(4)(b) of the Companies Act, 1956 for a period of three years w.e.f., August 1,2013, at not more than one percent (1%) per annum of the net profits of the Company computed in the manner laid down in Sections 198, 349 and 350, subject to a ceiling of Rs.200 Lacs for or in respect of any one financial year of the Company. He has ceased to be the Director w.e.f. May 28, 2015.
4 The Company has service contract with Mr. Samir Kumar Modi, Executive Director for a period of three years with effect from September 1, 2013. The Board of Directors has decided to re-appoint him on fresh terms and conditions for a period of three years w.e.f. October 1, 2015, subject to approval of the shareholders. The notice period is three months by either party. No severance fees is payable to him.
v) Performance evaluation
The performance evaluation of the Board, its committee and individual Directors was carried out on the basis of duly filled-in self- evaluation questionnaire which was prepared under the guidance of Chairman of the Board and then circulated amongst the Directors.
The Nomination and Remuneration Committee in its meetings held on 4th July, 2014 and 5th February, 2015 and Independent directors in their separate meeting held on 14th March, 2015 evaluated the replies/feedbacks received in response to the questionnaire circulated and based on discussion expressed their satisfaction with the evaluation process.
As required under Clause 49 of the Listing Agreement, all members of the senior management team shall disclose their interest in all the material financial and commercial transactions, which may have a potential conflict with the interests of the Company at large.
The senior management team comprising of top executives of the Company and who have been associated with the Company as on date of this report, have disclosed to the Board of Directors about all the material financial and commercial transactions that have taken place during the financial year ended March 31, 2015 where they had personal interest. These include dealing in/holding of shares of the Company by them/their relatives, transactions entered into by them/their relatives with the Company, transactions entered into by the Company with the companies in which they/their relatives are Directors or Members and transactions entered into by them/their relatives with the subsidiary companies of the Company and these were placed at the Board Meeting held on 31stJuly, 2015.
8. nomination and remuneration committee
The Nomination and Remuneration Committee comprises of Dr. Lalit Bhasin, as its Chairman and Mr. R.A. Shah and Mr. Anup N. Kothari, as its members.
The terms of reference of the Committee are as under:
(i) To identify persons who are qualified to become directors and who may be appointed in senior management and recommend to the Board of Directors their appointment and removal.
(ii) To carry out evaluation of every director's performance.
(iii) To formulate the criteria for determining qualifications, positive attributes and independence of a director.
(iv) To recommend to the Board a policy, relating to the remuneration for the directors, key management personnel and the employees in senior management.
(v) Any other matter as may be assigned by the Board from time to time.
9. stakeholders relationship committee
The Stakeholders Relationship Committee comprises of Dr. Lalit Bhasin, as its Chairman and Mr. K.K. Modi and Mr. R. Ramamurthy as its members.
This Committee, besides sanctioning share transfers/transmissions and other related matters, also looks into the redressal of shareholders' and other investors' complaints. Mr. Sanjay Gupta, Company Secretary, is designated as Compliance Officer.
The Committee met twice during the financial year 2014-15 i.e. on 5th July, 2014 and 5th February, 2015. 8(eight) complaints were received during the year under report from the shareholders/investors and all were redressed to their satisfaction. No complaint was pending for redressal as on March 31, 2015.
10. corporate social responsibility (csr) committee
The CSR Committee comprises of Mr. R.A. Shah, as its Chairman and Mr. K.K. Modi and Mr. Anup N. Kothari, as its members.
The terms of reference of the Committee are as under:
(i) To formulate and recommend to the Board of Directors, the Corporate Social Responsibility Policy (CSR Policy) indicating the activities/programs to be undertaken by the Company in line with those specified in Schedule VII to the Companies Act, 2013.
(ii) To recommend the amount of expenditure to be incurred on each of such activities/programs.
(iii) To monitor the CSR activities/programs undertaken by the Company from time to time.
(iv) Any other function as may be assigned by the Board from time to time.
During the year, the Committee met once on i.e. 5th July, 2014 and all committee members attended this meeting.
11. INDEPENDENT DIRECTORS' MEETING
All the Independent Directors met on 14th March, 2015, inter-alia, to evaluate the:
(i) Performance of Non-Independent Directors and the Board as a whole;
(ii) Performance of the Chairman of the Board, taking into account the views of the Executive and Non-Executive Directors;
(iii) Quality, content, and timeliness of flow of information between the Management and the Board that is necessary for the Board to act effectively and reasonably perform its duties.
14. GENERAL SHAREHOLDER INFORMATION
i) Annual General Meeting
Date and Time : 29th September, 2015 at 3.00 P.M.
Venue : Y. B. Chavan Auditorium, General Jagannath Bhosle Marg (Next to Sachivalaya Gymkhana), Mumbai - 400 021
ii) Financial Calendar for 2015-16
First Quarter Results : 31st July, 2015(Actual)
Second Quarter Results : Latest by 14th November, 2015
Third Quarter Results : Latest by 14th February, 2016
Annual Results : Latest by 30th May, 2016
iii) Date of Book Closure : 23rd September, 2015 to 29th September, 2015 (both days inclusive)
iv) Dividend Payment Date : Dividend payment shall be made from 3rd October, 2015 to those shareholders whose names shall appear on the Members' Register as on 29th September, 2015.
v) Listing on the Stock Exchanges:
The Company's shares are listed on National Stock Exchange (Stock Code GODFRYPHLP) and Bombay Stock Exchange (Stock Code 500163).
During the year under report, the Company sub-divided the equity shares of the face value of Rs.10 each into 5 equity shares of Rs. 2 each fully paid up w.e.f. 1st December, 2014.
The Company has paid the listing fees to the above Stock Exchange(s) for the financial year 2015-16.
viii) Registrar and Share Transfer Agents
Sharepro Services (India) Pvt. Ltd. 13 AB, Samhita Warehousing Complex, Second Floor, Sakinaka Telephone Exchange Lane Off Andheri Kurla Road, Sakinaka, Andheri (East), Mumbai-400072 Telephone No : 022-67720300, 67720400 Fax No : 022-28591568 E-mail : email@example.com
ix) Share Transfer System
The Company's share transfer and related operations are handled by Sharepro Services (India) Pvt. Ltd., Registrar and Share Transfer Agents (RTA) who are registered with the SEBI as a Category 1 Registrar.
The shares for transfer received in physical mode by the Company/RTA, are transferred expeditiously, provided the documents are complete in all respect and the shares are not under dispute. The share certificates duly endorsed are returned immediately after transfer.
xii) Demateralisation of shares
The shares of the Company are compulsorily traded in the demateralised form and are available for trading under both the Depository Systems - NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services (India) Ltd). As on March 31, 2015, a total of 5,02,38,000 equity shares of the Company, which forms 96.62% of the share capital, stood demateralised.
Under the Depository System, the International Securities Identification Number (ISIN) allotted to the Company's equity shares of face value of Rs.2/- each is INE260B01028.
xiii) Outstanding GDRs/ADRs/Warrants or other Convertible Instruments
The Company has no outstanding GDRs/ADRs/Warrants or other convertible instruments.
xiv) Plant Locations
The Company's plants are situated at Rabale (Navi Mumbai), Bazpur, Kolkata, Ongole, Ghaziabad & Faridabad and the cigarette plant located at Guldhar (Ghaziabad) is owned by the Company's wholly owned subsidiary, International Tobacco Company Limited.
Guldhar Plant : International Tobacco Company Limited, Delhi- Meerut Road, (Cigarette) Guldhar, Ghaziabad -201 001.
Rabale Plant : Plot No. 19, MIDC, TTC Industrial Area, Rabale, Navi (Cigarette) Mumbai - 400 701
Ghaziabad : B-19, Meerut Road, Site No. 3, Ghaziabad (Chewing Products)
Faridabad : Industrial Plot No. 120, Sector-59, Industrial Estate, Tehsil
(Chewing Products) Ballabgarh, District Faridabad, Haryana
Bazpur : Plot No. C-9, Bazpur - 1, UPSIDC Industrial Area, Distt - Udham (Tea Blending & Packaging) Singh Nagar, (Uttrakhand) - 262 123
Kolkata : Landys + GYR Compound, Diamond Harbour Road, Joka, (Tea Blending and Packaging- Kolkata- 700104 operated by a contractor)
Ongole : Plot No. 289 to 300, APIIC Growth Centre, Gundlapally (Reconstituted Tobacco) Ongole, Prakasam Dist., Andhra Pradesh - 523 001
Production at chewing products plant at Baramati was discontinued during the year under report.
xv) Address for Correspondence
Shareholders are requested to address all their correspondence concerning shares to the Company's Registrar and Share Transfer Agents, Sharepro Services (India) Pvt. Ltd. at the address mentioned in para 14(viii) above or at:
Sharepro Services (India) Pvt. Ltd. Unit: Godfrey Phillips India Limited 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai- 400 021 Telephone No : 022-22825163 E-mail : firstname.lastname@example.org
xvi) Corporate Identity Number (CIN): L16004MH1936PLC008587
15. CEO/CFO CERTIFICATION
A certificate signed by Mr. K.K. Modi, Managing Director as CEO and by Mr. Sunil Agrawal, Executive-Vice President-Finance as CFO is attached with this report.
16. REPORT ON CORPORATE GOVERNANCE
The Corporate Governance Report forms part of the Annual Report.
The Company is regularly filing the Quarterly Compliance Report on Corporate Governance with the Stock Exchanges as per the format specified in Annexure 1B to the Clause 49 of the Listing Agreement.
Certificate from the Statutory Auditors with respect to compliance with the conditions of Corporate Governance stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report.
For and on behalf of the Board
Place : New Delhi
Date : July 31, 2015