REPORT ON CORPORATE GOVERNANCE
Pursuant to Schedule V(C) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a report on
Corporate Governance is given below:
1. Company’s philosophy on Code of Governance
The Company believes in abiding by the Code of Governance so as to be a responsible corporate citizen and to serve the best interests of all the stakeholders, viz., the employees, shareholders, customers, vendors and the society at large. The Company seeks to achieve this goal by being transparent in its business dealings, by disclosure of all relevant information in an easily understood manner, and by being fair to all stakeholders, by ensuring that the Company’s activities are managed by a professionally competent and independent Board of Directors.
2. Board of Directors
The strength of Board as on 31st March, 2016 is nine Directors. The Board comprises of Executive and Non-Executive Directors. The Managing Director and a Whole-time Director are the two Executive Directors. There are seven Non-Executive Directors, of which four Directors, including the Chairman, are Independent Directors. The Board also consists of one Woman Independent Director. The number of Independent Directors on the Board is in conformity with the requirement of Regulation 17(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Three Non-Executive Directors namely, Mr. M. Tanaka, Mr. H. Furukawa and Mr. S. Asatsuma are nominees of Kansai Paint Co. Ltd., Japan, Promoter Company. Orientation of newly elected directors and updation strategy
Newly elected directors are given a presentation on the functioning of the Company. Every quarter, reports of the various departments of the Company are circulated among all the directors. These reports give specific particulars of the respective departments. Apart from this, the directors are intimated of the changes as and when they happen. All the functional heads are present at the Audit Committee Meeting of the Company held every quarter. Presentations are also made to the Board of Directors by the functional heads. This ensures that the functional heads can apprise all the directors about the developments in their specific areas.
Access to information
The Vice Chairman of the Company, who is an independent director, has been provided an office at the Corporate Head Office of the Company. He has direct access to the officials of the Company, without the involvement of the CEO. Directors, including independent directors, visit the various manufacturing locations of the Company.
They are not necessarily accompanied by the Managing Director. The purpose is to ensure that the independent directors have free and independent access to the Company’s officials and records, so that they can form an independent opinion about the state of affairs of the Company.
Apart from this, reports of the audit carried out by the internal auditors and the statutory auditors are circulated to all the directors. Independent audits are also carried out by the parent company, Kansai Paint’s auditors.
Monthly Performance Report is also forwarded to the Chairman updating him with the performance on various parameters.
It is ensured that the Board receives qualitative and quantitative information in line with the best management practices adopted.
The familiarization programme for our Directors is also given on the website http://www.nerolac.com/Financial.
Code of Conduct for Board of Directors and Senior Management
The Company has adopted a Code of Conduct for Board of Directors and Senior Management (the Code). The Code has been communicated to the Directors and the members of Senior Management. The Code has also been posted on the Company’s website at www.nerolac.com. All Board members and senior management have confirmed compliance with the Code for the year ended 31st March, 2016. The Annual Report contains a declaration to this effect signed by the Managing Director who is the Chief Executive Officer.
3. Audit Committee
The Audit Committee acts in accordance with the terms of reference specified by the Board which includes the recommendation for appointment, remuneration and terms of appointment of auditors of the Company, review and monitor the auditor’s independence and performance and effectiveness of the audit process, examination of the financial statements and the auditor’s report thereon, approval or any subsequent modification of transactions of the Company with related parties, scrutiny of inter-corporate loans and investments, valuation of undertakings or assets of the Company wherever it is necessary, evaluation of internal financial controls and risk management systems, monitoring the end use of funds raised through public offers and related matters.
The members of the Audit Committee are Mr. Pradip P. Shah, Mr. D. M. Kothari and Mr. N. N. Tata. All the members of the Audit Committee are Non-Executive and Independent Directors. All the members possess sound knowledge of accounts, audit, financial management expertise, etc.
Mr. Pradip P. Shah is the Chairman of the Audit Committee.
Mr. G. T. Govindarajan, Company Secretary acts as the Secretary to the Audit Committee
Besides this, another meeting of the Audit Committee was held on 27th April, 2016 at which meeting the Audited Annual Accounts for the year ended 31st March, 2016, were placed before the Committee for consideration.
The Internal Auditor and the representatives of the Statutory Auditors also attend the Audit Committee meetings, besides the executives invited by the Audit Committee to be present thereat.
The Internal Auditors report directly to the Audit Committee.
4. Nomination & Remuneration Committee
The terms of reference of the Nomination & Remuneration Committee are:
i. formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration of the directors, key managerial personnel and other employees,
ii. formulation of criteria for evaluation of Independent Directors and the Board,
iii. devising a policy on Board diversity,
iv. identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down and recommend to the Board their appointment and removal and shall carry out evaluation of every Director’s performance.
All the members of the Nomination and Remuneration Committee are Non-Executive and Independent Directors. The members of the Committee are Mr. D. M. Kothari, Mr. P. P. Shah and Mr. N. N. Tata.
Mr. D. M. Kothari, an Independent Director, is the Chairman of the Committee.
Mr. D. M. Kothari was present at the Annual General Meeting held on 3rd July, 2015.
5. Remuneration of Directors
The Company has adopted a Remuneration Policy for its Directors, Key Managerial Personnel and other employees. The Remuneration Policy has laid down the criteria for determining qualifications, positive attributes, independence of Director and Board diversity. The Policy lays down the factors for determining remuneration of Whole-time Directors, Non-Executive Directors, Key Managerial Personnel and other employees. The policy also lays down the evaluation criteria of the Independent Directors and the Board.
The Nomination and Remuneration Committee decides the remuneration for the Whole-time Directors.
A. Remuneration to Whole-time Directors:
The remuneration paid to Whole-time Directors is subject to the limits laid down under Section 197 and Schedule V to the Companies Act, 2013, and in accordance with the terms of appointment approved by the Shareholders of the Company. The remuneration of the Whole-time Directors is determined by the Nomination & Remuneration Committee based on factors such as the Company’s performance and performance/track record of the Whole-time Directors. The remuneration consists of Salary, Commission, Company’s contribution to Provident Fund and Superannuation Fund, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and other perquisites and allowances in accordance with the rules of the
Company, applicable from time to time.
The Whole-time Directors are not paid any sitting fees for attending the meetings of the Board of Directors or Committees thereof.
The Agreement with the Whole-time Director is for a period not exceeding five years at a time. In the event that there is no breach of the terms of the Agreement by the Whole-time Director, but the Company exercises the discretion to terminate his services during the term of his Agreement, without assigning any reason therefor, then and in that event, the Whole-time Director shall be paid a compensation of a sum which shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold the office or where he held the office for a lesser period than three years, during such period.
? Presently, the Company does not have a scheme for grant of stock options either to the Whole-time Directors or employees
B. Remuneration to Non-Executive Directors
The Non-Executive Directors are paid commission within the ceiling of 1% of net profits of the Company as specified in Section 197 of the Companies Act, 2013, in accordance with the approval granted by the Shareholders for payment of commission to the Non-Executive Directors. The commission payable to Non-Executive Directors is decided by the Board, based on a number of factors including number of Board and Committee meetings attended, individual contribution thereat etc.
The Non-Executive Directors are also paid sitting fees for attending the meetings of the Board or Committee thereof within the limits prescribed under the Companies Act as approved by the Shareholders of the Company.
Apart from the commission and sitting fees paid by the Company, the Non-Executive Directors, in their individual capacity, did not have any pecuniary relationship or transactions with the Company during the financial year 2015-16.
C. Remuneration to Key Managerial Personnel and other employees
The objective of the policy is to have a compensation framework that will reward and retain talent. The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.
Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.
For Directors, the Performance Pay will be linked to achievement of Business Plan.
For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.
The above will take into consideration industry performance, customer performance and overall economic environment.
For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall company performance.
Pursuant to the provisions of Section 149 of the Companies Act, 2013, the Independent Directors of the Company have been appointed for a period of 5 years.
Pursuant to Schedule IV to the Companies Act, every Independent Director has been issued a letter of appointment containing the terms and conditions of his/her appointment. The terms and conditions of appointment have been posted on the website of the Company at www.nerolac.com. Separate meeting of Independent Directors:
In accordance with the provisions of Schedule IV of the Companies Act, 2013, a separate meeting of the Independent Directors was held during the year on March 10, 2016 without the attendance of Non-Independent Directors and members of management, inter alia to:
a. Review the performance of the Non-Independent Directors and the Board as a whole;
b. Review the performance of the Chairman of the Company, taking into account the views of the executive directors and non-executive directors;
c. Assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
The meeting was attended by Mr. P. P. Shah, Mr. D. M. Kothari and Mrs. Brinda Somaya. Mr. P. P. Shah, Chairman of the Company, who is an Independent Director was the Chairman of the meeting of Independent Directors. The Independent Directors discussed matters pertaining to the Company’s affairs and functioning of the Board and presented their views to the Managing Director for appropriate action
Notes on Directors seeking appointment/re-appointment as required under Regulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Mr. P. D. Chaudhari
Mr. P. D. Chaudhari is a Whole-time Director of the Company with effect from 1st May, 2008.
Mr. Chaudhari, B.E. (Production), MMS, is the Executive Director – Supply Chain & Auto division of the Company.
Mr. Chaudhari holds 200 equity shares in the Company.
Mr. Chaudhari is not a director or member of the committee of the board of any other listed entity. Mr. M. Tanaka
Mr. Masaru Tanaka is a Non-Executive Director on the Board of the Company.
Mr. Tanaka graduated from the Faculty of Technology, Doshisha University, Japan and joined Kansai Paint Co. Ltd., Japan in April 1981.
Mr. Tanaka has expertise in the Technical field, in Automotive and Industrial Coatings.
Mr. Tanaka is the Managing Executive Officer of Kansai Paint Co. Ltd., Japan.
Mr. Tanaka does not hold any shares in the Company.
Mr. Tanaka is not a director or member of the committee of the board of any other listed entity.
6. Stakeholders’ Relationship Committee
In our Company, the Stakeholders’ Grievance Committee is known by the name of Stakeholders’ Relationship Committee.
(i) The Members of the Stakeholders’ Relationship Committee are Mr. D. M. Kothari, Mr. H. M. Bharuka and Mrs. Brinda Somaya.
Mr. D. M. Kothari, a Non-Executive Independent Director, is the Chairman of the Stakeholders’ Relationship Committee. Mr. D. M. Kothari, Chairman of the Committee was present at the Annual General Meeting.
(ii) Mr. G. T. Govindarajan, Company Secretary, is the Compliance Officer.
iv) Normally all complaints/queries are disposed off expeditiously. The Company had no complaint pending at the close of the financial year.
(v) The Committee considers and resolves the grievances of the security holders of the Company including complaints related to transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends. The Committee attends to share-transfer formalities every fortnight
8. Means of Communication
(i) Quarterly Results:
The quarterly results are published in accordance with the requirements of the Listing Agreement of the BSE and the NSE.
(ii) Newspaper in which results are normally published:
The Economic Times and The Maharashtra Times. Results could also get published in any other reputed newspaper such as the Financial Express / Loksatta or the Business Standard / Tarun Bharat.
(iii) Any website, where displayed: www.nerolac.com
(iv) Whether it also displays official news releases; and presentation made to institutional investors or to the analysts:
Relevant information is displayed on the website.
As the financial results of the Company are published in the Newspapers and press release issued in newspapers and also displayed on the Company’s website, a separately half yearly declaration of financial performance is not sent to each household of shareholders.
9. General Shareholder Information
(i) AGM Date, Time and Venue:
Wednesday, 22nd June, 2016 at 11.00 a.m. at M. C. Ghia Hall, Bhogilal Hargovindas Building, 4th floor, 18/20, Kaikhushru Dubash Marg, Behind Prince of Wales Museum, Kala Ghoda, Mumbai – 400001.
(ii) Financial Calendar: : April-March
– Financial reporting for the quarter ending 30th June, 2016 : End July, 2016
– Financial reporting for the quarter ending 30th September, 2016 : End October, 2016
– Financial reporting for the quarter ending 31st December, 2016 : End January, 2017
– Financial reporting for the year ending 31st March, 2017 : End April, 2017
– Annual General Meeting for the year ending 31st March, 2017 : End June, 2017
(iii) Dates of Book Closure:
Thursday, June 16, 2016 to Wednesday, June 22, 2016 (both days inclusive) for the purpose of Annual General Meeting and Dividend.
(iv) Dividend Payment Date: On or after 27th June, 2016.
Dividend, when declared, will be payable on or after 27th June, 2016 to those members whose names are registered as such in the Register of Members of the Company as on June 15, 2016 and to the Beneficiary holders as per the beneficiary list as on June 15, 2016 provided by the NSDL and CDSL.
(v) Listing on Stock Exchanges:
The Company’s Equity Shares are listed on the BSE and the NSE.
The annual listing fees of the BSE and the NSE have been paid.
vi) Stock Code
Stock Exchange Code
Demat – ISIN Number for NSDL & CDSL : INE531A01024
(viii) The securities of the Company have never been suspended from trading.
(ix) Registrar and Share Transfer Agents:
Upto April 30, 2016 Sharepro Services (India) Pvt. Ltd. Office: Samhita Warehousing Complex, Plot No. 13AB, Off Andheri-Kurla Road, Sakinaka, Andheri (East), Mumbai – 400 072. Tel. No.: 67720300, 67720400 • Fax No.: 28591568
Investor Relations Centre:
912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai – 400 021. Tel. No.: 22881563, 22881568 E-mail: email@example.com From May 1, 2016:
TSR Darashaw Ltd. 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Mahalaxmi, Mumbai – 400 011. Tel. No.: +91 22 66568484 Fax No.: 91 22 66568494 E-mail: firstname.lastname@example.org
(x) Share Transfer System:
After consideration by the Stakeholders’ Relationship Committee, the Share Transfers in physical form are registered and returned within a period of 15 days from the date of receipt in case the documents are complete in all respects. The particulars of movement of shares in the dematerialized mode are also placed before the Stakeholders’ Relationship Committee.
Dematerialisation of Shareholding and liquidity:
99.12% of the paid-up share capital had been dematerialised, as at 31st March, 2016.
(xiii) Outstanding GDRs / ADRs / Warrants or any Convertible Instruments: Not Issued.
(xiv) Commodity price risk or foreign exchange risk and hedging activities: Commodity Risk
There are several raw materials which are directly driven by crude oil. These are monitored on regular basis using pricing trends and forecast from internationally reputed news agencies. Appropriate coverage is taken on rising trends and inventory is cut in declining trends. Wherever direct co-relation exists, cost sheet is monitored to calculate delta changes and accordingly purchase prices are decided. For metal related buying, price indices such as LME are used to check on trends. Additionally, import data is tracked to compare average import prices and buying prices. Accordingly, appropriate actions are taken to minimise commodity risks.
Foreign Exchange Risk
To control and minimise exchange risk, the Company has documented Forex Policy according to which currency forecast is received from various banks and consultants on regular basis. Additionally regular meetings are also done with banks and important data announcements such as unemployment data, G 7 meetings, Non-farm payroll, RBI announcements etc. is watched carefully. Coverage of currency – approximately 80% payments are in USD and approximately 15% in Yen. Normally we try and cover 30%-40% open market exposure depending upon movement of currencies and forward premium. Also, supplier credit terms are decided time to time looking to current forex rates and volatility. Option strategies are evaluated periodically.
(xv) Plant Locations:
The Company’s plants, which are operative, are located at:
1. Lote Parshuram, Ratnagiri, Maharashtra
2. Jainpur, Kanpur Dehat, U.P.
3. Bawal, Haryana
4. Hosur, Tamil Nadu
(xvi) Address for correspondence:
TSR Darashaw Ltd. 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Mahalaxmi, Mumbai – 400 011. Tel. No.: +91 22 66568484 Fax No.: 91 22 66568494 E-mail: email@example.com
Shareholders can also contact the Secretarial Department at the Registered Office of the Company at:
Nerolac House, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013. Tel. No.: + 91 22 24992796, 24992807 E-mail ID for Investor Grievances:
The Company has created an e-mail ID for redressal of Investor Complaints named firstname.lastname@example.org
(i) Related Party Transactions
All transactions entered into with the Related Parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations during the financial year were in the ordinary course of business and on arm’s length basis and do not attract provisions of Section 188 of the Companies Act, 2013. There were no materially significant transactions with the related parties during the financial year that may have potential conflict with the interests of the Company at large.
Related party transactions have been disclosed in Note 30 to the financial statements. A statement in summary form of transactions with related parties in the ordinary course of business and arm’s length basis is periodically placed before the Audit Committee for its review. Omnibus approval was obtained for transactions which were repetitive in nature. Transactions entered into pursuant to omnibus approval were placed before the Audit Committee for its review during the year. The Company has a Related Party Transaction Policy in place, which has been posted on the website of the Company at http://www.nerolac.com/Financial/Policies.
(ii) Non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchanges, or SEBI or any statutory authority, on any matter related to capital markets, during the last three years: Nil.
(iii) Vigil mechanism and Whistle Blower Policy:
The Company has a Whistle blower Policy in place. The internal auditors of the Company have been provided with a separate e-mail address. They are also stationed at the Head Office of the Company as the Company has provided the auditors with a separate office. Any employee of the organization can contact the auditor on the mail or personally. The Company’s portal provides a very effective means for the employees to communicate freely with the Managing Director. The Company’s employees can also directly meet the Managing Director and express their grievances/concerns. There are safeguards to ensure that all employee concerns receive due consideration. The Whistle Blower Policy of the Company has been posted on the website of the Company.
The Code of Conduct for the Board of Directors and Senior Management states that Directors and Senior Managers of the Company shall endeavour to promote ethical behaviour and to provide an opportunity to employees to report violation of laws, rules, regulations or codes of conduct and policy directives adopted by the Company to the appropriate personnel without fear of retaliation of any kind for reports made by the employees in good faith.
No personnel has been denied access to the Audit Committee.
(iv) Details of compliance with mandatory requirements and adoption of the non-mandatory requirements of this clause. Details of any non-compliance of any requirement of corporate governance report:
All the mandatory requirements have been complied with as stated in this report on Corporate Governance. There is no non-compliance with any requirement of corporate governance report of sub-paras (2) to (10) of the Corporate Governance report as given in Schedule V(C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The disclosures of the compliance with Corporate Governance requirements specified in Regulation 17 to 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Regulations), have been made in this Corporate Governance report. Details required under clauses (b) to (i) of sub-regulation (2) of Regulation 46 of the said Regulations are displayed on the website of the Company at www.nerolac.com.
The non-mandatory requirements as stipulated in Part E of Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations have been adopted to the extent and in the manner as stated under the appropriate headings in the Report on Corporate Governance.
(v) Material Subsidiaries: The Company does not have a material subsidiary as defined under Regulation 16(1)(c) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations. The Policy for determining material subsidiaries is posted on the website of the Company at www.nerolac.com/Financial/Policies.
(vi) Disclosure of commodity price risks and commodity hedging activities:
This has been discussed under point no 9 (xiv) of this Corporate Governance Report.
(vii) CEO/CFO Certification:
A certification from the CEO and CFO as specified in Part B of Schedule II in terms of Regulation 17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations was placed before the Board Meeting held on 27th April, 2016 to approve the Audited Annual Accounts for the year ended 31st March, 2016.
(viii) Risk Management: The Company has a Risk Management Framework in place, the details of which are provided in the Board’s report.
(ix) Unclaimed Dividend:
Pursuant to Section 205A of the Companies Act, 1956, all unclaimed dividend upto 56th Dividend for the year ended 31st March, 1994 have been transferred to the General Revenue Account of the Central Government. Shareholders who have not encashed the dividend warrants for the said period are requested to claim the amount from the Registrar of Companies, Maharashtra, Mumbai, by submitting an application in Form No. II to the aforesaid authority.
Pursuant to Section 205A read with 205C of the Companies Act, 1956, unclaimed dividends for the year ended 31st March, 1995 to 31st March, 2008 have been transferred to the Investor Education and Protection Fund.
Shareholders are requested to encash their dividend warrants immediately on receipt as dividends remaining unclaimed for seven years are to be transferred to the Investor Education and Protection Fund.
e) It is hereby confirmed that the voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares.
For and on behalf of the Board
P. P. SHAH
date : 27th April, 2016