REPORT ON CORPORATE GOVERNANCE
Corporate governance philosophy and compliance
Your Company's philosophy is based on a belief that good Corporate Governance helps to enhance Stakeholders' value by focusing on long-term Stakeholder value creation without compromising on integrity, social obligations and regulatory compliances.The Company's Management firmly believes that good Corporate Governance should be internally driven and not be looked upon just as an issue of compliance dictated by statutory requirements. Your Company has complied with the mandatory and non-mandatory requirements relating to Corporate Governance prescribed under Clause 49 of the Listing Agreement,as detailed below:
I. Composition of the Board
The Board of Directors has 7 members (as on June 30, 2015), including the Managing Director and 6 Non-Executive Directors who bring in a wide range of skills and experience to the Board. The Company has a Non-Executive Chairman and the number of Independent Directors is more than one-third of the total number of Directors. The Chairman is neither a Promoter of the Company nor he is related to any Promoter or person occupying Management positions at the Board level or at one level below the Boards as defined under Clause 49 of the Listing Agreement. Thus the composition of the Board is in conformity with Clause 49 of the Listing Agreement.
Table I Particulars of directorships. membership of board committees and attendance at
None of the Directors of the Board serve as members of more than ten committees or they act as Chairman of more than five Committees across all companies. There is no relationship amongst Directors inter-se.
As per the provisions of Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has issued a formal letter of appointment to all the Independent Directors of the Company.The terms of appointment has also been disclosed on the website of the Company http://www.kennametal.com/contentldamlkennametal/kennametallhi/About%20UslCompany 7o20Profi\elterms_conditions_appointmentJndep_directors.pdf
The Independent Directors are familiarized with the Company, their roles, rights, responsibilities in the company, nature of the industry in which the company operates, business model etc. The familiarization document is also disclosed on the website of the Company at <http:llwww.kennametal.com/>content/dam/kennametallkennametal/hi/About%20Us/Company%20Profile/Familiarization_Program_for_lndependent_ Directors_20l5.pdf
As required, a brief profile and other particulars of the Directors seeking appointments/re-appointment are given in the Notice convening the 50th Annual General Meeting.
Number of Board Meetings held during the period along with the dates of the Meetings.
During the year under review, five meetings of the Board of Directors were held on the following dates:
August 12,2014, November 04,2014,January 30,2015, May 05, 2015 and June 11,2015.
During the year, a separate meeting of the Independent Directors was held on May 06.2015 without the attendance of non-independent Directors and members of the management.
Compliance with the Code of Conduct and Ethics
The Company has adopted the "KIL Code of Conduct and Ethics for Board Members and its senior management" and has framed a Whistle Blower Policy aimed at better Corporate Governance and continued Vigil Mechanism which is available on the Company weblink <http://www.kennametal.com/> hilabout-uslkil-financials.html or www.kennametal.com/kennametalindia/
In accordance with SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has formulated the "KIL Code of Conduct for Regulating, Monitoring and Reporting of Trading in Securities by Employees and Other Connected Persons" which is available on the Company website www.kennametal.com/kennametalindia
2. Audit Committee
The Audit Committee has the powers, role and terms of reference as per Clause 49 of the Listing Agreement and Section 177 of the Companies Act, 2013. The Company has setup a qualified and independent Audit Committee and the term and reference of the Audit Committee is set out below:
1. The Audit Committee shall have a minimum three directors as members.Two-thirds of the members of the Audit Committee shall be Independent Directors.
2. All members of the Audit Committee shall be financially literate and at least one member shall have accounting or related financial management expertise.
3. The Chairman of the Audit Committee shall be an independent director;
4. The Chairman of the Audit Committee shall be present at the Annual General Meeting to answer shareholder queries;
5. The Audit Committee may invite such of the executives, as it considers appropriate (and particularly the head of the finance function) to be present at the meetings of the committee, but on occasions it may also meet without the presence of any executives of the company. The Chief Financial Officer (CFO).the Intemal Auditors and a representative of the statutory auditor may be present as invitees for the meetings of the Audit Committee;
6. The Company Secretary shall act as the secretary to the committee.
7. The Audit Committee shall meet at least four times in a year and not more than four months shall elapse between two meetings. The quorum shall be either two members or one third of the members of the audit committee whichever is greater, but there should be a minimum of two independent members present.
Powers of the Audit Committee:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee.
3. To obtain outside legal or other professional advice.
4. To secure attendance of outsiders with relevant expertise, if it is considered necessary.
Role of the Audit Committee
The role of the Audit Committee include the following:
1. Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible;
2. Recommendation for appointment, remuneration and terms of appointment of auditors of the company;
3. Approval of payment to statutory auditors for any other services rendered by them;
4. Reviewing, with the management, the annual financial statements and auditor's report thereon before submission to the board for approval, with particular reference to:
a. Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (c) of sub-section (3) of section 134 of the Companies Act,20l 3
b. Changes, if any, in accounting policies and practices and reasons for the same
c. Major accounting entries involving estimates based on the exercise of judgment by management
d. Significant adjustments made in the financial statements arising out of audit findings
e. Compliance with listing and other legal requirements relating to financial statements
f. Disclosure of any related party transactions
g. Qualifications in the draft audit report
5. Reviewing, with the management, the quarterly financial statements before submission to the board for approval;
6. Reviewing, with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized, if any, for purposes other than those stated in the offer document / prospectus / notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take steps in this matter;
7. Review and monitor the auditor's independence and performance, and effectiveness of the audit process;
8. Approval or any subsequent modification of transactions of the company with related parties;
9. Scrutiny of inter-corporate loans and investments;
10. Valuation of undertakings or assets of the company, wherever it is necessary;
11. Evaluation of internal financial controls and risk management systems;
12. Reviewing, with the management, performance of statutory and internal auditors, the adequacy of the internal control systems;
13. Reviewing the adequacy of the internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage, the internal audit plans and the frequency of internal audit;
14. Discussion with internal auditors of any significant findings and follow up there on;
15. 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;
16. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern;
17. To look into the reasons for substantial defaults, if any, in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors;
18. To review the functioning of the Whistle Blower mechanism;
19. Approval of appointment of the CFO (i.e., the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience and background, etc. of the candidate;
20. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.
Review of information by Audit Committee
The Audit Committee shall mandatorily review the following information:
1. Management discussion and analysis of financial condition and results of operations;
2. Statement of significant related party transactions (as defined by the Audit Committee), submitted by management;
3. Management letters / letters of internal control weaknesses issued by the statutory auditors;
4. Internal audit reports relating to internal control weaknesses; and
5. The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee.
Composition and Details of Audit Committee Meetings during the financial year
Consequent upon the vacancy caused by the retirement of Mr. M. N. Bhagwat as Director with effect from November 04, 2014, his position as Chairman of the Audit Committee was vacated. The Board of Directors at its meeting held on November 04,2014 co-opted Mr.Prakash M.Telang as member of the Committee and Mr. B.Anjani Kumar as Chairman of the Committee. As on June 30, 2015, the Audit Committee of the Company consists of three (3) Non-executive Independent Directors and all of them have financial and accounting knowledge. The members of the Committee are (i) Mr. B.Anjani Kumar, Chairman of the Committee (ii) Mr. Prakash M.Telang and (iii) Mr.Vinayak K.Deshpande.
During the period under review, five meetings of the Audit Committee of Directors were held on the following dates: August 12, 2014, November 04, 2014, January 30, 2015, May 05,2015 and June I 1,2015.
The Chief Financial Officer (CFO), Internal Auditors and the Statutory Auditors were invited to attend the meetings of the Audit Committee.
The Company Secretary is the Secretary to the Audit Committee.
3. Stakeholders' Relationship Committee
Stakeholders' Relationship Committee has powers to oversee and review all matters connected with the transfer of the Company's securities, monitor redressal of investors' / shareholders' / security holders' grievances, oversee the performance of the Company's Registrar and Transfer Agents, recommend methods to upgrade the standard of services to Investors and carry out any other function as is referred by the Board from time to time or enforced by any statutory notification / amendment or modification as may be applicable.
Consequent upon the vacancy caused by the retirement of Mr. M. N. Bhagwat as Director with effect from November 04, 2014, his position as the Chairman of the Committee was vacated. The Board of Directors at its meeting held on November 04, 2014 co-opted Mr. Prakash M.Telang as the Chairman of the Committee and reconstituted the Stakeholders' Relationship Committee to comprise (a) Mr. Prakash M.Telang and (b) Mr. Bhagya Chandra Rao.
The Committee met on August 12,2014 during the year under review and the attendance of the members at the said meeting is provided in Table 3.
4. Directors' remuneration
Remuneration paid to Directors for the year under review is provided in Table 4 and 5. Table 4:
Remuneration paid to Managing Director in respect of financial year 2014-2015.
The criteria for determination of commission to Non-Executive Independent Directors as approved by the Board, includes attendance at the meetings of the Board / Board Committees, Chairmanship of the Board / Committees of the Board, individual responsibilities and additional contribution to the Company.
The Company presently has no Employee Stock Option Plan.
5. Nomination and Remuneration Committee
The Nomination and Remuneration Committee has the following objectives:
i Identify persons who are qualified to become directors and who may be appointed in senior management roles in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every Director's performance.
ii. Formulate the 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.
iii. Formulation of criteria for evaluation of Independent Directors and the Board.
iv. Devise a policy on Board diversity.
v. Produce the Committee's report on the remuneration policy and evaluation criteria to be included in the Annual report of the Company.
1. Policy relating to the Remuneration for the Whole-time Director, KMP, and Senior Management Personnel.
a) The remuneration / compensation /performance pay/ Variable pay etc. of the Managing/Whole-time Director, KMP and Senior Management Personnel will be recommended by the Committee to the Board for approval.The remuneration / compensation / commission etc. of directors shall be subject to the prior/post approval of the shareholders of the Company and Central Government, wherever required and with the limit permitted under the Companies Act, 2013 and rules made thereunder.
b) The extent of overall remuneration should be sufficient to attract and retain talented and qualified individuals suitable for every role. Remuneration should be:
• Market competitive
• Driven by the role played by the individual
• Reflective of the size of the Company, complexity of the industry in which it operates
• Consistent with recognized best practices
• Aligned to regulatory requirements, if any.
c) The Committee may recommend increments to the existing remuneration/ compensation structure to the Board which should be within the limit approved by the Shareholders in the case of the Managing Director.
d) Where any Director and officers liability (D&O) insurance is taken by the Company on behalf of its Directors, Chief Executive Officer, Chief Financial Officer, the Company Secretary and any other employees for indemnifying them against any liability, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel. Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part of the remuneration.
2. Remuneration to Whole-time / Executive / Managing Director, KMP and Senior Management Personnel:
a) Annual Guaranteed Cash/Fixed Remuneration and Performance Pay:
The Managing Director/Whole-time Director/ KMP and Senior Management Personnel shall be eligible for a monthly remuneration as may be approved by the Board on the recommendation of the Committee.The breakup of the Annual
Guaranteed Cash comprising of Basic Salary, Housing Allowance, Special allowance, LTA, Medical allowance and quantum of perquisites including, employer's contribution to P.F, pension scheme, medical expenses, club fees and performance/Variable pay etc. shall be decided and approved by the Board/ the Person authorized by the Board on the recommendation of the Committee and approved by the shareholders and Central Government, wherever required.
b) Minimum Remuneration:
If, in any financial year, the Company has no profits or its profits are inadequate, the Company shall pay remuneration to its Managing/Whole-time Director in accordance with the provisions of ScheduleV of the Act and if it is not able to comply with such provisions, with the previous approval of the Central Government.
• Section 197(1) of the Companies Act, 2013 provides that the total managerial remuneration payable by the Company to its directors, including managing director and whole time director, and its manager in respect of any financial year shall not exceed eleven percent of the net profits of the Company computed in the manner laid down in Section 198 in the manner as prescribed under the Act.
• The Company may with the approval of the shareholders authorise the payment of remuneration upto five percent of the net profits of the Company to its anyone Managing Director/Whole Time Director/ Manager and ten percent in case of more than one such official.
c) Provisions for excess remuneration:
If any Managing/Whole-time Director draws or receives, directly or indirectly by way of remuneration any such sums in excess of the limits prescribed under the Act or without the prior sanction of the Central Government, where required, he / she shall refund such sums to the Company and until such sum is refunded, hold it in trust for the Company.The Company shall not waive recovery of such sum refundable to it unless permitted by the Central Government.
3. Remuneration to Non-Executive / Independent Director:
The remuneration / commission shall be fixed as per the provision of the Companies Act, 2013 and rules made thereunder.
b) Sitting Fees:
An Independent Director may receive remuneration by way of fees for attending meetings of Board or Committee thereof as approved by the Board. Provided that the amount of such fees shall not exceed the amount prescribed under the Companies Act, 2013 and rules/regulations/notification applicable thereunder.
The Company may pay the Commission to Independent Directors within the limit approved by shareholders and subject to a limit not exceeding 1% of the profits of the Company computed as per the applicable provisions of the CompaniesAct,2013.
d) Stock Options:
An Independent Director shall not be entitled to any stock option of the Company or its promoter's company.
e) In addition to the sitting fees and commission, the company may pay to any Director such fair and reasonable expenditure, as may have been incurred by the director while performing his/her role as a director of the Company.This could include reasonable expenditure incurred by the director for attending Board/Board Committee meetings, general meetings, court convened meetings, site visits, induction and training (as permitted by the Companies Act, 2013 and the Listing Agreement) and obtaining professional advice from independent advisors in furtherance of his/her duties as Director.
The Committee shall carry out evaluation of the performance of every Director, KMP and Senior Management Personnel at regular interval (yearly) as per the performance management system of the Company.
a) Consequent upon the resignation of Mr. John Chang as Director with effect from August 12, 2014 his position as Member of the Committee was also vacated. The Board of Directors at its meeting held onAugust 12,2014 reconstituted the Nomination and Remuneration Committee to comprise (i) Mr.M.N.Bhagwat (ii) Mr.B.Anjani Kumar and (iii) Mr.Vinayak K.Deshpande.
b) Consequent upon the vacancy caused by the retirement of Mr. M. N. Bhagwat as Director with effect from November 04, 2014, his position as Chairman of the Committee was also vacated. The Board of Directors at its meeting held on November 04,2014 co-opted Ms. Michelle R. Keating as a member and appointed Mr. Vinayak K. Deshpande as the Chairman of the Committee and reconstituted the Nomination and Remuneration Committee to comprise (i) Mr.Vinayak K. Deshpande (ii) Mr. B. Anjani Kumar and (iii) Ms. Michelle R. Keating.
The Committee met on August 12,2014, September I 1,2014, November 04, 2014 and May 05,2015during the year under review and the attendance of the members at the said meetings is provided in Table 6.
As per Clause 49 of the Listing Agreement, Nomination and Remuneration policy, Performance Evaluation and Policy on Board Diversity are available on the website of the Company weblink<http://www.kennametal.com/ /kil->financials.html or www.kennametal.com/kennametalindia
6. Corporate Social Responsibility Committee
The Board has constituted a Corporate Social Responsibility Committee which shall formulate and recommend to the Board, a Corporate Social Responsibility Policy in terms of Schedule VII of the Companies Act, 2013; recommend the amount of expenditure to be incurred on the CSR activities; review the Corporate Social Responsibility Policy of the Company from time to time; and act in terms of any consequent statutory modification(s)/ amendment(s)/ revision(s) to any of the provisions applicable to the said Committee.
a) The Board of Directors at its meeting held on August 12, 2015 co-opted Ms. Michelle R. Keating as a member of the Committee and reconstituted the Corporate Social Responsibility Committee to comprise (i) Mr. M.N. Bhagwat (ii) Mr. B.Anjani Kumar (iii) Mr. Bhagya Chandra Rao and (iv) Ms. Michelle R. Keating.
b) Consequent to the vacancy caused by the retirement of Mr. M. N. Bhagwat as Director with effect from November 04,2014 his position as Chairman of the Committee was also vacated.The Board of Directors at its meeting held on November 04, 2014 reconstituted the Committee and co-opted Mr.John H.Jacko in place of Ms. Michelle Keating and Mr. Prakash M.Telang in place of Mr. M. N. Bhagwat as members and appointed Mr. Bhagya Chandra Rao as the Chairman of the Committee. As on June 30, 2015, the Corporate Social Responsibility Committee was consisting of (i) Mr. Bhagya Chandra Rao, Chairman of the Committee (ii) Mr. Prakash M. Telang (iii) Mr. B. Anjani Kumar and (iv) Mr. John H. Jacko.
The Committee met on August I1,2014, November 03, 2014 and May 06, 2015 during the year under review and the attendance of the members at the said meetings are provided in Table 7.
The Corporate Social Responsibility Policy is also disclosed on the website of the Company at<http://www.kennametal.com/> content/dam/kennametal/kennametal/hi/About%20Us/Comp any%20Profile/KMTIndia_corp_social_responsibility_policy. pdf
7. Risk Management Committee
The Committee was constituted on January 30,2015 and met on May 06, 2015 during the year under review and the attendance of the members at the said meeting is provided in Table 8.
• The Company has adopted a Code of Internal Procedures
and Conduct for Prevention of Insider Trading.
The Company has in place a Code of Conduct applicable to the Board of Directors as well as the Senior Management. The Managing Director has confirmed and declared that all the members of the Board and Senior Management personnel have affirmed compliance with the Code of Conduct for the year 2014-2015.
• Mr. B.Anjani Kumar, Director holds 10 Equity Shares of
Rs. 10/- each in the Company. No other Director holds any shares in the Company.
• No penalties were imposed or strictures passed on the
Company by BSE Limited, SEBI or any statutory authority on any matter relating to capital markets during the last three years
• All the Equity Shares of your Company are listed.
• The Company places the requisite information about related party transactions before the Audit Committee from time to time. Please refer to Notes on Accounts for materially significant related party transactions. None of the said transactions were potentially in conflict with the interest of the Company at large.
• There has been no accounting treatment different from that prescribed in the Accounting Standards laid down by the Institute of Chartered Accountants of India (ICAI) or as notified under the Companies Act.
• The Company being a part of Kennametal Group ("the group"), complies with the whistle blower policy of the group which is applicable to all employees of the group.
• The Senior Management personnel have declared to the Board of Directors that none of them or their relatives had any material, financial, commercial transactions that were potentially in conflict with the interests of the Company.
• The Managing Director and Chief Financial Officer have certified to the Board in accordance with Clause 49(IX) of the listing agreement, for the year ended June 30,2015.
• The Company does not have any subsidiaries.
• The Company has not made any capital issues during the
year ended June 30,2015.
• The Company has complied with all the mandatory requirements of Clause 49 of the listing agreement. As regards the non-mandatory requirements the extent of compliance has been stated in this report against each item.
Adoption of non-mandatory requirements
i) The Board
The Company reimbursed the expenses towards the maintenance of the office up to November 4,2014 by its nonexecutive independent former Chairman Mr. M.N. Bhagwat.
ii) Shareholder Rights
The Company's quarterly and half-yearly financial results are published in the newspapers and the results were also uploaded in the Company's website. Therefore, no individual intimations were sent to the shareholders. However, based on the requests from shareholders, if any, the Company would provide them individually.
iii) Audit qualifications
There are no qualifications in the Auditors' Report on the Financial Statements of the Company for the year ended June 30,2015.
iv) Separate posts of Chairman and CEO
The Company has appointed separate persons to the post of the Chairman and the CEO.
v) Reporting of Internal Auditor
The Internal Auditor reports directly to theAudit Committee.
10. Means of Communication
a. Quarterly / half-yearly / annual financial results of the Company were forwarded to the BSE Limited (where listed) immediately after the Board Meetings so as to enable hosting the same in their website and the results were also published in Financial Express (English) and Sanjevani (Kannada) newspapers within 48 hours from the conclusion of the Board Meetings.
b. As per the latest amendment by SEBI the requisite details of the Company in terms of Clause 54 of the listing agreement are maintained in the website viz.www.kennametal.com/ kennametalindia/ under the icon 'Company Profile' (Kennametal India Financials).
The link is as follows: <http://www.kennametal.com/hi/about-us/kil-financials.html>
c. Management Discussion and Analysis Report is annexed to the Board's Report.
Annual General Meeting:
The 50th Annual General Meeting of the Company is scheduled to be held on November 09,2015 at the Registered Office of the Company at 8/9th Mile.Tumkur Road, Bengaluru-560073.
The Register of Members and share transfer books will remain closed from November 03, 2015 to November 09, 2015 (both days inclusive).
Event Month (tentative)
Un-audited results for the quarter ending September 30, 2015 November, 2015
Un-audited results for the quarter ending December 31, 2015 January / February, 2016
Un-audited results for the quarter ending March 31, 2016 April / May, 2016
Audited results for the year ending June 30, 2016 August, 2016
The equity shares of the Company are listed with BSE Limited, Mumbai. (Scrip Code: 505890) and the listing fee has been paid for the year 2015-2016.
Share Transfer Agents
Work related to both physical & demat shares is handled by Integrated Enterprises (India) Limited as common Share Transfer Agent.AII correspondence relating to share transfers, change of address for shares held in physical form and dematerialisation of shares etc. are to be addressed to Integrated Enterprises (India) Limited, No.30,"Ramana Residency", 4th Cross, Sampige Road, Malleswaram, Bengaluru - 560003, Phone:080 - 23460815 to 818.Fax: 080 - 23460819, E-mail:firstname.lastname@example.org
Share transfer system
The authority relating to transfer of shares has been delegated to a Share Transfer Committee consisting of the Managing Director as its Chairman, Vice President & Chief Financial Officer and the Company Secretary as its members. The Committee meets fortnightly or as often as may be necessary to ensure that the transfer process is completed without delay.
Dematerialisation of shares
The Company's shares are admitted into both the depositories viz. National Securities Depository Limited [NSDL] and Central Depository Services (India) Limited [CDSL] and the ISIN allotted for the equity shares of the Company is INE717A01029, 99.96% of the equity shares of the Company are held in demat form.
There are no outstanding GDRs / ADRs / other convertible instruments.
Address for correspondence
For all matters relating to shares, demat, remat, annual report, etc.
Integrated Enterprises (India) Limited
Unit: Kennametal India Limited
No. 30,"Ramana Residency", 4th Cross, Sampige Road, Malleswaram, Bengaluru - 560 003
Phone:080 - 23460815 to 818 Fax:080-23460819.
For dividend queries and other general matters:
The Company Secretary
Kennametal India Limited
8/9* Mile.Tumkur Road, Bengaluru - 560 073. Karnataka, India
Phone:080-28394321 & 080-22198345 Fax: 080 28397572 e-mail:kundan. Ial@kennametal.com e-mail: email@example.com
for the purpose of addressing investor complaints and also to take necessary follow-up action.