REPORT ON CORPORATE GOVERNANCE
1. Company's Philosophy on Code of Governance
Your Company has always adhered to good corporate governance practices and maintai ned the highest levels of fai rness, transparency, accountability, ethics and values in all facets of its operations.
Your Company's Corporate Governance practices emanate from its commitment towards accountability, transparency and fairness. Your Company ensures timely and accurate disclosure on all material matters including the financial situation, performance and regulatory requirements.
Your Company believes that good corporate governance is essential for achieving long-term corporate goals of the Company and for meeting the needs and aspirations of its stakeholders, including shareholders.
2. Board of Directors
(a) Composition of the Board:
As of 31st March, 2016 in compliance with corporate governance norms, the Board comprises of 14 Directors. It includes a Chairman & Managing Director, a Managing Director, a Whole-time Director, 3 Non-Executive Directors and 8 Independent Directors. None of the Directors on the Board is a member of more than 10 committees or act as Chairman of more than 5 committees across all Listed Companies and Unlisted Public Limited Companies in which he/she is a director.
The Committee memberships of Directors are within the limits prescribed under the SEBI Regulations.
Mr. K M Mammen, Chairman & Managing Director and Mr. Arun Mammen, Managing Director, are brothers. Mr. Rahul Mammen Mappillai, Whole-time Director is the son of Mr. K M Mammen, Chairman & Managing Director. Dr. (Mrs.) Cibi Mammen is the wife of Mr. Arun Mammen, Managing Director and Mrs. Ambika Mammen is the wife of Mr. K M Mammen, Chairman & Managing Director.
(c) Dates of Board meetings:
Duringthe 18 months period ended 31 st March, 201 6, seven Board Meetings were held on 30.10.2014, 26.11.2014, 12.02.2015, 23.04.201 5, 27.07.201 5, 29.1 0.201 5 and 25.01.201 6.
(d) Information placed before the Board:
The Board of Directors periodically reviews reports regarding statutory compliance and the other minimum information required to be placed before the Board (including orderly succession for appointment of Board of Directors and senior management).
(e) Familiarization Programme:
Your Company during the period, familiarized the directors on the Company's policies and procedures on a regular basis. Presentations/briefings were also made at the meeting of the Board of Directors / Committees by KMP's/senior executives of the company on industry scenario, Company's operating and financial performance, raw material scenario, industrial relations status, marketing strategies, long term strategies, risk management etc., apart from visit by directors to company's manufacturing plants.
The details of familiarization programme are available on the Company's web site at: <http://www.mrttyres.com/downloads/> download.phpRs.ti lename=fam i I iarisation-programme-for-independent-di rectors.pdf.
3 Audit Committee
The powers, role and terms of reference of the Audit Committee covers the area as mentioned under Regulation 1 8 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 201 5 and Section 1 77 of the Companies Act, 201 3, besides other terms as may be referred by the Board of Directors. The powers, role and terms of reference of the Audit Committee include inter alia oversight of Company's financial reporting process, internal financial controls, reviewing the adequacy of the internal audit function, reviewing with management the quarterly/ annual financial statements before submission to the Board, recommending the appointment of statutory auditors and fixation of their remuneration, approval of related party transactions, evaluation of risk management systems etc.
The Audit Committee comprises of 3 Directors and all of them being Non-Executive Independent Directors. The members of the Committee are as follows:
Mr. Jacob Kurian Chairman
Mr. V Sridhar Member
Mr. Ranjit I Jesudasen Member
Mr. Ravi Mannath, Company Secretary, is the Secretary of the Committee.
Mr. K M Mammen, Chairman & Managing Director, Mr. Arun Mammen, Managing Director and Mr. Rahul Mammen Mappillai, Whole-time Director, are permanent invitees. Heads of finance, internal audit, statutory auditors and other executives, as considered appropriate, also attend the meetings by invitation.
(iii) Meetings and Attendance:
During the 18 months period ended 31st March, 2016, the Audit Committee met on the following dates: 24.11.2014,11.02.2015, 23.04.2015, 27.07.2015, 29.10.2015 and 25.01.2016.
All the members of the Committee were present for all the meetings.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee was constituted to recommend/review the remuneration package of the Managing and Whole-time Director. In accordance with Section 1 78 of the Companies Act, 201 3 and Regulation 1 9 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the terms of reference of the Committee include the following namely formulation of criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to remuneration of the directors, key managerial personnel and other employees; formulation of criteria for evaluation of Directors performance, devising a policy on Board diversity, identify persons who are qualified to become directors and who may be appointed in senior management positions in accordance with the criteria laid down, and recommend to Board their appointment and removal.
The Committee comprises of 3 Non-Executive Independent Directors and an Executive Director. The Chairman is a Non-Executive Independent Director. The Committee comprises of:
Mr. Ranjit I Jesudasen Chairman
Mr. V Sridhar Member
Mr. Jacob Kurian Member
Mr. K M Mammen Member
Mr. Ravi Mannath, Company Secretary, is the Secretary of the Committee.
(iii) Meetings and Attendance:
During the 18 months period ended 31st March, 2016, the Committee met on the following dates 24.11.2014, 11.02.2015 and 23.04.2015. All the members of the Committee were present for all the meetings.
5. Criteria for determining the qualifications, positive attributes and Independence of a Director
Candidates for the position of a Director, shall be a person of integrity and possesses requisite education, experience and capability to make a significant contribution to the deliberations of the Board of Directors. Apart from the above, the Board candidate should be of the highest moral and ethical character. The candidate must exhibit i ndependence, objectivity and be capable of serving as a representative of the stakeholder. The candidate should have the personal qual ities to be able to make an active contribution to Board deliberations. These qualities include intelligence, inter-personal skills, independence, communication skills and commitment. The Board candidate should not have any subsisting relationships with any organization which is a competitor to the Company. The Board candidate should be able to develop a good working relationship with other Board members. This apart, the Directors must satisfy the qualification requirements laid down under the Companies Act, 2013, the SEBI Listing Regulations and any other applicable law and in case of Independent Directors, the independence standards laid down in those laws.
6. Performance evaluation of Independent Directors
The criteria for evaluation of the Independent Directors will be attendance, participation in deliberations, understanding the Company's business and that of the industry and in guiding the Company i n decisions affecting the business and additional ly based on the roles and responsibilities as specified in Schedule IV of the Companies Act, 201 3.
The Board carried out evaluation of the performance of the Independent Directors on the basis of the criteria laid down. The evaluation was done by the Board of Directors except the Director who was evaluated.
7 Remuneration of Directors
a. Remuneration Policy:
A Policy on remuneration of Directors, Key Managerial Personnel and Senior Management and other staff was put in place by Nomination and Remuneration Committee on 23/7/2014 and approved by the Board of Directors at its meeting held on 30/10/2014.
The Policy provides as follows :
(i) Non-Executive Directors:
The Non-Executive Directors (including Independent Directors) may be paid remuneration by way of sitting fees for attending meetings of Board or Committee thereof.
The Directors may also be reimbursed any expenses in connection with attending the meetings of the Board or Committee or in connection with the business of the Company.
The quantum of fees shall be determined, from time to time, by the Board subject to ceiling / limits as provided under Companies Act, 2013 and rules made thereunder.
(ii) Chairman & Managing Director, Managing Director(s) / Whole-time Director(s):
The level and composition of remuneration will be reasonable and sufficient to attract, retain and motivate directors of the quality to run the Company successfully. The remuneration package should adequately compensate them for the high level of responsibilities shouldered by them and sensitivity of the position held. The level of remuneration shall take into consideration the professional expertise, past credentials and potential of the person concerned. The compensation package may comprise of a fixed compensation package in the nature of monthly and annual payout, provision of perquisites, contribution to retirement benefits, health and insurance and any other benefits (including provision of loans on such terms as to interest, repayment and security as determined by the Board) and commission on profits, in such proportion and quantum as decided from time to time based on the Company's business needs and requirements and prevailing practices in industry.
Besides the above, the remuneration to be paid to Chairman & Managing Director, Managing Director(s) and Whole-time Director(s) shall be governed by the provisions of the Companies Act, 201 3 and rules made thereunder or any other enactment for the time being in force.
iii) KMP's (other than MD's and WD's), Senior Management Personnel and other Staff:
The level and composition of remuneration will be reasonable and sufficient to attract, retain and motivate persons of the quality required to handle appropriate management roles in the Company successfully. The level of remuneration may be based on the qualification, experience and expertise and potential of the person concerned and also the responsibilities to be shouldered, criticality of the job to the Company's business and any other criteria as considered appropriate. The compensation package may comprise of a fixed compensation package in the nature of monthly and annual payout, provision of perquisites, contribution to retirement benefits, health and insurance and any other benefits (including provision of loans on such terms as to interest, repayment and security as determined by the Board) and variable pay (having a clear relationship to performance which will meet appropriate benchmarks relevant to the working of the Company and its goals), in such proportion and quantum as decided from time to time based on the Company's business needs and requirements and prevailing practices in industry.
(iv) Directors and Officers' Insurance:
Where any insurance is taken by the Company on behalf of its Directors, KMP's / Senior Management Personnel, Staff etc. 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.
8. Stakeholders' Relationship Committee
The Committee looks into redressal of grievances of the investors namely shareholders and fixed deposit holders and other security holders. The Committee deals with grievances pertaining to transfer of shares, non-receipt of annual report, non-receipt of dividend, dematerialisation / rematerialisation of shares, complaint letters received from Stock Exchanges, SEBI, non-receipt of interest warrants, repayment of Fixed Deposit issues etc. The Board of Directors have delegated the power of approving transfer/transmission of shares to a Share Transfer Committee.
The Committee comprises of 3 Directors. The Chairman of the Committee is a Non-Executive Independent Director.
The members of the Committee are :
Mr. V Sridhar Chairman
Mr. Ranjit I Jesudasen Member
Mr. K M Mammen Member
Mr Ravi Mannath, Company Secretary, is the Secretary of the Committee.
(iii) Meetings and Attendance:
During the 18 months period ended 31st March, 2016, the Stakeholders' Relationship Committee met twice on 24.11.2014 and 29.10.2015. All the members of the Committee were present for all the meetings.
17 investor complaints were received during the 18 months period ended 31/03/2016. All the complaints were redressed and no queries on the same were pending for the period under review.
Mr Ravi Mannath, Company Secretary, is the Compliance Officer of the Company.
9.Means of Communication
Quarterly / half yearly results are disclosed to Stock Exchanges and also published in daily newspapers viz., Business Standard (all over India) and MakkalKural (Vernacular). As per the requirements of Regulation 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the quarterly / half yearly results and the press release issued annually are displayed on the Company's website www.mrttyres.com . The Company provides information to the stock exchanges as per the requirements of the SEBI (Listing Obligations and Disclosure Requi rements) Regulations, 2015. No presentations were made to institutional investors / analysts. The Company has a designated e-mail address viz., email@example.com exclusively for investor servicing.
10. General Shareholder Information
a) Annual General Meeting:
Date and Time Venue
11.08.2016, 11.00 A.M TTK Auditorium 'The Music Academy' No. 1 68, TTK Road, Chennai - 600 014
b) Financial Year :
The Company's financial year which commenced from 1st October, 2014 concluded on 31st March, 2016 in order to fall in line with the requirements of the Companies Act, 2013, regarding adoption of a uniform financial year. Effective 1st April, 2016, the financial year of the Company will be from 1 st April to 31 st March of each year.
c) Dividend payment date:
Interim Dividend : 20-08-2015Rs. 3 per share (30%)
II Interim Dividend : 25-11-2015Rs. 3 per share (30%)
Final Dividend : 19-08-2016, Rs. 94 per share (940%),(subject to approval of Shareholders)
d) Listing on Stock Exchanges at:
1. National Stock Exchange of India Ltd., (NSE)
Exchange Plaza, 5th Floor, Plot No. C/1, 5 G Block, Bandra-Kurla Complex, Bandra (E), Mumbai 400 051.
2. Bombay Stock Exchange Ltd., (BSE)
Phiroze jeejeebhoy Towers, Dalai Street, Mumbai 400 001.
Equity ISIN : INE883A01011
Listi ng Fees upto the year ending 31 st March, 201 7 have been paid to all the above mentioned Stock Exchanges.
e) Stock Code:
Bombay Stock Exchange Code 500290
National Stock Exchange Symbol MRF
f) Registrars and Transfer Agents:
In-house Share Transfer
MRF Limited No. 114, Creams Road, Chennai - 600 006
In terms of SEBI Circular No. O&CC/FITTC/CIR-15/2002 dated 27th December, 2002, your Company is carrying out both physical transfer work as well as electronic connectivity, i n-house.
In-house investor relations department provides various services viz., Dematerialization and Rematerializsation of shares, Share Transfers/Transmissions, Disbursement of dividend, Issue of duplicate share certificates, Dissemination of information and Fixed Deposit related activities. Members are therefore requested to communicate pertaining to both physical and electronic connectivity to Secretarial Department, MRF Limited, No. 114, Creams Road, Chennai 600 006.
g) Share Transfer System:
The average time taken for processing and registration of share transfer requests received is less than 12 days. All dematerialization requests are processed within 10 days.
h) Dematerialization of Shares and Liquidity:
71.82% of total Equity Capital is held in dematerialized form with NSDL and CDSL upto 31st March, 2016. All requests for dematerialization of shares were carried out within the stipulated time period and no share certificates were pending for dematerialization.
Trading in equity shares of the Company is permitted only in dematerialized form w.e.t. 1 7-01-2000 as per notification issued by the Securities and Exchange Board of India (SEBI).
i) Outstanding GDR/Warrants/any other convertible instruments:
The Company do not have any outstanding GDR / Warrants / any other convertible instruments.
j) Debenture Trustee: Axis Trustee Services Limited
2nd Floor, Wadia International Centre, Pandurang Budhkar Marg, Worli, Mumbai -400 025.
k) Commodity price risk / foreign exchange risk and hedging:
Natural Rubber which is one of the key commodities used for the company's manufacturing operations is an agricultural commodity and subject to price volatility and production concerns both in the domestic front and in the international front. Moreover, the price of natural rubber is controlled by external environment. The company has not taken any hedging contracts for commodity price risks during this period.
Foreign Exchange Risks for the Company arise from (a) payment obligations arising from imports of raw materials / capital goods, services availed from overseas service providers and foreign currency loans, (b) export transactions and (c) dividend receipts. The Company's Policy on hedging foreign currency risks is enumerated in the Accounting Policy annexed to the Financial Statement.
l) Plant Locations:
1. Tiruvottiyur — Tiruvottiyur, Chennai, Tamilnadu.
2. Kottayam — Vadavathoor, Kottayam, Kerala.
3. Goa — Usgao, Ponda, Goa.
4. Arkonam — Icchiputhur, Arkonam, Tamilnadu.
5. Medak — Sadasivapet, Medak, Andhra Pradesh.
6. Puducherry — Eripakkam Village, Nettapakkam Commune, Puducherry.
7. Ankanpally — Sadasivapet, Medak, Andhra Pradesh.
8. Perambalur — Naranamangalam Village & Post,Kunnam Taluk, Perambalur District (Near Trichy), Tamilnadu.
m) Address for Correspondence:
No. 114, Creams Road, Chennai - 600 006. Tel : (044) 28292777 Fax : (044) 28295087 E-mail : firstname.lastname@example.org
(a) As required under applicable SEBI Regulations, your Company has adopted a Policy on Related party transactions and also a Policy on materiality of Related party transactions and the same have been approved by the Board of Directors and uploaded on the Company's Web site: <http://www.mrttyres>. com/down loads/down I oad.p hp Rs.ti I ename=Related- Party-Transaction- Policy.pdf., <http://www.rn> rttyres.com/downloads/ download. phpRs.fi lename=pol icy-on-material i ty-ot-related-party-transactions.pdf. Requisite approvals from the Audit Committee/ Board have been obtained for the transactions as stipulated under applicable law. The details of related party transactions entered into during the 18 months period ended 31st March, 2016 are given in the financial statements. These related party transactions are not material as per the materiality thresholds laid down and hence no details are furnished in Form AOC-2 of the Companies (Accounts) Rules, 2014. Duringthe period under review, Hasbro Inc., the technical collaborator divested their shareholding in Funskool (India) Limited. In the light of this development, the equity shares held by the Company in Funskool (India) Limited were sold to a related party.
(b) The Company has complied with the requirements of the Stock Exchanges/SEBI and statutory authority on all matters related to capital markets during the last three years. No penalties, strictures were imposed on the Company by the stock exchange/ SEBI or any other statutory authority in respect of the same.
(c) The Company has established a vigil mechanism pursuant to the requirements of Section 1 77(9) of the Companies Act, 201 3 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. No personnel have been denied access to the chairman of the Audit Committee to report genuine concerns. Establishment of vigil mechanism is hosted on the web site of the company under the web link: <http://www.mrttyres.com/downloads/download>. phpRs.filename=vigi l-Mechanism.pdt.
(d) The Company has complied with the mandatory requirements of Corporate Governance prescribed in Schedule II, Part A to D of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 201 5.
(e) The Company has complied with all the applicable mandatory requirements specified in Regulations 1 7 to 27 and Clauses (b) to (i) of sub-regulation (2) of Regulation 46 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.
(f) The Board has laid down a Code of Conduct for all Directors and senior management staff of the Company. The code suitably incorporates for the independent directors their duties as independent directors as laid down in Schedule IV of the Companies Act, 2013. The code of conduct is available on the website: www.mrttyres.com <http://www.mrttyres.com>. All Directors and members of the senior management have affirmed their compliance with the code of conduct.
Your Company has also adopted a Code of Conduct to regulate, monitor and report trading by insiders as per Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. All Directors and Designated persons who could have access to unpublished price sensitive information of the Company are governed by the Code. An annual disclosure was taken from the Directors and designated persons, as at the year end.
(g) The Audit Committee reviews the financial statements of the unlisted subsidiary companies. The Minutes of the Board Meetings of the unlisted subsidiary companies and the details of transactions with them were placed at the Board meeting of the company. Your Company has formulated a policy on material subsidiary as required under Regulation 1 6 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and the policy is hosted on the website of the company under the web link:<http://www.mrttyres.com/downloads/download>. phpRs.filename=material-subsidary-policy.pdf. The Company does not have any material unlisted subsidiary company.
(h) The Company has issued a formal letter of appointment to all the independent directors. A sample of the terms and conditions of their appointment have been disclosed in the web site of the company under the web link: <http://www.mrttyres.com/> downloads/download.phpRs.filename=Terms-and-Condiions-of-Appointment-of-lndependent-Directors.pdf.
During the period, a meeting of the independent directors was held as prescribed under applicable SEBI Regulations and the Companies Act, 201 3. Discretionary requirements as specified in Part E of Schedule II of SEBI [Listing Obligations and Disclosure Requirements] Regulations, 2015:
12. Discretionary requirements as specified in Part E of Schedule II of SEBI [Listing Obligations and Disclosure Requirements] Regulations, 2015:
a. Maintaining Non-Executive Chairman's Office:
Not Applicable as the Chairman is an executive director.
b. Shareholder Rights:
The Company's quarterly and half yearly results are published in the newspapers and also uploaded on its website www.mrftyres <http://www.mrftyres>. com and in stock exchange websites namely www.connect2nse <http://www.connect2nse>. com and <http://listing.bseindia.com>. Therefore, no individual communications are sent to the shareholders in this regard.
c. Audit Qualification:
There are no qualifications in the Auditors' Report on the accounts for the period 01/10/201 4 to 31/03/201 6. Adoption of other non-mandatory requirements are being reviewed from time to time.
13. CEO / CFO Certification
Mr. Arun Mammen, Managing Director and Mr. Madhu P Nainan, Vice President Finance, have certified to the Board regarding the financial statements for the 18 months period ended 31st March, 2016 in accordance with Regulation 17(8) of SEBI [Listing Obligations and Disclosure Requirements] Regulations, 201 5.
14. Unclaimed Share Certificates
In terms of the provisions of Regulation 39(4) read with Schedule VI of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, shares issued pursuant to the public issues or any other issue which remain unclaimed shall be credited to a demat suspense account with one of the depository participants opened by the Company for this purpose. As per the said clause, the Company has sent 4 reminder letters to the shareholders, whose share certificates were lying with the Company due to non-submission of allotment letters. Since good response was received from the shareholders staking their claim for the unclaimed shares, further reminder(s) were also sent to shareholders and those who have submitted the requisite supporting documents were issued share certificates. In further compliance with the SEBI Regulations, a Demat account for transfer of unclaimed physical shares lying with the company into the suspense account has been opened by the Company namely "MRF Unclaimed Suspense Account" and necessary steps are being taken to transfer the unclaimed physical shares into the demat suspense account.
As requi red by Para D of Schedule V to the SEBI (Listing Obi igations and Disclosure Requirements) Regulations, 2015, it is hereby confirmed and declared that al I the members of the Board and senior management have affirmed compliance with the Code of Conduct of the Company for the 1 8 months period ended 31 st March, 201 6.
On behalf of the Board of Directors
K M MAMMEN
Chairman & Managing Director
Date: 3rd May, 2016