REPORT ON CORPORATE GOVERNANCE
1. Company's Philosophy on Corporate Governance
The Company subscribes fully to the principles and spirit of sound Corporate Governance and embodies the principles of fairness, transparency, accountability and responsibility into the value systems driving the Company. The Company is committed to attain high standards of Corporate Governance by ensuring integrity in financial reporting, disclosure of material information, continuous improvements of internal controls and sound investor relations. The Company believes that all its operations and actions must serve the underlying goal of enhancing overall shareholders' value over a sustained period of time. The Company has implemented the mandatory requirement of Corporate Governance as set out under Part C of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015.
2. Board of Directors Composition
As on 31st May 2016, the Company's Board of Directors comprises 6 members, out of whom 1 is Executive Director and 5 are Non-Executive Directors (NEDs). These Directors bring in a wide range of skills and experience to the Board.
As required by The Companies Act, 2013, the Company has extended its financial year from 30th September 2015 to 31st March 2016. Consequently, the financial year of the Company is 18 Months from 1st October, 2014 to 31st March 2016.
a) None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees [as prescribed in SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015] across all the companies in which he/she is a Director. The necessary disclosures regarding Committee positions have been made by the Directors.
b) None of the Directors held directorship in more than 10 public limited companies.
c) None of the Directors of the Company were related to any Director or member of an extended family.
d) None of the Independent Directors of the Company served as Independent Director in more than 7 listed companies.
e) Mr. P.J.Nath Executive Director & CEO is not Independent Director of any other listed company.
f) All Independent Directors of the Company have been appointed as per the provisions of the Companies, Act 2013 (the Act). Formal letters of appointment have been issued to the Independent Directors. The terms and conditions of their appointment are disclosed on the Company's website: www.nelco.in
g) None of Non - Executive Directors held any shares of the Company.
Web link of Familiarization programmes is: <http://www.nelco.in/_content/investor-relations/Familiarisation_Programme.pdf>
The information required under Part A of Schedule II of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 is being made available to the Board periodically.
Code of Conduct
The Board has laid down Codes of Conduct for NEDs which includes details as specified in Schedule IV to the Act. The Company has adopted the Tata Code of Conduct for all the employees including Managing Director/Executive Directors. Both the codes of conduct are posted on the Company's website www.nelco.in. All Board Members and Senior Management personnel have affirmed compliance with the Code of Conduct. The Executive Director and CEO has also confirmed and certified the same. The certification is enclosed at the end of this report.
Committees of the Board
The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. Each Committee of the Board functions according to its role and defined scope.
> Mandatory Committees:
The Mandatory committees under the Act and the SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 are:
• Audit Committee of Directors
• Nominations, HR & Remuneration Committee
• Stakeholders Relationship Committee
The Audit Committee met 9 times during the financial year under review on the following dates:
27th November 2014, 7th January 2015, 28th January 2015, 28th April 2015, 30th July 2015, 29th September 2015, 28th October 2015,29th January 2016 and 10th March 2016.
The terms of reference, role and scope of the Audit Committee are in line with those prescribed by SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015. The Company also complies with the provisions of Section 177 of the Companies Act, 2013 (the Act) pertaining to Audit Committee and its functioning.
The Board has delegated the following powers to the Audit Committee:
• To investigate any activity within its terms of reference.
• To seek information from any employee.
• To obtain outside legal or other professional advice.
• To secure attendance of outsiders with relevant expertise, if it considers necessary. The role and responsibilities of the Audit Committee include the following:
• Oversight of the Company's Financial Reporting Processes and Financial Statements.
• Recommend to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees and terms of appointment.
• Review the adequacy of internal audit function.
• Appointment of Cost Auditor.
• Evaluate on a regular basis the adequacy of risk management systems.
• Review with the management, external and internal auditors and outsourced internal audit firms, the quality, adequacy and effectiveness of internal control systems and any significant deficiencies or material weakness in the internal controls.
• Review the effectiveness of the system for monitoring compliance with applicable laws and regulations.
• To review the functioning of the Whistle Blower mechanism.
• To approve all related party transactions in accordance with the Act.
• Subsidiary company oversight.
The Audit Committee invites such of the executives, as it considers appropriate (and particularly the head of the finance function) to be present at its meetings. The Executive Director & CEO and Chief Financial Officer attend the meetings. The Statutory Auditors are also invited to the meetings. Mr. Girish V. Kirkinde, the Company Secretary, acts as the Secretary of the Committee.
Internal Controls and Risk Management
The Company has robust systems for internal audit and corporate risk assessment and mitigation. The risk based audit plan is prepared and approved by the Audit Committee at the beginning of every year. The Audit Committee is presented with key control issues and actions taken on past issues. These procedures provide the Management an assurance on the internal processes and systems. Business Risk Assessment procedures have been set in place for self-assessment of business risks, operating controls and compliance with Corporate Policies. There is an ongoing process to track the evolution of the risks and delivery of mitigating action plans. Risks and their mitigation plans are reviewed by the Audit Committee.
4. Stakeholders Relationship Committee
The SRC met twice during the year under review on 29th September 2015 and 10th March 2016.
In accordance with Regulation 40 (2) of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, the Board has authorized Mr. Girish V. Kirkinde, Company Secretary and Compliance Officer, to severally approve share transfers/transmissions, in addition to the powers with the members of the SRC. Share Transfer formalities are regularly attended to at least once a fortnight.
• There were no pending Transfers/Demats as on 31st March, 2016.
The responsibilities of the SRC inter alia include:
• Review of statutory compliance relating to all security holders.
• Resolving the grievances of all security holders of the Company.
• Overseeing and reviewing of all matters related to the transfer of securities and movement in shareholding and ownership of the Company.
5. Nominations, HR and Remuneration Committee
In terms of Section 178(1) of the Act, the Company has constituted the Committee titled "Nominations, HR and Remuneration Committee" (NRC
The NRC met 6 times during the year under review on 29th October 2014, 27th November 2014, 21st May 2015, 29th September 2015, 16th February 2016 and 10th March 2016.
At its meeting held on 9th June 2015, the Board adopted the amended Charter of the NRC which specifies the principles and objectives, composition, meetings, authority and power, responsibilities, reporting, evaluation etc. of the Committee.
The Board has delegated the following powers to the NRC:
• Investigate any matter within the scope of its Charter or as referred to it by the Board.
• Seek any information or explanation from any employee or director of the Company.
• Ask for any records or documents of the Company.
The role and responsibilities of the NRC include the following:
• Board Composition and succession related
• Evaluation related
• Remuneration related
• Board Development related
• Review of HR Strategy, Philosophy and Practices
• Other functions
In terms of the provisions of Section 178(3) of the Act and Part D of Schedule II of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity and Director Attributes, which is reproduced in Annexure-I and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-II to the Directors' Report.
6. Executive Committee of the Board
The Executive Committee of the Board comprises of Mr. R.R. Bhinge (Chairman), Mr.K. Ramachandran, Mr. S. Ramakrishnan and Mr. P. J. Nath (Executive Director & CEO). This Committee covers a detailed review of the following items before being presented to the full Board:
• Business and strategy review
• Long-term financial projections and cash flows
• Capital and Revenue Budgets and capital expenditure programmes
• Acquisitions, divestments and business restructuring proposals
• Senior management succession planning
• Any other item as may be decided by the Board
7. Subsidiary Company
Regulation 16 (1) (c) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 defines a "material Subsidiary" whose income or net worth exceeds 20% of the consolidated income or net worth respectively of the listed holding company and its subsidiaries in the immediately preceding accounting year. Under this definition, the Company has one "Material Subsidiary" during the year under review viz. Tatanet Services Ltd. An Independent Director of the Company has been appointed on the Board of the said Subsidiary Company. The minutes of Board meetings of the Subsidiary Company are placed before the Board of Directors of the Company for review.
8. Prevention of Insider Trading
In accordance with Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (effective 14th May 2015) (the Regulations), the Board of Directors of the Company has adopted the Tata Code for Prevention of Insider Trading and Code of Corporate Disclosure Practice (the Code) to be followed by Directors, Employees and other connected persons. The Code is based on the principle that Directors and Employees of a Tata Company owe a fiduciary duty to, among others, the Members of the Company, to place the interest of the Members above their own and conduct their personal securities transactions in a manner that does not create any conflict of interest situation. The Code contains regulations for preservation of price sensitive information, pre-clearance of trade and monitoring and implementation of the Code. Under the Code, the Audit Committee is empowered:
• To approve policies in relation to the implementation of the Code and to supervise implementation of the Code;
• To note and take on record the status reports detailing the dealings by Designated Persons in securities of the Company, as submitted by the Compliance Officer on a quarterly basis;
• To provide directions on any penal action to be initiated, in case of any violation of the Regulations by any person.
1. There were no materially significant related party transactions i.e. transactions of the Company of material nature, with its promoters, Directors or the management, their subsidiaries or relatives etc. during the financial year, that may have potential conflict with the interests of the Company at large.
2. The Board has received disclosures from key managerial personnel and senior management relating to material, financial and commercial transactions where they and/or their relatives have personal interest. There are no materially significant related party transactions which have potential conflict with the interest of the Company at large.
3. There was no non-compliance during the last three years by the Company on any matter related to Capital Market. There were no penalties imposed nor strictures passed on the Company by Stock Exchanges, SEBI or any statutory authority.
4. The Board of Directors of the Company has adopted a Whistle Blower Policy for establishing a mechanism for employees to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The said policy has been posted on the Company's intranet site. The Company affirms that no employee has been denied access to the Audit Committee.
5. All mandatory requirements as prescribed under Schedule II of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have been compiled by the Company.
6. The URL of policy for determining 'material' subsidiaries is <http://www.nelco.in/_content/investor-relations/Policy_for_> determining_Material_Subsidiaries.pdf
7. The URL of policy on dealing with related party transaction is <http://www.nelco.in/_content/investor-relations/Related_> Party_Transaction_Policy.pdf
8. The Company follows Accounting Standards issued by The Institute of Chartered Accountants of India and there are no statutory audit qualifications in this regard.
9. In terms of part B of Schedule II of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 , the Executive Director & CEO and the Chief Financial Officer made a certification to the Board of Directors in the prescribed format for the year under review which has been reviewed by the Audit Committee and taken on record by the Board.
11. Means of Communication
i) Quarterly and half yearly Results are published in the Free Press Journal (English) and Navashakti (Marathi) newspapers and displayed on the Company's website www.nelco.in
ii) NSE Electronic Application Processing System (NEAPS) and BSE Online Portal: The Company also submits to NSE, all disclosures and communications through NSE's NEAPS portal. Similar filings are made to BSE on their Online Portal - BSE Corporate Compliance & Listing Centre.
iii) Extensive Business Reporting Language (XBRL): XBRL is a language for electronic communication of business and financial data. It offers major benefits to all those who have to create, transmit, use or analyze such information which aids better analysis and decision making. Ministry of Corporate Affairs (MCA) vide its Circular No.8/2012 dated 10th May, 2012 [as amended on 29th June, 2012], has already mandated all cost auditors and the concerned companies to file their Cost Audit Reports and Compliance Reports for the year 2011-12 onwards [including the overdue reports relating to any previous year(s)] only in the XBRL mode. The Company has filed its Cost Audit Report and Compliance Report on MCA through XBRL.
iv) SEBI Complaints Redress System (SCORES): A centralized web-based complaints redressal system which serves as a centralized database of all complaints received, enables uploading of Action Taken Reports (ATRs) by the concerned companies and online viewing by the investors of actions taken on the complaint and its current status.
v) Website: Comprehensive information about the Company, its business and operations, and Investor information can be viewed at the Company's website. The 'Investor Relations' section serves to inform the investors by providing key and timely information like Financial Results, Annual Reports, Shareholding Pattern, etc.
12. General Shareholder Information
i) The AGM of the Company is scheduled to be held on Monday, 25th July 2016 at 3.00 p.m. at Ebony, Hotel Regenza by Tunga, Ground Floor, Plot No.37, Sector 30-A, Vashi, Navi Mumbai - 400 703.
As required under Regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, particulars of Director seeking appointment/re-appointment at the forthcoming AGM are given in the Annexure to the Notice of the AGM to be held on 25th July 2016.
ii) Financial Year: 1st October 2014 to 31st March 2016.
iii) Book Closure: From 12th July 2016 to 14th July 2016 (both days inclusive).
iv) Listing on Stock Exchanges : The Company's Equity Shares are listed on the following two Stock Exchanges in India:
BSE Limited (BSE) (Regional Stock Exchange) Phiroze Jeejeebhoy Towers Dalal Street, Mumbai 400 001.
The National Stock Exchange of India Limited (NSE) ‘Exchange Plaza’, Bandra-Kurla Complex Bandra (E), Mumbai 400 051.
The Company has paid the Annual Listing fees to BSE and NSE for the year 2015-16.
v) Stock Code and Corporate Identification Number (CIN)
BSE Ltd. (Physical segment) - 4112, Demat Segment- 504112 National Stock Exchange of India Ltd. - NELCO EQ
CIN allotted to the Company by the Ministry of Corporate Affairs, Govt. of India is L32200MH1940PLC003164
vii. Registrars and Transfer Agents:
TSR Darashaw Limited (TSRD) 6-10, Haji Moosa Patrawala Industrial Estate (Near Famous Studio), 20, Dr. E. Moses Road, Mahalaxmi, Mumbai 400 011.Tel.: 022 6656 8484, Fax: 022 6656 8494 Email: firstname.lastname@example.org Website: www.tsrdarashaw.com
For the convenience of Members based in the following cities, transfer documents and letters will also be accepted at the following branches/agencies of TSRD.
Branches of TSRD
1. 503, Barton Centre, 5th Floor, 2. 84, Mahatma Gandhi Road, Bengaluru 560 001. Tel: 080 25320321. Fax: 080 25580019E-mail: email@example.com
2.Bungalow No.1, 'E' Road Northern Town, Bistupur, Jamshedpur 831 001. Tel: 0657 2426616. Fax: 0657 2426937 E-mail: firstname.lastname@example.org
3. Tata Centre, 1st Floor, 4. 43, Jawaharlal Nehru Road, Kolkata 700 071. Tel: 033 22883087.Fax: 033 22883062 E-mail: email@example.com
4.Plot No.2/42, Sant Vihar, Ansari Road, Darya Ganj, New Delhi 110 002. Tel: 011 23271805 Fax: 011 23271802 E-mail: firstname.lastname@example.org
Agent of TSRD
Shah Consultancy Services Pvt. Limited 3, Sumatinath Complex, Pritam Nagar, Akhada Road, Ellisbridge, Ahmedabad 380 006. Telefax: 079 2657 6038 E-mail: email@example.com
viii) Share Transfer System:
Share Transfers in physical form can be lodged with TSRD at the above mentioned address or at their branch Transfer offices, addresses of which are available on website:www.tsrdarashaw.com Transfers are normally processed within 15 days from the date of receipt. If the documents are complete in all respects, Mr. Girish V. Kirkinde Company Secretary and Compliance Officer is empowered to approve transfers, in addition to the powers with the Members of the Stakeholders Relationship Committee.
xii) Dematerialization of Shares as on 31st March 2016 and Liquidity:
The Company's shares are compulsorily traded in dematerialized form and are available for trading on both the Depositories in India, namely, National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
xiii) The Company has not issued any GDR's/ADR's/Warrants or any Convertible Instruments.
xiv) Works, facilities and address for correspondence
EL-6, TTC Industrial Area, MIDC Electronics Zone, Mahape, Navi Mumbai - 400 710.
Telephone : 022 67399100, Fax : 022 67398787. Email : firstname.lastname@example.org Website : www.nelco.in
E-voting is a common internet infrastructure that enables investors to vote electronically on resolutions of companies. Investors can now vote on resolutions requiring voting through Postal Ballot as per the applicable rules and regulations without sending their votes through post. The Company will also have the E-voting facility for the items to be transacted at this AGM. The MCA has authorized NSDL and CDSL for setting up electronic platform to facilitate casting of votes in electronic form. The Company has entered into agreement with NSDL for availing e-voting facilities.
14. Compliance with Non-Mandatory Requirements
i) The Board
The Company does not reimburse expenses incurred by the Non-Executive Chairman for maintenance of a separate Chairman's Office.
ii) Shareholder Rights
The Company posts the quarterly, half yearly and annual financial results on its website www.nelco.in
iii) Audit qualifications
During the financial year under review, there was no audit qualification in the Company's financial statements. The Company continues to adopt best practices to ensure a regime of unqualified financial statements.
iv) Training of Board Members
The Company's Board of Directors comprise of professionals with expertise in their respective fields and industry. They Endeavour to keep themselves updated with changes in the economy, legislation and technologies.
v) Mechanism for evaluation of Non-Executive Board Members (NEDs)
The Board of Directors of the Company, at present, comprises five NEDs. The Directors appointed are from diverse fields which are relevant to the Company's business and they have long-standing experience and are experts in their respective fields. They have gained considerable experience in managing large corporate and have been in public life for decades. The enormously rich and diverse background of the Directors is of considerable value to the Company.
vi) The NEDs add substantial value through discussions and deliberations at the Board and Committee Meetings. Besides contributing at the Board and Committee meetings, the NEDs also have detailed deliberations with the Management Team and add value through such deliberations.
vii) The Company has appointed separate persons to the post of Chairperson and Executive Director & Chief Executive Officer.
viii) The internal auditor of the Company report directly to the audit committee.
15. Transfer of unclaimed dividend to Investor Education and Protection Fund (IEPF)
Pursuant to the provisions of Sections 205A and 205C of the Companies Act, 1956, the dividend which remains unclaimed/ unpaid for a period of seven years from the date of transfer to the unpaid dividend account is required to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government.