REPORT ON CORPORATE GOVERNANCE
In Compliance with the Clause 49 of the Listing Agreement with the Stock Exchanges, the Directors submit the following Report on the Corporate Governance, for the information of the shareholders.
1. Company's Philosophy on Code of Governance
The Company has always been committed to good corporate governance and adequate disclosure and it lays emphasis on transparency, accountability and integrity in all its operations and dealings with its customers, dealers, employees, shareholders and with every individual who comes in contact with the Company.
The Company believes all its actions and operations must serve the underlying goal of enhancing overall shareholders' value, over a sustained period of time.
The Company is committed on creating and sustaining a relationship of trust, belief and transparency with all stakeholders and as a part of its growth and development strategy, it places the highest importance on strengthening and further developing Corporate Governance initiatives.
2. Board of Directors Composition
The Composition of the Board is in compliance with the provisions of Section 149 (4) of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement with the Stock Exchanges. The Board of Directors of the Company has an optimum combination of Executive, Non-Executive and Independent Directors with a promoter non-executive Director as its Chairman.
As on 31st March, 2015, the Board of Directors of the Company comprised of seven Directors, two of whom being promoters (Non-Executive Directors) and one Executive Director. The remaining four being Non-Executive, Independent Directors, including one woman Director.
Ms. Pushpa Chowdhary was appointed as an Additional Director, in Independent Category with effect from 30th May, 2014.
During the year under Review, Dr. Raghavachari Srinivasan, the retiring Director under Independent Category pursuant to Clause 49 of the Listing Agreement, expressed his unwillingness to be re-appointed at the Annual General Meeting held on 26th September, 2014 and therefore, ceased to be a director with effect from 26th September, 2014.
Mr. Sameer Nagpal, Managing Director and CEO and Mr. Pujit Aggarwal, Non-Executive, Independent Director, had resigned from the Board of the Company with effect from 30th May, 2015 and 16th June, 2015, respectively and Mr. Surender Kumar, was appointed as the Whole-time Director and Chief Operating Officer & Chief Financial Officer by the Board of Directors of the Company in its meeting held on 30th May, 2015.
Detailed profile of each of the Directors is available on the Company's website at www.shalimarpaints.com
(2) Committees considered for the purpose are those prescribed under Clause 49(II)(D)(2) of the Listing Agreement i.e. Audit Committee and Stakeholders Relationship Committee of Indian Public Limited Companies other than Shalimar Paints Limited. Committee membership details provided do not include chairmanship of committees as it has been provided separately.
(3) Ms. Pushpa Chowdhary was appointed as an Additional Director by the Board in its meeting held on 30th May, 2014 and was regularised and appointed as an Independent Director for a term of five years at the Annual General Meeting held on 26th September, 2014.
(4) None of the Directors are relatives of any other Director as per the provisions of Section 2 (77) of the Companies Act, 2013 read with Rule 4 of Companies (Specification of Definitions Details) Rules, 2014.
(5) None of the Directors except the following, held equity shares in the Company as on 31st March, 2015: Mr. Ratan Jindal 30,500 equity shares
Mr. Sameer Nagpal 2,850 equity shares
Appointment/ Re-appointment of Directors
Mr. Surender Kumar was appointed as an Additional Director by the Board of Directors of the Company at its meeting held on 30th May, 2015 and will vacate his office at the ensuing Annual General Meeting. A notice in writing has been received from a member of the Company in terms of Section 160 of the Companies Act, 2013 signifying the intention to propose the appointment of Mr. Surender Kumar as a Director of the Company.
Mr. Surender Kumar, was also appointed as the Whole-time Director and Chief Operating Officer & Chief Financial Officer by the Board of Directors of the Company at its meeting held on 30th May, 2015 for a period of three years with effect from that date, subject to the approval of the members of the Company and the Central Government.
Mr. Girish Jhunjhnuwala, Promoter Non-Executive Director is liable to retire by rotation at the ensuing AGM pursuant to the provisions of Section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Articles of Association of the Company and being eligible to offer himself for re-appointment.
The Board recommends the appointment/re-appointment, as mentioned above for the approval of the shareholders at the ensuing Annual General Meeting.
Detailed profile and other information as required under Clause 49(VIII)(E) of the Listing Agreement, of the aforesaid proposed appointees are provided in the Notice of the ensuing Annual General Meeting.
Board Meetings and Annual General Meeting
During the financial year 2014-15, four meetings of the Board of Directors were held i.e. on 30th May, 2014, 29th July, 2014, 11th November, 2014, 3rd February, 2015. The last Annual General Meeting (AGM) of the Company was held on 26th September, 2014. The necessary quorum was present for all the meetings
During the financial year 2014-15, in compliance with the provisions of Sections 149, 150 and 152, read with Schedule IV and other applicable provisions of the Companies Act, 2013 and relevant Rules made there under Mr. Aditya Vikram Lodha, Mr. Pujit Ravikiran Aggarwal, Mr. Rajiv Rajvanshi and Ms. Pushpa Chowdhary were appointed as Independent Directors on the Board of Directors of the Company at the 112th Annual General Meeting of the Company held on 26th September, 2014 to hold office for a term of 5 (five) consecutive years with effect from the date of the said Annual General Meeting.
The Independent Directors have submitted declarations that they meet the criteria of Independence as per the provisions of the Companies Act, 2013 and the Listing Agreement; a statement in this regard forms part of the Board's Report. The Company has issued letter of appointment to all Independent Directors. The terms and conditions of their appointment are available on the Company's website at www.shalimarpaints.com
In compliance with the provisions of Schedule IV of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Independent Directors of the Company met separately on without the presence of any Non-Independent Director and members of the Management.
The Board Meetings are held within forty-five days of end of each quarter (other than the last quarter) and within sixty days of the end of the financial year in the manner that it coincides with the announcement of quarterly and financial results. In addition to the above, in case of urgent necessity additional Board Meetings are called. The Board Meetings are governed by structured agenda. The agenda along with comprehensive notes and background material are circulated well in advance before each meeting to all the Directors for facilitating effective discussion and decision making. The Board members may bring up any matter for consideration of the Board, in consultation with the Chairman. Presentations are made by the management on the Company's operations and other matters on a periodic basis. The proceedings of the meetings of the Board and its Committees are recorded in the form of minutes. The important decisions taken at the Board / Committee meetings are communicated to the concerned departments / divisions promptly.
The Board has complete access to the relevant information of the Company and to all the employees of the Company. The details of information as per provisions of Clause 49 (II)(D)(1) are shared on a regular basis with the Board along with other specific information.
Code of Conduct
The Company has adopted the Code of Conduct for the members of the Board and Senior Management Personnel of the Company. The Code is available on the Company's website www.shalimarpaints.com
A declaration signed by Mr. Surender Kumar, Whole-time Director and COO & CFO of the Company, pursuant to Clause 49(II)(E)(2) of the Listing Agreement, regarding receipt of affirmation from all the members of the Board and Senior Management Personnel regarding compliance with Code of Conduct of the Company during the year under review is attached.
The Company has a well-structured familiarisation, induction and training program for the new appointees on the Board. The Company through such programs provides them with an opportunity to familiarisewith the Company, its management, its operations, the business model of the Company, the industry in which the Company operates, their roles, rights and responsibilities in the Company. They are also informed about the policies of the Company including the Code of Conduct for the Board Members and Senior Management Personnel and the Code of Conduct to regulate, monitor and reporting of trading by insiders etc.
The Directors are given periodic presentation in the Board and Committee meetings in order to provide details on the business and performance updates, Company's strategy and operating plans, product offerings, finance and risk management system etc.
The detailed familiarisation program for Independent Directors is available on the Company's website www.shalimarpaints.com
3. Audit Committee
The Company's Board has a qualified and Independent Audit Committee. The Committee was reconstituted on 30th May, 2014. As on 31st March, 2015, the Committee comprised of four Non-Executive Independent Directors, under the Chairmanship of Mr. Rajiv Rajvanshi. The Composition of the Audit Committee is in compliance with the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.
The Company Secretary acts as the Secretary of the Committee. The Chairman of the Committee was present at the last Annual General Meeting (AGM) held on 26th September, 2014.
(1) Appointed as the Chairman of the Committee by the Board on 30th May, 2014
(2) Appointed as the member of the Committee by the Board on 30th May, 2014
(3) Ceased to be the Chairman and Member of the Committee pursuant to the reconstitution of the Committee by the
Board on 30th May, 2014
The terms of reference of the Audit Committee of the Company are in accordance with Clause 49(III)(D) and (E) of the Listing Agreement and Section 177 of the Companies Act, 2013.
4. Nomination and Remuneration Committee
The Board of Directors of the Company re-named and re-constituted the existing Remuneration Committee as 'Nomination and Remuneration Committee', with effect from 30th May, 2014. As on 31st March, 2015, the Committee comprised of three Non-Executive Independent Directors. The composition of the Nomination and Remuneration Committee is in compliance with the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.
The Company Secretary acts as the Secretary of the Committee. The Chairman of the Committee was present at the last
AGM held on 26th September, 2014
(1) Appointed as the Chairman of the Committee by the Board on 30th May, 2014
(2) Appointed as the member of the Committee by the Board on 30th May, 2014
(3) Ceased to be the Chairman and Member of the Committee pursuant to the reconstitution of the Committee by the Board on 30th May, 2014
The terms of reference of the Nomination and Remuneration Committee of the Company are in accordance with Clause 49(IV)(B) of the Listing Agreement and Section 178 of the Companies Act, 2013.
In accordance with the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the Committee has been entrusted with the power and responsibilities to administer and monitor the ESOP Scheme, formulating the various terms and conditions under the scheme, decide on future grants, allot shares upon exercise of options and to do all such acts relating to stock options
Nomination and Remuneration Policy
In compliance with the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board of Directors on the recommendation of the Nomination and Remuneration Committee has approved and adopted the Nomination and Remuneration Policy.
The Nomination and Remuneration Policy of the Company is posted on the Company's website link at: <http://www.shalimarpaints.com/upload/investor> reports/Nomination%20and%20Remuneration%20Policy.pdf forms part this report.
Details of the Remuneration to Directors during the Financial Year 2014-15
All the non-executive Directors are being paid sitting fees for attending meetings of the Board and Committees thereof. During the year under review there was an increase in the sitting fee from Rs. 10,000/- to Rs. 20,000/- for attending each Board Meeting and the sitting fee for attending Committee meeting remained unchanged at Rs. 10,000/- for each Committee meeting. The Executive Director is being paid remuneration as approved by the Shareholders of the Company and subject to the approval of the Central Government.
5. Stakeholders Relationship Committee
During the period under review, the nomenclature of the Shareholders' Grievance Committee was changed to "Stakeholders Relationship Committee" pursuant to the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The composition of the Stakeholder Relationship Committee is in compliance with the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.
The Stakeholders Relationship Committee of the Board of Directors of the Company is comprised of Mr. Girish Jhunjhnuwala and Mr. Aditya Vikram Lodha under the Chairmanship of Mr. Aditya Vikram Lodha. Mr. Pumit Kumar Chellaramani, Company Secretary of the Company was designated as Compliance Officer till the date of his resignation w.e.f. 15th November, 2014. Ms. Bernadette Dominic, Company Secretary, has been designated as Compliance Officer w.e.f. 30th May, 2015.
6. Corporate Social Responsibility (CSR) Committee
In compliance with the requirements of Section 135 of the Companies Act, 2013, the Company has constituted the Corporate Social Responsibility Committee. The Company has framed a Corporate Social Responsibility Policy, the purpose of which is to articulate what Corporate Social Responsibility (CSR) means to the Company, kind of projects to be undertaken, identifying broad areas of intervention, approach to be adopted to achieve the CSR goals and monitoring mechanism. The framework enables to put in place, policies and practices in line with this Policy. The CSR Policy is an attempt to showcase the linkage of the Company's social objectives with business strategy.
As on 31st March, 2015, the Committee comprised of three members namely Mr. Sameer Nagpal, Mr. Rajiv Rajvanshi and Ms. Pushpa Chowdhary under the Chairmanship of Mr. Sameer Nagpal.
The Company's Corporate Social Responsibility Policy is available on the Company's website at www.shalimarpaints.com
The Annual Report on CSR activities in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as 'Annexure - E' to the Board's Report.
7. Subsidiary Companies
The Company has two unlisted subsidiary companies, which are not material as per the Clause 49(V)(E) of the Listing Agreement. The Audit Committee of the Company reviews the financial statements of these Subsidiaries.
The Company's Policy on Material Subsidiaries is available on the Company's website at www.shalimarpaints.com
8. CEO/CFO Certification
As required under Clause 49(IX) of the Listing Agreement, Mr. Surender Kumar, Whole-time Director and COO & CFO of the Company has certified to the Board of Directors, inter-alia, the accuracy of the financial statements and adequacy of internal control for the financial reporting purpose, for the year under review.
There were no materially significant related party transactions i.e. transactions of material nature made by the Company with its promoters, directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company at large. The requisite disclosure on 'Related Party Transactions' pursuant to Accounting Standard 18 has been given in Note No. 2.39 of Notes to the Accounts. The Company has adopted a Policy on Related Party Transaction which is posted on the Company's website at www.shalimarpaints.com
No strictures or penalties have been imposed on the Company by the Stock Exchanges or the Securities and Exchange Board of India (SEBI) or any other statutory authority on any matter related to capital market during the last three years.
The Company has established a Vigil Mechanism for Directors and Employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct. This mechanism provides adequate safeguards against victimization of whistle blower who avails of the mechanism and it also provides direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy has been uploaded on the Company's website at www.shalimarpaints.com During the year under report, there has been no incidence reported under Vigil Mechanism and no personnel has been denied access to the audit committee.
The Company has complied with all mandatory requirements of Clause 49 of the Listing Agreement. The Company has also adopted non-mandatory requirement viz. the Company has moved towards a regime of unqualified financial statements.
11. Management Discussion and Analysis Industry Structure and Development
The Indian Paint Industry which stands at estimatedRs.40,000 crores is broadly divided into two segments decorative and industrial. The decorative segment contributes approximately 73% whereas industrial segment contributes remaining 27%. The organised players of the industry cater to almost 65% of overall demand, the unorganized players of the industry take care of the remaining 35% by value.
The decorative paint market is segmented into high and medium end acrylic exterior and interior emulsions and enamel paints, low end distempers, wall putty, primers, cement paints, and wood coatings. They can also be broadly categorised into water and solvent based paints. The rural sector in India has a major share of decorative paints segment. Thus any benefit to the rural sector for improving the dispensable income is directly co-related to the growth of the paint industry.
Similarly, industrial paint market is further segmented into high performance coating, powder coating, coil coating and automotive coating.
The Indian Paint Industry has been sluggish in the past few years. However, it is likely to surge from the current level of about Rs. 40,000 crores to about Rs. 62,000 crores by 2018 witnessing a breakthrough double-digit compounded annual growth rate (CAGR) of 12-13%.
The rural market has grown at a rate of around 20% a year in fiscal year 2014. Hence, increase in sales outside metros is witnessing a handsome growth. Due to increased government funding for infrastructure, demand for paints both in industrial and decorative is set to rise, thereby rendering Indian paint industry to be poised for further growth. India is an emerging economy and with a rising GDP and the subsequent growth in industrial activities and infrastructural developments. Aided with increased Government spending on infrastructure in India, market is optimistic about its impact on the paint industry.
Opportunities and Threats
Paint Industry in India is driven by growth not only in construction activities but also in automotive industry. Media exposure and innovative marketing initiatives by the players have also added impetus to increasing awareness about latest trends prevalent in the sector. Due to increased Government funding for infrastructure, paint industry is poised for growth.
A further analysis of key drivers and challenges of the market indicate the factors for growth of the market including boom in real estate construction, growth in industrial sector, growth in automobile industry, increase in disposable income, increased government expenditure on infrastructure.
Your Company is poised to grow in the Decorative as well as Industrial segment. The Company is in the process of reinforcing its current production facilities and is simultaneously expanding its manufacturing base to new geographical locations. Many new products are ready for launch in the coming months.
Risk and Concerns
The paint sector in India is facing certain challenges. Factors like rising input prices and stringent environmental regulations pose a barrier for growth.
The paint sector is raw material intensive, with over 300 raw-materials (50% petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry is sensitive to crude oil prices. Another concern is that the demand for paint, being a discretionary expenditure, is typically hurt during periods of inflation.
Further, as the growth of Paint Industry is aligned with the growth of economy, any sluggish economic growth may adversely impact the business of the Company. Similarly, depreciating rupee may also impact the profitability of your company. However, recent softening of oil prices would reduce the raw material cost thereby boost up your company's financial performance.
Internal Control Systems
The internal control system is an integral part of the general organizational structure of the Company. The system is highly structured and totally in sync with the size and nature of its business. This process is aimed at pursuing the values of both procedural and substantial fairness, transparency and accountability. External audit firms are appointed at various locations of the Company to conduct regular audits. The internal control system is basically a set of rules, regulations, policies and procedures which run on softwares with in-built authorizations for enhanced control.
The financial year 2014-15 had been a challenging year for us. The Company reported total revenue from operations & other income of Rs. 48564.47 lacs as against Rs. 54607.17 lacs during FY 2013-14. One of the factor affecting the company's performance was an unfortunate fire incident at our Howrah plant, leading to a loss in production capacity. The Company is consolidating its position and it will lead to improvement in its bottom-line. New products were launched in the decorative paint segment in the interior as well as exterior paint category. The industrial paint segment also saw the addition of new product categories.
Segment-wise or product wise performance
The Company offers an extensive range of Decorative and Industrial paint products for interior and exterior segments. The portfolio of the Company spans across product categories and price points catering to a wide variety of consumers. During the Financial Year 2014-15, the decorative segment recorded a gross sales of Rs. 360 crores and the industrial segment was at Rs. 155 crores.
The Company has started strengthening its presence in the consumer business to emerge as a strong contender in the Indian Paint Industry. During the year, the Company launched five products in the decorative segment to reinforce its business. The Company is now poised to focus on development of eco-friendly and water-based decorative products in the near future.
In the Industrial Products segment, the Company has introduced new product categories during the Financial Year 2014-15, key categories being single coat primer-cum-finish, epoxy based DTM coating, solvent free epoxy coating, bitumen coating for potable water application, surface tolerant (self-priming) anticorrosive coating, zinc silicate fast drying primer and coating system for LPG cylinders.
The company truly believes that employees are the most important asset in any organisation. Therefore, Shalimar provides a workplace where employees can fully demonstrate their skills and capabilities and thereby maximize their potential to the fullest.
The company's recruitment policy is to select applicants according to their capability, competence and relevant experience based on a fair recruitment process. Keeping this philosophy in mind, the talent pool of the organisation was enriched during the year in order to achieve the organisational goals. Induction process was revisited and strengthened besides a rigorous product training module for all new joinees.
At Shalimar, communication between management and employees is strongly encouraged as a means of sharing the company's Management Philosophy and policies. There are open platforms wherein two-way communication takes place with the management regarding the employees concerns and grievances. The company is committed to the comprehensive health management of its employees and a lot of initiatives were taken during the year to sensitize the employees towards their health and safety through the EHS scheme.
12. Means of Communication
The quarterly and annual results are generally being published in Financial Express in English language and in local Bengali newspaper and are also posted on the Company's website www.shalimarpaints.com
The Company has not made any presentation to institutional investors or analysts during the year under review.
13. General Shareholder Information:
a) As indicated in the Notice dated 20th July, 2015, the 113th Annual General Meeting of the Company will be held on Monday, 28th September, 2015 at 12:00 Noon at The Lake Land Country's Club, Kona Expressway, P.O.: Munshidanga, P.S. : Domjur, Howrah 711 403
b) The Register of Members and Share Transfer Books of the Company will remain closed from Wednesday 23rd September, 2015 to Monday 28th September, 2015 both days inclusive.
c) Financial Calendar: The unaudited/audited financial results of the Company for the following quarters ending/year ending will be published on or before the dates mentioned against the respective period:
For the Quarter ending 30th June, 2015 (Unaudited) 20th July, 2015
For the Quarter ending 30th September, 2015 (Unaudited) 14th November, 2015
For the Quarter ending 31st December, 2015 (Unaudited) 14th February, 2016
For the year ending 31st March, 2016 (Audited) 30th May, 2016
The Shares of the Company are listed with the following Stock Exchanges with the stock code mentioned there against:
The Calcutta Stock Exchange Limited* 7, Lyons Range, Kolkata - 700 001
Stock Code: 10029193
BSE Limited Phiroze Jeejeebhoy Towers Dalal Street, Mumbai - 400 001
Stock Code 509874
3. National Stock Exchange of India Ltd. Exchange Plaza, Badra Kurla Complex Bandra (E), Mumbai - 400 051
Stock Code SHALPAINTS
The stock code (ISIN) for the Company's shares in demat segment is INE849C01026.
*The Company has since received a letter dated 2nd July, 2015 from the Calcutta Stock Exchange Limited (CSE), approving voluntarily delisting of the Company's shares from CSE with effect from 3rd July, 2015, as applied for by the Company vide its letter dated 30th May, 2014 under the Securities & Exchange Board of India (Delisting of Equity Shares) Regulations, 2009.
k) Dematerialization of Shares and liquidity: As on 31st March, 2015, 97.41% of Equity shares are in dematerialized form.
l) The Company's plants are located at the following places:
• P.O. Danesh Shaikh Lane, Goabaria, Howrah, West Bengal (Operations suspended due to fire accident in the month of March, 2014)
• Village: Gonde Dumala,Tehsil: Igatpuri, Nasikand
• No.A-1 andA-2Sikandrabad Industrial Area, Sikandrabad, Dist. Bulandsahar, Uttar Pradesh.
m) Address for Correspondence: Secretarial Department, Shalimar Paints Limited, Plot No 64, Sector, 44, Gurgaon, Haryana 122 001
n) E-Mail ID of the Grievance Redressal Division/Compliance Officer exclusively for the purpose of registering complaints bythe Investors: firstname.lastname@example.org
For and on behalf of the Board
Surender Kumar Rajiv Rajvanshi
Whole-time Director and COO & CFO Director
Date: 20th July, 2015
Place: New Delhi