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Your Directors are pleased to present the Annual Report on the business and operations of your Company and the audited Financial Statements of the Company for the year ended March 31, 2016.
Performance of the Company
Your Company has delivered consistently 11 years in a row double digit profitable growth. Net Sales and PAT for the year ended March 31, 2016 were Rs. 41,06,60.54 Lacs and Rs. 6,86,91.49 Lacs respectively despite the end of fiscal benefits from end April '15 (457 bps impact on Net Sales). Your Company strengthened its leadership position in HFD category to 66.2% and 58.3% by gaining 1.4% and 0.9% volume and value market share respectively.
Your Company continues to focus on innovation and delivering products of value with superior science.
Horlicks built on its Power of Milk that was led by the claim that "Horlicks is clinically proven to increase the power of milk". Awesome Squad, fully animated campaign was launched with the objective of making milk consumption exciting for kids and gives children a chance to see their animated selves digitally. Further, Horlicks continued on its strategy of driving daily consumption in core markets by activating the "Drink Daily, Grow Daily" and "Food Science" campaign to address the evening consumption. This educates the Mother about her food basket that may be varied and good but may not have the requisite nutrition unless she adds Horlicks twice a day to it. Further, Rs. 10 sachet has been launched in South and East markets to drive penetration and cater to the bottom of pyramid.
New 'Best Ever' Chocolate Horlicks was launched in October '15 to enhance the consumption experience in terms of taste for the Consumers. Product development and formulation optimisation was completed utilising global cutting edge sensory techniques, by understanding the drivers of liking and the consumer segmentation of both groups of consumers. The launch was backed up by 360 degree campaign including consumer activation "Toy Store" for kids to taste Chocolate Horlicks and also get a chance to choose toys from a store full of toys, if selected as the winner.
The Life stage Nutrition portfolio driven by Horlicks brand extensions continued to do well during the year, on the back of innovative campaigns as a result of which impressive all round performance with key milestones have been achieved and 0.5% increase in value market share.
Mother's Horlicks continues to grow high double digits with the launch of "Early Start" campaign in March '15 to drive brand adoption from Trimester 1 of Pregnancy. Further, new campaign launched in Q4 '16 was accompanied by the launch of the concept of "Small for Gestational Age" to detail Gynaecologists to drive recommendation from Trimester 1 by the Expert Team. This has resulted in higher off takes and the highest ever prescription share.
Women's Horlicks continued its differentiation through "Bone Health" platform. New improved product with 100% Recommended Dietary Allowance (RDA) of Calcium and Vitamin D with improved taste was launched that has seen a steady increase in household penetration across the country. Further, it was backed by 360 degree campaign that highlights '30' as the age to start nutrients consumption for strong bones. The digital campaign "Strong to the Bone" launched on the Women's Day that included an online Bone Mineral Density test (BMD) resulting in Women's Horlicks emerging as the No.1 brand in share of voice.
Junior Horlicks launched a new campaign and visibility drives in select cities including Modern Trade that focuses on healthy weight gain and brain development of the child that has resulted in improving the Market Share.
Boost restage was launched in March 2016 with a new pack and trendy design than focuses on building "3X more stamina"** that was backed up new campaign with a market insight that inspires kids with the theme of 'Play the Bigger Game'. This was supported with compelling thematic communication, shopper and consumer activation "Boost Race of Champions", strong trade and shopper visibility to increase awareness and importance of correct nutrition and highlight the unique proposition of "Scientifically Proven to Give 3X more Stamina". As a result, Boost continues to rank third in HFD Category.
Further, a new campaign "Har Chhote Dhoni Ke Liye Chhota Boost" for Boost sachets was released in October '15 to engage, create excitement and accelarate trials with the consumers including the bottom of pyramid end users.
The Foods portfolio focus is to improve profitability margin. Horlicks Oats new package rolled out in July '15 backed by distribution focus and consumer promotions to strengthen its second number position in the category in South India. Horlicks Oats has been launched in the East India for the first time in Q4 2015–16.
Your Company had taken a decision to have in–house resources for detailing of GSK brands to Health Care Professionals (HCP's) to enable delivery of cutting edge science through a highly engaged field force. The team has enabled the Company Brands and the product science to reach out to HCP's and chemists across India through the various programs to drive awareness on the 'Role of right nutrition' in pregnant women and kids, educate gynecologists on the detection of anomalies in fetus due to nutrition deficiencies and the role of early nutrition intervention with supplements like Mother's Horlicks during pregnancy. This has resulted in higher off takes and the highest ever prescription share for the Company products.
The Directors recommend a total dividend of Rs. 70 per equity share of Rs. 10 each for the year ended March 31, 2016. If approved by the Members at the ensuing Annual General Meeting to be held on August 5, 2016, it will be paid on or before September 4, 2016 to those Members whose names appear in the Company's Register of Members and to those persons whose names appear as beneficial owners (as per the details to be furnished by the Depositories in respect of the shares held in dematerialised form) as at the close of business hours on July 27, 2016.
Management Discussion and Analysis Report
The economic environment in the financial year 2015–16 remained largely neutral due to subdued growth momentum though the overall consumer sentiments remained positive for potential and revival. The global economy slowdown and uncertainty, amidst China fears, in the recent year has made growth and profitability increasingly elusive. There is a tremendous focus on the Emerging Markets due to continuous pressure and stress at global level. Indian economy faced its own set of challenges in terms of weak / poor monsoons for two successive years, subdued consumer sentiment impacting consumption and slowdown of rural economy, natural calamities (Chennai floods, Nepal earthquake), political disturbances in Bangladesh and Nepal leading to low growth in volume and value in HFD and the Company.
The economy benefitted in the financial year from softening of commodity and crude prices that kept the general inflation to moderate levels, Central Bank decision to cut rates and highest forex reserves. The Government focus on "Make in India", investments in infrastructure projects, rural development and financial empowerment (bank accounts, direct benefit transfer) of the people at the bottom of pyramid are the positive indicators for the economy and industry to be optimistic that the economy will pick up in times to come. Further, the fundamentals of the Indian economy continue to be good that reinforces it's growth potential, however the pace of executing the reforms agenda remains key to translate the positive sentiment to the economy's revival.
According to A C Nielsen, market researcher, FMCG volume growth slowed down to 0.9% for PAN India. The impact was high in Southern market, where growth declined by 0.2%. The Rural growth has also slowed down on account of below average monsoon and unseasonal rains, low minimum wages and MSP hike.
Despite these challenges, we believe we are well placed to deliver strong performance given our understanding of consumer behaviour. We also have robust Go to Market Strategy, superior science, pipeline for innovative products, efficient cost management and talent management processes. These, we believe, fortifies us against all headwinds that we may face.
Your Company is growing consistently and improving the Market Share both in volume and value terms despite category slowdown due to macroeconomic challenges, through sustained focus on brand connect, continuous investment in brands and driving execution excellence in coverage expansion in the urban and rural business. Rural business now reaches directly to over 20,000 villages and works with the rural communities to build our categories, brands and create positive social impact by building awareness on nutrition and promoting good health practices amongst the rural population.
Two key growth drivers in our Rural Programme are Horlicks Swasthya Abhiyan (HSA) and Village Level Entrepreneurs (VLE); HSA program aims to improve the standard of living in the rural areas, engaging with rural medical practitioners and community workers, thus creating awareness, education and relevance for our brands. HSA now reaches over 5,000 villages and connects with over a million consumers. VLE has reached more than 1,000 villages by which we are reaching out to bottom of the pyramid, and in this process, create livelihood for underprivileged rural women while enhancing access of our products in small villages economically empowering rural women. Further, Mobile Sakhi, a mobile based advisory service for pregnant mothers delivers vital information pertaining to pregnancy is used by over 50,000 rural women. Rural Marketing Association of India has recognised your Company efforts for its marketing campaigns in rural India at the recently convened Flame Asia awards as GSK won 6 awards in different categories.
Your Company's growth in Modern Trade continues to defy the slowdown in the channel and improve penetration level with a double digit growth and gaining 196 bps in Volume Market Share (A C Nielsen). The strong performance has been on the back of strong and competitive growth during Big Day sales, activations and bone health checks.
Your Company continues to invest in Brands and connect with the Consumers through innovative and diversified platforms of Advertising. In today's environment digital media is an effective mean to connect with a large Consumer base in real time. The Company launched a digital campaign "Strong to the Bone" on the Women's Day that included an online Bone Mineral Density test (BMD) resulting in Women's Horlicks emerging as the No.1 brand in share of voice. The film saw 17 million views across various digital platforms and more importantly 25000+ women take Online Bone Mineral Density test. Further, Chocolate Horlicks "Mixes in milk even before you skip this Ad" was awarded the Best Digital Strategy award at Media Abbys in April '15.
Your Company's focus on cost management, working capital optimisation and simplification program continued to deliver strong results in mitigating inflation and supporting profitable growth despite the end of fiscal benefits at Baddi in the financial year. Sustained improvement in working capital continued in the current financial year. The cost optimisation programs and returns from surplus cash arising from working capital initiatives have supported sustained investments in your Company's brands. Simplification initiatives like Electronic Collection Model and E–claims were taken to empower, improve speed and strengthen the existing processes for better customer experience.
The total Reserves as on March 31, 2016 stood at Rs. 24,03,57.70 Lacs representing an increase of 16% from March 31, 2015. An amount of Rs. 68,69.15 Lacs has been transferred to Reserves.
Research and Development (R&D)
Your company's vision is to develop novel products backed by consumer insights along with superior science and differentiation from competitors. Last year saw 3 new launches and restages in India including the reformulation of Chocolate Horlicks for North and West market delivering a significantly better tasting product based on strong regional consumer preference to drive strong HFD category growth in North & West market. Product development and formulation optimisation was completed utilising global cutting edge sensory techniques, by understanding the drivers of liking and the consumer segmentation of both groups of consumers. With this launch, Chocolate Horlicks has gained significant market share than competition.
Your favourite Women Horlicks brand was restaged with new and improved taste to drive enhanced consumption. The restage also offered other exciting delivery of contemporary, user friendly packaging. These new products were also harmonised with the efficient manufacturing technology to provide the best end to end benefits to the supply chain. Your company's R&D goal continues to focus on strengthening our category leadership through the differentiated Science and Technology breakthrough in the Indian subcontinent, while leveraging synergies to drive growth in other new geographies across the world. In addition, efforts were also undertaken to drive efficient development to enable the future growth agenda for other markets such as Bangladesh and Sri Lanka.
R&D is significantly involved in building defining new science and benefits either through new technology that would give cutting edge advantage for our offerings along with scientific research to drive differentiated claims to maintain category leadership for 2016 and beyond. Some of the high science differentiated products are in advance stage of development for launches in short, medium, and long term, and thus making our innovation pipeline robust.
New end to end Innovation process has been rolled out to bring rigor in project management and ensure delivery of the innovation pipeline in time, meeting strong quality, speed, product design to value and process governance. Your Company continues to focus its efforts on commercialising differentiated science based innovations in all the categories we compete in, while keeping the values and compliance in mind.
You will be glad to know that your company's R&D has significantly dialled up our reach to external technologies through the Open Innovation network. The Open Innovation team is working to bring external innovation from across the globe to drive unique technology advantages to the Company and speed to market to strengthen innovation portfolio.
You will be pleased to know your Company's R&D function is adopting best practices in consumer insights and have strong network with GSK's global capabilities on scientific exploration, clinical science, sensory and product understanding, packaging networks to access best information to deliver product of best quality, science and relevance.
Profitable growth ambitions are actively supported by R&D through a structured Value Engineering Program which also helps to mitigate the increasing cost of raw materials. Design to value remains an integral part of R&D product development process to provide most efficient cost advantage to end consumer. R&D also partners with Supply Chain on a long term manufacturing process that is cost efficient, more sustainable manufacturing process and high quality
You will be proud to know that your Company's R&D is working towards our environment sustainability initiatives. The R&D function has also partnered with Supply Chain for capacity enhancement projects and initiated work on long term manufacturing processes that are efficient from a capital, operational cost, and aspires to have a lower carbon footprint.
The R&D function continues to focus on the regulatory compliance with local food laws, and also proactively engages with the regulatory authorities and industry associations to shape the regulatory environment for science based innovation in food and nutrition.
Packaging has long proven to be a critical success factor for winning with the consumers at the first and second moments of truth. The team works seamlessly with Design, Commercial and R&D functions to drive Packaging Innovation. The team also has been recognised externally through multiple Packaging Excellence awards in India, Asia, and at the Global level. This is in recognition of the committed efforts from the Company's Packaging function.
Your Company's manufacturing facilities at Nabha, Rajahmundry and Sonepat continue to be certified to the latest version of ISO 9001: 2008, ISO 22000: 2005, ISO 14001: 2004 and OHSAS 18001: 2007 by SGS, a leading International certification Company. These certifications indicate our commitment in meeting, in a sustainable manner, Global Quality, Environment Health and Safety Standards.
Your Company continues to lead integration of Information Technology for business efficiencies.
The Information Technology function has been a key business enabler across all functions of the Company.
During the year, your Company has rolled out projects to strengthen Human Resource (HR) processes by implementing WORKDAY an integrated system for all HR processes and continued to focus on increasing the consumer reach by enabling digital solutions across brands.
During the year Company also kicked off the following projects
– New ERP (SAP) Project to support and strengthen the Business process operations, a dedicated team is working on this project with a target to go live by June 2017.
– New DMS system (Distributor Management System) to strengthen the Sales operations and target to rollout by March 2017
The Information Technology function continues to display excellent agility and innovation to address the challenging business and economic environment and has come up as a key growth enabler for your Company.
Internal Control system and Adequacy
The Company has established and maintained adequate internal control framework in line with the Internal Financial Controls ("IFC") requirement within the meaning of the explanation to Section 134(5)(e) of the Companies Act, 2013 including financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). The Company has evaluated the operating effectiveness of internal control systems and is supplemented by:
• Well–documented standard operating procedures, policies, risk and control matrices for all material processes and fraud risk mitigation. Further, these documents are tested for operating effectiveness, regularly reviewed and updated to align with global best practices.
• Any material variances from the budget are reviewed on a monthly basis and require approval of the Management Team. All major policy changes are approved by the Managing Director.
• Quarterly submission of structured Internal Control Letters (ICLs) covers all functions in the Company. The self–assessment by process/ control owner is also used as the basis of CEO/CFO certification as required under Clause 49 of the Listing Agreement with the Stock Exchange.
• The Company has a Risk Management and Compliance Board (RMCB), now called the 'Risk Management Committee' (RMC), comprising of the Managing Director, Finance Director, Operations Director, Executive Vice President – Legal and Executive Vice President –Human Resource. Risk maps stating the significant business risks, potential consequences along with mitigation plans are prepared by each function and reviewed by RMC on a regular basis.
The Company has a robust internal audit function, that reports into the Audit Committee and carries out review of operations, systems and functions basis the plan approved by Audit Committee.
All significant Audit observations and follow–up actions thereon are reported to the Audit Committee. The Committee reviews the adequacy and effectiveness of the Company's internal control framework and monitors the implementation of audit recommendations including those relating to strengthening the Company's risk management policies and systems.
Human Resource Development
In 2015 your Company continued its journey to embed the new People and Performance culture to become a truly fast moving consumer healthcare company that employees would love to work for.
Your Company remains focussed on building a culture where both People & Performance are equally important. It is a culture that focuses on speed with accountability, appropriate risk taking and an enterprise orientation.
To support this, we continue to invest significantly in developing talent across levels, leveraging processes such as Integrated Talent Management to ensure sustainability of talent and robust succession pipelines for all our key roles. Our focus on Differentiated Development ensures that employees are able to leverage a variety of opportunities to develop and take on greater responsibilities in line with their career aspirations. Along with this, in 2016, we rolled out the "Winning Soft Skills" program to enhance the behavioural capability of our frontline sales force and accelerate their careers.
Your organisation has also reshaped the Expert Sales & Marketing organisation in 2015 by in sourcing the existing employees and giving a fresh impetus to the Go–To–Market approach. The entire exercise of designing, hiring and integrating a multi functional organisation took place over the entire year, and in 2016, the focus will be to further integrate the new organisation into the Company and make it engaged, empowered and successful.
Your organisation also took positive steps towards Industrial relations. As a part of this, the Rajahmundry Long Term Wage Settlement was successfully signed on 17th December 2015 with the recognised union.
Simplification remains one of our top priorities. In keeping with the same, we have embraced technology and have launched a new cloud based people management system on 14th December 2015 for all our employees across India. Introduction of this system will transform the way HR functions; it will make people management simpler and more effective and help deliver superior business results. It is a simple, intuitive, easy–to–use interface for manager and employee self–service, coupled with anytime, anywhere access will substantially change the life for our people. Providing a single, global system of record, the system will facilitate a more strategic role for HR as a genuine partner to the business. Workday will also be supported by an efficient HR Service Delivery Model and a query management solution.
The employee uptake of this new system has been heartening and it was demonstrated during the 2016 Performance and Development Planning cycle.
Your Company is strongly committed to principles of Inclusion and Diversity which is a global HR focus. This is being driven across the Company through a set of programmes to sensitise managers to appreciate the diversity in workforce, hiring suitable women candidates and by building a culture more congenial for women colleagues. We are delighted that we have been constantly improving our gender ratio over the years and have been successful in hiring women candidates in roles that have been traditionally filled up by men. In 2015, for the first time, we have hired the women Sales managers and women Sales trainees. In 2016, our focus will be to build a culture of inclusive empowerment and trust through various initiatives.
We continue to reinforce the values of the company through relevant and transparent internal communication, employee engagement and direct contact programmes to ensure we have a highly engaged workforce that is truly aligned to the Company's mission of "do more, feel better, live longer"
Awards and Recognition
Your Company efforts to deliver the best quality products backed up by science based innovation, strong talent base and brands have been recognised during the year. Some of the key recognitions are:
• In the Economic Times Brand Equity Survey 2015, Horlicks has been ranked as the most trusted brand in Hot Beverages. Further, Horlicks has moved to Top 10 Brands across India (Ranked 6 vs 25 last year).
• Your Company featured amongst Forbes "Super 50" Companies.
• Your Company Rural Marketing Initiatives (HSA, VLE, etc) won 6 awards at the 10th Annual Flame Asia Awards conducted by Rural Marketing Association of India.
• Horlicks makes it to Hot 50 brands of Delhi–NCR
• Horlicks won at INK awards for excellence in newspaper advertising
• The Primary manufacturing sites have won the Runner Up award (Environment Sustainability category) by GSK global CEO for project Green Leap, which is a global recognition for sustainability practices for GSK's efforts towards sustainability.
The Board of Directors, at its meeting held on May 8, 2015 appointed Mr. Manoj Kumar as Managing Director of the Company for a period of 5 years with effect from June 1, 2015, pursuant to nomination received from the Horlicks Ltd., in place of Mr. Zubair Ahmed. The appointment was also approved by the shareholders at the Annual General Meeting held on August 6, 2015.
The Board of Directors, at its meeting held on May 8, 2015 also appointed Mr. Vivek Anand as Director– Finance and Chief Financial Officer (CFO) of the Company, with effect from June 1, 2015, in the casual vacancy caused by the resignation of Mr. Ramakrishnan Subramanian.
Mr. Joaquin Mascaro was nominated as Director by Horlicks Limited under Article 97A of the Articles of Association of the Company w.e.f. May 18, 2016 in place of Mr. Jonathan Box. The Board of Directors wishes to place on record its sincere appreciation for the valuable advice and guidance rendered by Mr. Jonathan Box.
Performance Evaluation of Board
A regular process of evaluating the Board's performance can help the Board in validating the relevance of its processes and provide insights for strengthening its overall efficiency and effectiveness.
(i) The performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.
(ii) On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director.
The Act has not specified a rigid procedure for this evaluation, keeping it open for the Board to adopt a procedure best suited for it. Therefore, the Remuneration & Nomination Committee decided that a peer feedback process will be adopted and a 360 degree feedback will be taken from all Directors. The final results will be compiled and submitted to the Chairman. The Committee also mentioned that it should be anonymous and confidentiality should be maintained.
The Committee decided that it will take place annually. The mechanism adopted will be as follows:
1. Every February the survey will be sent to all Directors through a secure online survey portal.
2. The Evaluation shall be based on: Board Effectiveness, Processes adopted by the Board, Contribution by the Board Members, Value addition by the Board, Committee Effectiveness and contribution at the Committee.
3. All Directors will fill in the survey and inform the Head, Human Resource.
4. The Head – HR will then compile the Results and share the same with the NRC Chairman and Chairman of the Board.
5. The results can be individually discussed and feedback can be provided to the Directors by the Chairman.
Criteria for Appointment of Directors
The success of the Board of Directors depends on the composition, structure, resources, diligence, and authority of the entire board, as well as their working relationships with other participants of corporate governance, including management. Your Company is committed to corporate governance best practices and is vigilant at the time of appointment of its Directors
The Board of Directors is ultimately responsible for the Company's business affairs and governance. To that goal a director would be expected to:
• Represent organisation's shareholders' interests and create value for them
• Align the interests of management with those of shareholders while protecting the interests of other stakeholders (customers, creditors, suppliers)
• Oversee the Company's performance by setting objectives, establishing short–term and long–term strategies to achieve these objectives
• Provide counsel to the Company's senior executives on material strategic decisions and risk management. Establish or approve strategic plans and decisions to achieve these goals
• Oversee the sustainability of the Company in creating long–term shareholder value and protecting interests of other stakeholders
Pre–requisites for consideration:
• The candidate to acknowledge that s/he have sufficient time to effectively discharge her/his duties.
• The candidate should have skill sets and expertise area which is complementary to the current Board. The Board assesses the needs of the current Board to ensure that there is a range of skills, experience and diversity represented, including an understanding of:
• the industry and markets in which the Company operates
• accounting, finance and legal matters
• other key areas of business operations
• The candidate should have experience and depth of knowledge in her/ his area of work so as to contribute meaningfully to the operations of the Board
• There should be no conflict of interest between the candidate and the Company. The individual should not be in relation to any current employee of the Company and should not be holding more than 2% of the Company's shares at the time or during the appointment
• The candidate should not be employed or related to another organisation/body which can directly/indirectly influence the operations of the Company or is in direct competition with the Company.
The Candidate has not been convicted of any offence, whether involving moral turpitude or otherwise and sentenced to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of sentence.
Remuneration Policy for Non–Executive Directors
GSK believes that its Board Members bring immense value in their independent evaluation and oversight of the operations of the company. It is therefore expected that they will devote significant time and provide unbiased point of view to their board duties.
The remuneration paid to each Non–executive Director is as per the structure determined by the Nomination & Remuneration Committee and the Board. This is reviewed on a periodically basis and also compared to other peer organisations. It is ensured that the remuneration paid to them is in accordance with the provisions of the Companies Act and any other applicable law.
The remuneration structure for the Non–Executive Directors comprises of annual Commission and sitting fee per meeting attended.
Remuneration Policy for Employees Philosophy
GSK recognises that reward is important in engaging employees and motivating them to do their best work to deliver our strategic priorities and mission. We reward high performance and recognise outstanding achievements of employees in a way that is consistent with our values and behaviours.
• Competitive – We provide competitive rewards within a global reward framework
• Differentiated – We differentiate reward to attract and retain skilled employees; reward the greatest contributors and recognise employees who evolve their skills to enhance their individual contribution to GSK's success
• Alignment – Our reward programs and practices are transparent and focus on ensuring alignment at several levels
– Business alignment – Our reward program take into account the common and business–specific skill/ performance requirements across our various business units
– Country alignment – Reward aims at meeting the needs of our diverse workforce and enabling them to live out our mission – to do more, feel better and live longer
– Individual alignment – Individual objectives are set and reviewed annually to ensure employees have a clear understanding of the link between the business value they deliver and their own performance based reward
The Company believes its employees are its biggest assets and aligns its compensation and benefits towards rewarding employees in line with its Rewards policy. The Company focuses on being market aligned as well as differentiate basis performance to drive a high performance culture.
Your Company has 3,731 permanent workers, including workmen. The remuneration for the workmen at two of the factories is governed by Long Term Wage Settlement (LTWS) which is done in consultation with the unions. For the remaining employees, the targeted salary increase was 5% for all employees including KMP.
If we compare the remuneration of these to that of median employee, we observe a ratio as given below.
The Company believes that by means of the variable pay plan the company is able to link a portion of compensation to the individual and business performance which creates a strong positive reinforcement. It also ensures that the employees of the Company are rewarded only when the shareholders' goals are met. The Company's variable pay plan, therefore, links the variable pay to both – individual performance and business results such as sales growth and operating profits.
The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the financial year is not applicable. It is also, affirmed that the remuneration is as per the Remuneration Policy of the Company
Total KMP Remuneration as a percentage of Revenue: 0.3% Total KMP Remuneration as a percentage of PBT: 1.4%
The Company believes in balancing the competitiveness of pay as well as sustainability of the associated costs for the organisation. The salary increases for this year were aimed at maintaining the pay competitiveness with market as well as performance of the company.
Policy on Board Diversity
As stated in the policy for appointment of Directors, GSK recognises that the success of the Board of Directors depends on the composition, structure, resources, diligence, and authority of the entire board, as well as their working relationships with other participants of corporate governance, including management. GSK is committed to build a truly diverse board which brings with it diversity of expertise, skills, regional and industry experience, gender and demographics. GSK believes that such a Board will enhance the quality of decisions by utilising the diversity of its members.
The Nomination and Remuneration Committee (NRC) is responsible for reviewing and assessing the composition and performance of the Board, as well as identifying appropriately qualified persons to occupy board positions. At time of appointment, the candidate must bring with him/her skill sets and expertise area which is complementary to the current Board composition. The Board will have an optimum combination of Executive, Non–executive and Independent Directors with at least one women director in compliance with all statutory provisions. The Board of Directors shall maintain an appropriate mix of diversity, skill, experience and expertise on the Board.
The NRC and the Board of Directors shall refer to this Policy on Board Diversity at the time of appointment of persons as a Board Member.
Particulars of Employees
The information required pursuant to Section 197 of the Companies Act, 2013 read with Rules, 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company will be provided to members upon request in writing made before the Annual General Meeting wherein Financial Statements for the relevant financial year are proposed to be adopted. In terms of Section 136 of the Act, the copy of the Annual Report is being sent to the Members and others entitled thereto, and is also available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.
The Annual Report of the Company is also available on the Company's website– www.gsk–ch.in .
Particulars of Loans, Guarantee, Investment u/s 186
There are no Loans, guarantees, Investments to be reported u/s 186 of Companies Act 2013.
Details of Board Meetings
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year five Board Meetings and five Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo
Information required as per the Companies Accounts Rules, 2014 is given in the Annexure I to this Report.
Messrs. Price Waterhouse, Chartered Accountants, who retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re–appointment.
Pursuant to provisions of section 204 of the Companies Act, 2013, the Secretarial Audit Report is annexed herewith as Annexure II to this Report duly certified by S N Ananthasubramanian & Co., a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company.
Composition of Audit Committee
Please refer corporate governance report for composition of audit committee.
Risk Management Policy
The Company has a Risk Management policy and an internal control framework, which is used to manage risks.
Vigil Mechanism for Directors and Employees of Company
The detailed policy for Vigil Mechanism and Whistle blower is available at <http://www.gsk–ch.in/Policies.aspx>
Extract of Annual Report
Information required under this clause is given in the Annexure III to this report.
Related Party Transaction
Disclosures as required under Form AOC 2 are contained in Note 34 (Financial Statements).There are no transactions, which are not at arm's length and all the Related Party transactions are at arm's length basis.
The detailed policy for Related Party Transactions is available at <http://www.gsk–ch.in/Policies.aspx>
The Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.
Information on Company's share Performance
The market capitalisation of the Company decreased by 4% (Rs. 2,53,81,13 lacs) Vs March 31, 2015 (Rs. 2,64,93,52 lacs). The EPS as on March 31, 2016 stands at Rs. 163.34 vs Rs.138.77 as on closing date of last financial year. The PE ratio as on March 31, 2016 stands at 37 vs 45 as on closing date of last financial year.
Environment and social Commitment
Your Company is dedicated towards improving the quality of human life by enabling people to do more, feel better and live longer. As a Global Healthcare Company, your Company believes that it can play an important role in meeting societal challenges through right engagement towards environmental and societal commitments. Your Company's philosophy is to target support to selected programmes that are innovative, sustainable and which produce tangible results.
Your Company's stated mission statement is "To lend a helping hand to the underserved in our society through the support of women, children and the aged in the areas of health and education". Towards implementing this philosophy in spirit, your Company continued its positive contributions during the current period to the communities and invested in health and education programmes and partnerships that aimed to bring sustainable improvements to under–served people.
The initiatives undertaken by your Company are primarily focused towards women, children and the aged and are directed in the areas of Health, Education and Livelihood.
In line with our commitment towards our stakeholders, the Company has been consistently supporting and spending on CSR programs focussing on skill development, income generation and awareness generation on health & nutrition to comply with the provision of law. However as per the experts interpretation, we reclassified certain CSR program spends during the year and post this reclassification the Company has spent 1.27% of our average net profit of last three financial years as part of our CSR in the reporting period.
For the reporting period, the Company focused on aligning our ongoing social development programs to the requirements of the Act. We have invested considerable resources on laying a foundation for implementing and scaling up future projects by developing strong internal mechanisms and identifying strategic and high impact avenues for CSR. Moving forward, we will endeavour to spend on CSR programs / activities as per the prescribed limits.
Your Company undertakes these activities in 4 different ways:
a. Disaster relief: We provided disaster relief support to the victims of the Chennai Floods through our partners Charities Aid Foundation (CAF) and Save the Children (SC).
b. Community Development: All community and rural development focussed projects running under supervision of BCF and CAF continued. The projects were focused on healthcare and nutrition, education, vocational training, income generation, support to the elderly across the country. Under these projects, GSK–CH is supporting 16 grass roots projects in 9 states of India addressing some important issues of poverty, malnutrition, education, health, disability, support to widows, differently–abled, infant & maternal mortality, and community disease like Kalazar, among others.
c. Rural development and malnutrition: Project Aaharam (with Save the Children) and Project Briddhi (with CARE) addressing rural development and malnutrition in Tamil Nadu and West Bengal were undertaken.
d. Healthcare: We supported our Global program for eradicating Lymphatic Filariasis (elephantiasis) through Albendazole contribution to World Health Organization (WHO).
e. The Company sponsors education for about 20 girl students studying in classes 10th to 12th in Government senior secondary school, Nabha by providing scholarships. The girls are selected on a merit–cum means basis.
The Company procures liquid milk from 400 villages in Nabha & Rajahmundry milk shed area. The Company drives a structured Dairy Development programme in its milk shed through Animal Health care, Breed improvement, Farm management and Clean Milk production.
• Free Veterinary Service
• Deworming Camps – Free deworming of animals
• Multipurpose camps – Vet treatment & awareness lectures
• Subsidy on Veterinary Medicines
• Subsidy on Feed Supplements – Mineral Mixture & Calcium Preparations
For other details regarding CSR, please refer Annexure IV to Director's Report.
Significant Material orders Passed by the Court/Regulator/Tribunal Impacting Going Concern status and Company's operations In Future
The Company has not received any material Show cause under the Act / SEBI Regulations. Notices received from other regulatory/statutory authorities are being suitably dealt with.
There are no significant legal /arbitral proceedings against the Company. All such matters are being brought to the notice of the Audit Committee / Board as the case may be.
Director's Responsibility statement
To the best of their knowledge and belief and according to the information and explanation obtained, your Directors make the following statement in terms of Section 134 (3) (c) and 134(5) of the Companies Act 2013 for the year ended March 31, 2016:
a. The Financial Statements of the Company for the period ended March 31, 2016 have been prepared in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. There have been no material departures in the adoption and application of accounting standards.
b. All Financial Statements have been prepared on historical cost convention, as a going concern and on the accrual basis.
c. The estimates and judgments relating to Financial Statements have been made on a prudent and reasonable basis in order to ensure that Financial Statements reflect, in a true and fair manner, the form and substance of the transactions and reasonably present the Company's state of affair and profit for the year.
d. The Directors of the Company have taken adequate care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding of assets of the Company and for preventing and detecting fraud and other irregularities.
e. The Company has established and maintained adequate internal control framework in line with the Internal Financial Controls ("IFC") requirement within the meaning of the explanation to Section 134(5) (e) of the Companies Act, 2013 including financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). The internal financial controls are adequate and operating effectively and our internal auditors have conducted periodic audits to provide reasonable assurances on the same.
f. The systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.
Declaration of Independent Directors
Pursuant to Sections 149(6) & 149(7) of Companies Act 2013, the
Independent Directors of GlaxoSmithKline Consumer Healthcare Limited have given a declaration that they have complied with the criteria of independence as set out under sub section (6) of Section 149 of the Companies Act, 2013
Statements in this report particularly that pertains to Management Discussion and Analysis may contain certain statements that might be considered forward looking. These statements are subject to certain risks and uncertainties. Actual results may differ materially from those expressed in the statement as important factors could influence the Company's operations such as Government policies, local, political and economic development, risks inherent to the Company's growth and such other factors.
The Directors wish to extend their thanks and appreciation to all the employees of the Company at all levels, agents and other business associates for their commitment, dedication and respective contributions to the Company's operations during the year under review.
The Directors would also like to acknowledge the valuable guidance, technical assistance and advice being received from the Associate Company in the U.K. Your Directors look forward to the future with confidence.
For and on behalf of the Board
Subodh Bhargava (DIN: 00035672) Chairman
Manoj Kumar (DIN: 07177262) Managing Director
Vivek Anand (DIN: 06891864) Directors
Mukesh H. Butani (DIN: 01452839) Directors
Place : Gurgaon
Dated : May 17, 2016