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Your Directors are pleased to submit their fifty third report together with the audited financial statements of the Company for the year ended 31st March 2016.
State of Company's Affairs Consolidated Performance
Consolidated Income from operations for 2015–16 was Rs. 8,111 Crores, against Rs. 7,993 Crores in the previous year, reflecting a 2% growth aided by improved performance both in the branded and unbranded businesses. At prior year exchange rates, the increase would be 3%. Within the branded business, India tea business performed well with good value and volume growth and our incubatory businesses, such as MAP in Australia, Tata Starbucks and NourishCo also increased their revenues. Within the non branded portfolio, improvements were mainly recorded in Coffee plantation and Coffee extraction businesses.
Profit from operations declined against the prior year mainly in the branded business due to underperformances in some developed markets. This decline is largely attributable to commodity price increases in coffee and tea in the international markets, higher spends behind brands and new launches, category decline in some developed markets and increased competitor and retailer activities. The Indian branded and non–branded businesses performed well offsetting the lower performance in developed markets. Profit after tax was however significantly higher than prior year mainly due to the impact of exceptional items. During the year, your Company sold some non–core investments realising a profit of Rs. 328 Crores. The Company also recognised non cash impairment losses amounting to Rs. 270 Crores mainly relating to its businesses in Eastern Europe and US. While the Company is actively pursuing various growth opportunities, the accounting impairment has been recognised due to underperformances as compared to plans mainly arising out of factors like macro–economic instability in Russia and category decline in every day black tea in certain markets and higher competitive intensity in some markets.
We continued our focus on green and specialty teas across markets during the year under review. There was renewed focus of increasing the distribution for our super premium segment whilst focus on new innovative products continued. The "Super Green tea" which is the first fortified green tea with proven health benefits which was launched in UK saw significant growth and was ahead of category growth on a full year basis. There was also significant growth in the green tea segment in India, France and US. Fruit and herbal teas were launched in UK and US where customer response has been very positive. Teapigs, our super premium tea brand, saw significant growth in UK, US and Canada and other international markets with improved distribution. In India, our new coffee brand, Tata Coffee Grand had a high impact launch which created the desired buzz and visibility. In addition, Tata Tea Gold with a region specific blend was launched in the state of Maharashtra which received favourable customer response. Various new products like the Signature Collection and London Blend have been launched in select developed markets. The year also reflected good execution of the launch plans in Middle–East which resulted in market share increases. The performance of the businesses under our strategic partnership with Starbucks and PepsiCo also saw good growth. In Tata Starbucks, growth has been achieved as a result of good in–store performance and expansion in the number of stores. NourishCo reflected good growth based on significant increase in the sales of Tata Gluco Plus and a moderate growth in Himalayan sales.
Your Company's consolidated performance has to be viewed in the context of difficult macro economic conditions and the emerging category trends in some of the developed markets that the Company operates in and that investments are being made for future growth.
Your Company's focus in 2016–17 would be to invest in innovations and capability building in line with the Group's medium term strategy plan and balancing the same with pressures on EBIT margins by prioritising our strategic objectives. The key focus themes across all regions will be to drive innovation and build momentum on the recent launches. Our focus will also be on improving distribution and driving cost efficiencies. We will meet these objectives through strengthening and leveraging people capabilities and robust execution of plans with continued commitment to our sustainability initiatives.
Your Company's Income from operations for the year ended 31st March 2016 was Rs. 3,084 Crores, registering an improvement against the prior year, driven by increase in volumes and average realisation reflecting the increase in both national and regional brands. Profit from operations at Rs. 319 Crores was higher than the previous year mainly driven by increased sales and lower commodity and input cost trends despite higher spends behind brands and new launches. Profit before and after tax was significantly higher aided by exceptional income, derived through sale of non–core investments partially offset by provisions relating mainly to the China extraction business arising out of delays in startup and stabilisation of technology for an enhanced product range.
Your Company recorded 7% income growth over the prior year with increases in the flagship Tata Tea Brands and also in the Regional brands. Your Company is pleased to report that it continues to maintain both volume and value leadership in the overall branded tea category and leadership in the green tea category, in a challenging and competitive environment. During the year, your Company renewed its focus on green tea and launched innovative products. The Company launched Tata Tea Gold with a region specific blend to strengthen its foothold in Maharashtra for which consumer response has been positive. In addition, to expand the product category, your Company launched Tata Coffee Grand with a unique blend that is gaining consumer acceptance.
The Amalgamation of Mount Everest Mineral Water Limited (MEMW) with the Company was completed during the year under review. Pursuant to and in consideration of the Scheme of Amalgamation of MEMW with your Company, which was effective 18th May 2015, your Company issued and allotted 1.27 Crore equity shares of Re. 1 to the eligible shareholders of MEMW, post which, the paid up capital of the Company increased to Rs. 63.11 Crores.
Your Directors are pleased to recommend for the approval of the shareholders, a dividend of Rs. 2.25 per share on the equity share capital of the Company with respect to the financial year 2015–16. The total outgo on account of dividend, inclusive of taxes, for 2015–16 is Rs. 165 Crores which represents a pay–out of 29% of the Company's stand alone profits.
Transfer to Reserves
An amount of Rs. 56 Crores is proposed to be transferred to General Reserves out of the amount available for appropriation and an amount of Rs. 1,263 Crores is proposed to be retained in the profit and loss statement.
Review of Subsidiaries, Associates and Joint Venture Companies
Pursuant to Section 129(3) of the Companies Act, 2013, the consolidated financial statements of the Company and its subsidiaries, joint ventures and associates, prepared in accordance with the relevant Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014, form part of this Annual Report. Pursuant to the provisions of the said section, a statement containing the salient features of the financial statements of the Company's subsidiaries, associates and joint ventures in Form AOC–1 is given in this Annual Report. Further, pursuant to the provisions of Section 136 of the Companies Act, 2013, the financial statements of the Company, consolidated financial statements along with relevant documents and separate accounts in respect of subsidiaries are available on the website of the Company.
There have been no material changes in the nature of the business of the subsidiaries (including associates and joint ventures) during the financial year 2015–16. Acquisitions/ divestments, as applicable, have been adequately disclosed in the financial statements.
Your Company has adopted a policy for determining material subsidiaries in terms of Regulation 16(1)(c ) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). The Policy as approved may be accessed on the Company's website at the link: <http://www.tataglobalbeverages.com/docs/default–source/> Investor–Governance–Policy–/policy–on–subsidiary.pdf?sfvrsn=0
Performance highlights of key operating subsidiaries / associates / joint ventures Indian Operations Tata Coffee Limited
Tata Coffee recorded a turnover of Rs. 718 Crores reflecting a growth of 5% over the prior year. The improvement is mainly attributable to higher instant coffee sales. The turnover of the plantation business also showed improvement driven by higher sales of Robusta and Pepper offset by lower Arabica volumes due to off year trends. The Instant Coffee business reported a strong growth in Africa and a favourable portfolio mix of volumes contributed to the Instant Coffee's turnover and profitability. The overall profitability of the plantation business was flat impacted by seasonal nature of the business, soft tea prices and higher costs. The depreciation policy for Tata Coffee was changed to align to a single basis of depreciation for similar type of assets as opposed to different basis of depreciation being followed earlier. A write–back was taken to exceptional items to reflect the impact of the change. Post the impact of exceptional items, Profits before and after tax are at prior year levels.
The Directors of Tata Coffee Limited have recommended a dividend of Rs.1.30 per equity share of Re. 1 each for the year 2015–16 which is the same as last year.
The instant coffee operations continues to focus on operational discipline, cost reduction and sustainability in operations. With a specific focus on cost reduction, various alternatives have been used to reduce the power and fuel costs in the instant coffee factories. In addition, the Theni Unit won the CII Sustainability award and Toopran unit won the National level Energy conservation award.
Tata Coffee also won two awards at the 12th Golden Leaf India Awards 2016 in recognition of the high quality teas produced at their factory located in the Anamalai hills in South India. Additionally, Plantation Trails, Tata Coffee's hospitality brand, was awarded the 'Certificate of Excellence' from Trip Advisor, the world's largest travel website, for the third consecutive year. The award is based purely on customer feedback and ratings.
NourishCo Beverages Limited
NourishCo Beverages Limited, a joint venture with PepsiCo, is driving our water agenda in India. It distributes the Himalayan brand whilst it manufactures and sells the Tata Water Plus and Tata Gluco Plus brands. The Company registered a turnover of Rs. 125 Crores for 2015–16, reflecting a growth of 44%. Tata Gluco Plus has been performing extremely well and high double digit growth in volume and value terms were recorded during the year 2015–16.
The new proposition of "Gas minus Energy Plus" and the visual changes on the packaging to communicate "Energy" for the brand were received very well by the consumers and have accelerated the brand's growth rate. We strengthened our distribution with presence in Maharashtra, Karnataka, Gujarat and Kerala. In addition, Himalayan sales declared a double digit growth in volume and value by focusing on channel mix and selective price increases. During the year, a television commercial was run with the objective of establishing Himalayan's source credentials.
Tata Starbucks Private Limited
Tata Starbucks recorded a turnover of Rs. 235 Crores during 2015–16 registering a growth of 39% over the prior year. Tata Starbucks' store count stands at 82 at the end of the financial year. The business continues to perform well with revenue growth driven by improved store performance and increase in the number of stores. In–store performance has been robust helped by various initiatives such as localisation of supply chain and other similar initiatives contributing to improving profitability.
Amalgamated Plantations Private Limited (APPL)
For the financial year 2015–16, turnover at Rs. 570 Crores was in line with prior year. However, profits were impacted mainly due to wage revisions which were negotiated on a tripartite basis. The business registered record production in February/ March 2016 due to good rains during end season. During the year, whilst regular tea prices were soft, premium teas reflected a hardening trend. In addition APPL is also involved with the tea extension planting advisory services initiative which ensures that the small tea growers are trained in Good Tea Cultivation practices to increase yield and improve compliance and quality of green leaf. This will help them get a fair price for sustainable livelihood and become a stable supply base to APPL factories. This initiative has led to identification and linkage of 5,252 small tea growers to APPL Estates for green leaf supply in 2016–17. Further, certain gardens achieved RA certifications and Trust Tea certification, in addition to ISO 22000 and SA 8000.
Kanan Devan Hills Plantation Company Private Limited (KDHP)
For the financial year 2015–16, KDHP recorded a turnover of Rs. 259 Crores. The profitability and operations were impacted by labour unrest in its estates and factories for a week in September and for a fortnight in October, resulting in heavy loss of production. The unrest was across most plantations in Kerala due to demands for wage revision and higher bonus. Additionally, loss of production during this period of unrest and its aftermath, left the tea fields in overgrown condition necessitating substantial costs for ensuing restoration work on the affected fields, which further impacted both production and income. The Company also incurred substantial increase in costs due to a significant increase in labour wages as decided by the Plantation Labour Committee, constituted by the Government of Kerala, and this plantation industry wide wage revision, done once in three years, was due in 2015.
Despite the labour unrest, the productivity for the season was higher than the previous year and total crop production performance was better than that of other companies in Munnar. The average price of tea achieved for the year was also higher than previous year, due to the increased production of high value teas and firming up of tea prices during the second half. In the Great Places to Work Survey (2015) conducted by the Economic Times and Great Place to Work® Institute, KDHP was ranked 97 in the Top 100 of India's Best Companies to Work for in 2015. On the quality front, KDHP won two awards at the 2016 Golden Leaf India Awards competition held at Dubai, a testimony to the stringent quality standards adopted by the Company. Additionally, two tea factories were awarded the Appreciation Award under the Small Industry Category of the Kerala State Pollution Control Award, 2016. This is a testimony to the strict safety standards maintained by all KDHP establishments. On the certifications front, KDHP continues to maintain all certifications of international repute, including Rainforest Alliance, Fairtrade, Organic, ISO 22000, ETP, GMP and Trustea. It was a moment of great joy and pride when the Company passed the Rainforest Alliance annual audit, with an astounding score of 98.9%.
Eight O Clock Coffee Company (EOC)
EOC's total income, under IGAAP, during 2015–16 at Rs. 1,046 Crores was higher than the previous year's income of Rs. 1,008 Crores. The increase in top line is mainly due to favourable currency movement. The business grew its non–promoted volumes over prior year but a significant increase in competitor intensity through additional promotional events and deeper discounting adversely affected the overall sales. Profits were impacted because of lower sales coupled with increase in coffee commodity costs. During the year, Eight O Clock Coffee was the recipient of two Reggie awards for their earlier partnership with Warner Brothers celebrating the 20th anniversary of the hit comedy TV show "Friends". The award recognises the best marketing campaigns activated by brands with a focus on strategy, creativity, originality, integration and results. The campaign resulted in introducing the brand to a younger consumer base which ultimately contributed to brand sales growth.
Tata Global Beverages Group Limited, UK
The consolidated income from Tata Global Beverages Group Limited, UK, under IGAAP, which substantially reflects the financial performance of the Tetley business and other international brands, at Rs. 3,313 Crores, was lower than prior year mainly due to adverse translation impact. At constant exchange rates, there was a marginal underlying topline growth. The improvement in underlying sales is mainly due to improvements in the Teapigs brand, Russia, Middle East, South Africa, and coffee business in Australia partially offset by lower performance in other key markets. The operating profit was behind prior year mainly due to category de–growth and high competitive intensity in some major markets, higher commodity prices, impact of the macro–economic condition prevailing in countries like Russia and higher spends on new launches and market entries. The underlying performance of the main brands was strong with many successes. Teapigs, our super premium brand has done exceedingly well by growing distribution in UK, US and in other international markets. Green tea has exceeded expectations and our growth is significantly higher than the category growth in UK. Super greens is the star performer in UK and the green tea portfolio, though small, has significantly increased in the last couple of years. In addition to UK, green tea has also done well in US, Canada and France. During the year, fruit and herbal categories were launched in UK and US and the initial response is positive. A new premium variant, the Signature Collection which was launched in Canada is gaining distribution and a new blend – "British Brands" was launched in US. Various advertisement campaigns were deployed in markets to support the Tetley brand and new launches. Whilst in the UK there was a focus on Tetley advertisement using the iconic "teafolk" and implementation of a new pack, Canada concentrated on Signature Collections and new packaging changes. We continue to be market leaders in Canada and have gained volume share in the UK.
The Company is happy to inform you that for the second year running, Tetley has been recognised in the 2015 Great Taste Awards, winning coveted gold stars for its Kenyan Gold (Blend Collection), Pure Green, Redbush Vanilla, Super Green Tea, Boost, Lime and Serenity, and Mood Infusions. The Great Taste Awards is one of the world's largest and most trusted food and drink awards, organised by the Guild of Fine Food. This respected seal of approval is a sign of quality, which consumers can trust whilst buying food and drink from their local retailer.
Non Cash Goodwill impairments were recorded during the year under review mainly relating to its businesses in Eastern Europe and US. While the Company is actively pursuing various growth opportunities, the accounting impairment has been recognised due to underperformances as compared to plans mainly arising out of factors like macro–economic instability in Russia and category decline in every day black tea / competitive intensity in other markets.
Tata Tea Extractions Inc.
Tata Tea Extractions Inc., a wholly owned subsidiary in the USA supplies customer specific tea ingredients to Iced Tea Beverage companies. During the year, the income from sales in underlying currency increased by 1%, while the Profit from Operations grew by over 5%, when compared to the previous year. This was mainly on account of improved realisation from customers despite challenging market conditions, favourable blend mix and a marginal reduction in the cost of goods sold.
In addition to the existing products, Tata Tea Extractions has developed a new formulation during the year to cater to the requirements of new customers as well as existing customers. The initial feedback on this formulation from some of the customers have been favourable. In the manufacturing plant in Munnar, we are also working on an enhanced product range for one of our major customers. Developmental activities such as these, coupled with the existing product range is expected to help the company to sustain and grow the extraction business.
Zhejiang Tata Tea Extraction Company Limited– China Joint Venture operations
Delays continue in stabilisation of the China business. While prospective customers have shown interest in our instant tea products, the final conversion to orders will be dependent on meeting the product profile requirements. Going forward, stabilising the production process and establishing a pipeline of external customers and successful scaling of technology will be key to the success of the project. In view of the continued uncertainty of the business, your Company is evaluating various options for restructuring the business.
Estate Management Services Private Limited (EMSPL)
Estate Management Services Private Limited, Sri Lanka (EMSPL) in which your Company owns 31.85% of the shares, is the holding company of Watawala Plantations Limited (WPL). WPL is one of the largest producers of tea and palm oil in Sri Lanka and amongst the most efficiently run in that country. EMSPL also owns Watawala Tea Ceylon Limited (WTCL) which is in the branded business and owns three key brands 'Zesta, 'Watawala' and 'Ran Kahata' which together command 33% market share of the branded tea market in Sri Lanka. Sri Lankan tea has good acceptance in several countries including Russia, South East Asia, Australia and Middle East.
EMSPL has continued to perform well during 2015–16. Watawala Plantations PLC registered growth in profitability driven by better performance of tea and rubber segments. Watawala Tea Ceylon also recorded healthy growth in operating performance with both revenue and profitability substantially improving over the previous financial year.
Companies which have become or ceased to be Subsidiaries, Associates and Joint Ventures
During 2015–16, RBC Hold Co LLC ceased to be a subsidiary as it was dissolved during the year. As stated above, Mount Everest Mineral Water Limited, an erstwhile subsidiary, was amalgamated with the Company, effective 18th May, 2015. No other company became or ceased to be a subsidiary, joint venture or associate during 2015–16.
Human Resources and Industrial Relations
During the year under review, a key agenda of the Company was to prioritise HR imperatives to support the Company's ambitious growth plans. The theme was 'Raising the Bar' and laying down practices on HR policies and principles to support in accelerating business Growth. The Company further continued leveraging the 3 tier leadership program to build the leadership capabilities across regions.
During the year under review, industrial relations remained harmonious at all our offices and establishments.
Corporate Governance and MD &A
A detailed report on Corporate Governance is separately attached together with a report on Management Discussion and Analysis (MDA). The MDA also covers the consolidated operations and reflects the global nature of our business.
Vigil Mechanism / Whistle Blower Policy
The Company has a vigil mechanism for directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the code of conduct/business ethics that provides for adequate safeguards against victimisation of the director(s) and employee(s) who avail of the mechanism. No director/employee has been denied access to the Chairman of the Audit Committee.
Internal Financial Controls
The Company has adequate system of Internal Controls which are detailed in the Management Discussion and Analysis Report.
The Company has adopted a governance guidelines on Board effectiveness. The guidelines cover aspects relating to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, term of directors, retirement age and committees of the Board. The guidelines also cover aspects relating to nomination, appointment and induction and development of directors, directors remuneration, subsidiary oversight, code of conduct, Board effectiveness reviews and mandates of Board committees.
Procedure for Nomination and appointment of directors
The Nomination and Remuneration Committee (NRC) is responsible for developing competency requirements for the Board based on the industry and strategy of the Company. The Board composition analysis reflects in–depth understanding of the Company, including its strategies, environment, operations, financial condition and compliance requirements.
The NRC makes recommendations to the Board in regard to appointment of new directors. The NRC also conducts a gap analysis to refresh the Board on a periodic basis, including each time a directors appointment or re–appointment is required. The NRC is also responsible for reviewing the profiles of potential candidates vis–à–vis the required competencies, undertake a reference and due diligence and meeting of potential candidates prior to making recommendations of their nomination to the Board. At the time of appointment , specific requirements for the position, including expert knowledge expected, is communicated to the appointee.
Criteria for determining qualifications, positive attributes and independence of a director
The NRC has formulated the criteria for determining qualifications, positive attributes and independence of directors in terms of the provisions of Section 178(3) of the Companies Act, 2013 and Regulation 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the key features of which are:
• Qualifications – The Board nomination process encourages diversity of thought, experience, knowledge, age and gender. It also ensures that the Board has an appropriate blend of functional and industry expertise.
• Positive Attributes– Apart from the duties of directors as prescribed in the Companies Act, 2013, the directors are expected to demonstrate high standards of ethical behaviour, communication skills and independent judgment. The directors are also expected to abide by the respective Code of Conduct as applicable to them.
• Independence – A director will be considered independent if he / she meet the criteria laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) the Listing Regulations.
Annual Evaluation of the Board, its Committees and Individual Directors
The Board of directors had carried out an annual evaluation of its own performance, board committees and individual directors as required under the Companies Act, 2013 and the Listing Regulations. The performance of the board was evaluated by the board after seeking inputs from all the directors on the basis of criteria such as board composition, structure, board processes and their effectiveness, information given to the board etc. The performance of the board committees was evaluated by the board after seeking inputs from the committee members on the basis of criteria such as committee composition, structure, effectiveness of committee meetings etc.
The Board and the NRC reviewed the performance of the individual directors on the basis of criteria such as contribution at meetings, their preparedness on the issues to be discussed etc. Additionally the Chairman was also evaluated on key aspects of his role.
The NRC has formulated a policy relating to the remuneration for the directors, key managerial personnel and other employees. The philosophy for remuneration is based on the commitment of fostering a culture of leadership with trust. The remuneration policy has been prepared pursuant to the provisions of Section 178(3) of the Companies Act, 2013, and Regulation 19 of the Listing Regulations. While formulating this policy, the NRC has considered the factors laid down in Section 178(4) of the Companies Act, 2013, which are as under:
• That the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;
• Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
• Remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long–term performance objectives appropriate to the working of the company and its goals.
The key principles governing the remuneration policy are as follows:
• Market competitiveness
• Role played by the individual
• Reflective of size of the company, complexity of the sector/ industry/ company's operations and the company's capacity to pay
• Consistent with recognised best practices and
• Aligned to any regulatory requirements
In accordance with the policy, the Managing / Executive directors / KMPs / employees are paid basic/ fixed salary, benefits, perquisites and allowances and annual incentive remuneration/ performance linked bonus subject to achievement of certain performance criteria and such other parameters as may be considered appropriate from time to time by the Board. The performance linked bonus would be driven by the outcome of the performance appraisal process and the performance of the Company.
Remuneration for independent directors and non independent non executive directors
The non–executive Directors, including Independent Directors, are paid Sitting fees for attending the meetings of the Board and Committees of the Board. The overall remuneration (sitting fees and commission) should be reasonable and sufficient to attract, retain and motivate directors aligned to the requirements of the Company including considering the challenges faced by the Company and its future growth imperatives. The remuneration should also be reflective of the size of the Company, complexity of the business and the Company's capacity to pay the remuneration.
The Company pays a sitting fee of Rs. 30,000 per meeting per director for attending meetings of the Board, Audit, Nomination and Remuneration and Executive Committees (Rs. 20,000 in case of Mr. Cyrus Mistry, Chairman and Mr. Harish Bhat, Director). For meetings of all other Committees of the Board, a sitting fee of Rs. 20,000 per meeting per director is paid (Rs. 15,000 in case of Mr. Cyrus Mistry, Chairman and Mr. Harish Bhat, Director). Within the ceiling of 1% of net profits of the Company computed under the applicable provisions of the Companies Act, 2013, the Non–Executive Directors including Independent Directors are also paid a commission, the amount whereof is recommended by the NRC and determined by the Board. The basis of determining the specific amount of commission payable to a Non–Executive Director is related to his attendance at meetings, role and responsibility as Chairman/Member of the Board/Committees and overall contribution as well as time spent on operational matters other than at the meetings. The shareholders of the Company had approved payment of commission to the non–executive directors at the Annual General Meeting held on 26th August 2014, which is valid up to the financial year ending 31st March 2019. No Stock option has been granted to the Non–Executive Directors.
Familiarisation programme for independent directors
The details for familiarisation of the independent directors are given in the website and the same can be accessed at the link <http://www.tataglobalbeverages.com/company/leadership/> board–of–directors
As required under Regulation 46(2)(i) of the Listing Regulations, the details of familiarisation programmes conducted during the year 2015–16, is also put on the Company's website.
Number of meetings of the Board
Nine meetings of the Board of Directors were held during the year 2015–16. For further details, please refer to the Corporate Governance Report, which forms part of this Annual Report.
The details pertaining to composition of audit committee are included in the Corporate Governance Report which forms part of this Annual Report.
Significant and material orders passed by the Regulators or Courts
There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations.
Corporate Social Responsibility and Sustainability initiatives
The Natural Beverages Policy of Tata Global Beverages is the apex policy that incorporates all relevant elements of Sustainability, Corporate Social Responsibility, Affirmative Action, Community Initiatives and volunteering. It is aligned with the Tata Group Sustainability Policy, and is applicable to all units of Tata Global Beverages, including associate companies and joint ventures. Through this policy, Tata Global Beverages aspires for global sustainability leadership in the natural beverages sector. The policy states that, "Tata Global Beverages is committed to be the most admired natural beverage company in the world by making a big and lasting difference through Sustainability and Corporate Social Responsibility. We shall achieve this by being the consumer's first choice in sustainable beverage production and consumption." The policy is built around the five pillars of sustainability – community development, sustainable sourcing, climate change, water management and waste management.
In compliance with Section 135 of Companies Act, 2013, Tata Global Beverages has undertaken CSR activities, projects and programs, excluding activities undertaken in pursuance of its normal course of business. The report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is given in Annexure 1 forming part of this report. The CSR Policy may be accessed on the Company's website at the link <http://www.tataglobalbeverages.com/docs/default–source/> default–document–library/corporate–social–responsibility–policy72 14b6881a2368caa65dff02001c5be1.pdf?sfvrsn=0
During the year under review, the Company has spent Rs. 5.53 Crores (around 2.46% of the average net profits of last three financial years) on CSR activities on projects qualifying as per Section 135 of the Companies Act, 2013 duly approved by the CSR Committee.
In addition to the projects specified as CSR activities under Section 135 of Companies Act 2013, the Company has also carried out several other sustainability / responsible business initiatives and projects on a global scale. In 2015, for the fourth year in a row, Tata Global Beverages (TGB) was recognised on the Climate Disclosure Leadership Index (CDLI), and ranked second in India by CDP.
Particulars of employees
The Information required under Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure 2 which forms part of this report.
Pursuant to Section 197 (14) of the Companies Act, 2013 the details of remuneration received by the Managing and Executive directors from the Company's subsidiary company during 2015–16 are also given in Annexure 2 attached to this report.
Particulars of Loans, Guarantees or Investments by the Company
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Annexure 3 attached to this report.
The Risk Management Committee of the Board is entrusted with the responsibility to assist the Board in overseeing and approving the Company's risk management framework. The Company has a comprehensive Risk policy and a Risk Register detailing the risks that the Company faces under various categories like strategic, financial, commercial, operational, IT, legal, regulatory, people, reputational and other risks and these have been identified and suitable mitigation measures have also been formulated. The Risk Management Committee reviews the key risks, the Risk register and the mitigation measures periodically. The Audit Committee has additional oversight in the area of financial risks and control.
Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace.
Deposits from public
The Company has not accepted any deposits from the public during the year under review. No amounts on account of principal or interest on deposits from public was outstanding as on 31st March 2016.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Dr. Asim Kumar Chattopadhyay, Company Secretary in Practice, to carry out the Secretarial Audit of the Company. The Report of the Secretarial Audit for 2015–16 is attached herewith as Annexure 4. There are no qualifications in the said report.
As provided under Section 92(3) of the Companies Act, 2013, the extract of annual return in Form MGT–9 is given in Annexure 5 which forms part of this report.
Directors' Responsibility Statement
Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:
(i) In the preparation of the accounts for the financial year ended 31st March 2016, the applicable accounting standards have been followed and that there are no material departures;
(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
(iii) That the Directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) That they have prepared the accounts for the financial year ended 31st March 2016 on a 'going concern' basis.
(v) The Directors have laid down internal financial controls for the company which are adequate and are operating effectively.
(vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and are operating effectively.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2015–16.
Related Party Transactions
All Related party transactions that were entered into during the financial year were on an arms length basis and in the ordinary course of business. There are no material significant related party transactions made by the Company during the year that would have required shareholder approval under Regulation 23(4) of the Listing Regulations and the erstwhile Clause 49 of the Listing Agreement. All related party transactions are reported to the Audit Committee. Prior approval of the Audit Committee is obtained for the transactions which are planned and/ or repetitive in nature and omnibus approvals are taken within the criteria/ limits laid down for unforeseen transactions. The disclosure under Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is not applicable. The Policy on Related Party transactions as approved by the Board has been uploaded on the Company's Website and may be accessed at the link <http://www.tataglobalbeverages.com/our–investors/> governance.
The details of the transactions with related parties during 2015–16 are provided in the accompanying financial statements.
None of the Directors had any pecuniary relationship or transactions with the Company during the year under review.
Directors and key managerial personnel
At the Annual General Meeting of the Company held on 26th August 2014, the members had approved the appointments of Mr. Analjit Singh, Mrs. Mallika Srinivasan, Mr. V Leeladhar, Mrs. Ranjana Kumar, Mr. Darius Pandole and Mrs. Ireena Vittal as Independent Directors for a term of five years from 26th August 2014. All the independent directors have given declarations that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of Listing Regulations. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the Rules made thereunder and they are independent of the management.
Mr. Cyrus P Mistry retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re–election. Brief particulars and expertise of Mr. Mistry together with his other directorships and committee memberships have been given in the annexure to the Notice of the Annual General Meeting in accordance with the requirements of Listing Regulations.
No director or key managerial personnel was appointed or has retired or resigned during the year under review.
Auditors and Auditors' Report
The Members at the Annual General Meeting held on 26th August 2014, had appointed M/s. Lovelock and Lewes, as the Statutory Auditors for three years subject to ratification by the members each year. The members are requested to ratify the appointment of M/s. Lovelock and Lewes as Statutory Auditors from the conclusion of the fifty third Annual General Meeting till the conclusion of the fifty fourth Annual General Meeting. The Auditors' report on the financial statements for the year 2015–16 does not contain any qualifications, reservations or adverse remarks.
Your Board has appointed M/s. Shome and Banerjee, 5A Nurulla Doctor Lane, 2nd Floor, Kolkata – 700 017 as cost auditors of the Company for conducting cost audit for the financial year 2016–17. The members are requested to ratify the remuneration payable to the Cost Auditors for 2016–17.
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure 6 attached to this report.
The Directors wish to convey their appreciation to all of the Company's employees for their sincere and dedicated services as well as their collective contribution to the Company's performance.
On behalf of the Board of Directors
Cyrus P Mistry
Date : 24th May 2016
Place : Mumbai,