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The Board of Directors presents the Company’s Annual Report, together with the audited financial statements for the financial year ended March 31, 2016. It was a challenging year given the slowdown in China and other emerging market economies, and a weak environment for commodities. Your Company stood strong and demonstrated its ability to withstand the commodity downcycle, by leveraging the inherent strengths of its portfolio and balance sheet. There was record production of zinc, lead and silver at Zinc India, copper, aluminium and power. Cost optimisation initiatives were implemented across the board which helped us to maintain first or second quartile positions on the global cost curves, and enabled us to deliver record free cash flow during FY2016. We are positive about Vedanta’s prospects for the coming years and are optimistic about the long–term outlook for the global resources sector.
Financial Highlights for FY 2015–16
FY 2016 saw several positive developments, including strong production, resumption of iron ore mining operations at Goa, commissioning of the entire 9000MW power portfolio and commencement of ramp–up at Aluminium. We implemented a series of initiatives to reduce capital expenditure and operating costs and to maintain financial strength during this period of weaker commodity prices. Our initiatives included capex re–phasing at the Gamsberg zinc project in South Africa, rationalisation of high–cost
operations, including the suspension of the rolled product facility at Bharat Aluminium Company Limited (BALCO), as well as single–steam operations at the Lanjigarh alumina refinery.
We are confident that our diversified business model and low–cost asset base will continue to generate attractive shareholder returns. Our strategy is to focus on prudent capital allocation with low–risk, phased projects with high returns. Our portfolio demonstrated long–term resilience, despite volatilities in the external environment.
Some of the key financial highlights for FY 2015–16 are:
Free cash flow post growth capex at Rs. 11,572 crore driven by operating performance and working capital initiatives Net debt reduced by Rs. 6,254 crore; cash and cash equivalents of Rs. 52,666 crore Contribution of Rs. 20,600 crore to the Indian Exchequer during the year, in the form of taxes, duties, royalties and profit petroleum
Revenues at Rs. 63,931 crore, EBITDA at Rs. 15,012 crore EBITDA margin of 30% (Excludes custom smelting at Copper India and Zinc India operations) Attributable PAT (pre–exceptional) at Rs. 2,910 crore Exceptional items include a non–cash impairment charge of Rs. 12,304 crore largely relating to mpairment of Cairn India acquisition goodwill
Operational Highlights for FY 2015–16
At Vedanta, we continue to optimise production across our portfolio to generate maximum value in a low commodity price environment; and remain focused on reducing costs to protect margins. Our strong operational results reflect the quality of our assets, capabilities and resilience to challenging market conditions. We also remain committed to managing our balance sheet in these weak markets with pragmatism and acumen.
During the year, we made significant progress at the operational level in the aluminum, power and iron ore businesses, commencing ramp–up of these capacities, which is expected to result in significant production increase in the coming year.
Some of the key operational highlights for FY 2015–16 are:
Record annual production of Zinc, Lead, Silver at Zinc India, Aluminium, Power and Copper cathodes Commenced ramp–up of capacities at Aluminium, Power and Iron Ore
Entire Power portfolio of 9,000 MW operational in March 2016 Oil and Gas: Successful ramp–up of Mangala Enhanced Oil Recovery Program Strong cost performance, with lower cost of production across all businesses
Update on Change of Registered Office
By way of postal ballot, the Company sought the approval of shareholders to change its registered office from Goa to Maharashtra (Mumbai). This was duly approved on July 7, 2015. Following the approval from shareholders, the Company filed a petition with the Regional Director (RD), Western Regional Bench, the Ministry of Corporate Affairs (MCA) in July 2015. The Company is awaiting final hearing with RD.
Management Discussion and Analysis
A detailed report on Management Discussion and Analysis is provided as a separate section in the Annual Report.
Update on the Merger with Cairn India Limited
In its meeting on June 14, 2015, Vedanta Limited’s Board of Directors approved the Scheme of Arrangement between the Company and Cairn India Limited and their respective shareholders and creditors (the ‘Scheme’). The Company and Cairn India applied for in–principal approval from the stock exchanges (NSE and BSE) in June 2015; and the stock exchanges indicated that they had no objection in September 2015. The Company and Cairn India have sought a three–month extension to arrange the meeting of equity shareholders; and the extension has been granted by both jurisdictional High Courts.
The Board of Directors approved the payment of an interim dividend of Rs. 3.50 per equity share of Rs. 1 on October 27, 2015. The Board has not recommended any final dividend for FY2015–16 in view of the current commodity outlook; and in order to preserve cash.
Transfer to General Reserve
The Company proposes not to transfer any funds out of its total profit of Rs. 5,471.88 Crore for the financial year to the General Reserve.
The Company has been rated by CRISIL Limited (CRISIL) and India Ratings and Research Private Limited (India Rating) for its banking facilities in line with Basel II norms. During the year, CRISIL downgraded their ratings of the Company’s long–term bank facilities and its Non–Convertible Debentures (NCD) programme from AA+/Negative to AA–/ Negative in August 2015 and January 2016, respectively. CRISIL has also revised the outlook to ‘Negative’, stating that a steeper fall in commodity prices and delayed rampup across the Company’s businesses may offset the benefits from cost–efficiency initiatives, leading to a further deterioration in EBITDA.
India Ratings downgraded the Company’s rating from IND AA+/Stable to IND AA–/Negative in January 2016. The downgrade reflects the Company’s credit metrics being lower than India Ratings’ expectations for the 2015 financial year and the first half of the 2016 financial year.
These downgrades were mainly on account of the lower commodity price estimates by the rating agencies in the near to medium term.
Overall, we are seeing an improvement in the dynamics of the global commodity markets. We are cautiously optimistic for FY 2017 and believe a recovery may be emerging, led by zinc.
We have always viewed sustainable development as integral to our core business strategy. We partner with communities, local governments, hospitals and academic institutions to help catalyse socio–economic development in the areas where we are present. We are committed to operate as a transparent and responsible corporate citizen; and maintain our ‘social license to operate’.
The Company’s refreshed Core Values of Trust, Entrepreneurship, Innovation, Excellence, Integrity, Respect and Care represent the genesis of Vedanta’s Sustainable Development Model. It is reflected in the Sustainable Development framework, which is aligned to global best practice standards, including the United Nations Global Compact’s (UNGC) 10 principles, the International Finance Corporation (IFC), the International Council on Mining and Metals (ICMM) and the Organisation for Economic Cooperation and Development (OECD).
This robust framework provides the business and the leadership teams to assess, monitor, review the safety, health and environment and community development activities, which are aligned to the Company’s Social License to Operate. The framework is built on the Sustainable Development model. The approach continues to be centred on the following strategic pillars: Responsible Stewardship, Building Strong Relationships, Adding and Sharing Value and Strategic Communications.
During the year, we analysed our Health, Safety and Environment (HSE) practices and community development programmes, which are part of our Vedanta Sustainability Assurance Programme (VSAP). It continues to aim for transparency and compliance of all our businesses with the Group’s Sustainable Development Framework. Last year, we introduced six key safety performance standards across the
Group; and this year, an audit programme was conducted to ensure the correct implementation of these standards. Our initiatives are translating into positive outcomes, with far fewer accidents and lost–time injuries reported in FY 2016. However, we regret to report, three fatal accidents occurred in the reporting period. Each fatality was thoroughly investigated and reported to the Company’s Executive Committee, as well as the Group Sustainability Committee.
We continue to work towards achieving zero accidents. Vedanta’s teams from across businesses are driving various capacity–building and behavioural programmes to launch campaigns. Our campaigns aim to entrench a culture of safety and risk awareness. This year, over 212,789 hours of safety training were delivered to employees and contractors. We ensure that our Biodiversity Management Plans are in place and our environmental footprint follows the most rigorous global standards. We have developed specific objectives and targets, particularly with regard to water and energy management. Coordinated and concentrated efforts have helped us surpass our water and energy conservation targets.
To reduce the hazardous waste generated by our mining, smelting and refinery operations, we are focusing on minimising our negative environmental impact; and transforming our business. Finding innovative ways to reduce waste is a priority for us at Vedanta. In our Aluminium division, the Lanjigarh refinery is the world’s first plant that makes cement–free concrete from fly ash, while the Company’s Copper division in Tuticorin extracts Copper Slag and Gypsum from smelter and phosphoric acid waste respectively. Gypsum is extensively used in cement industries as well as for improving soil fertility. Copper slag is used for roads, cement and power blocks.
We are present in some of the world’s most unique, remote and underdeveloped regions. We are committed to respect, learn from and create a shared understanding with those who host us. Connecting with our communities is not just the right thing to do; it is a fundamental imperative of our ‘license to operate’.
This year, we took another step for achieving consistency across the Group, with all subsidiary businesses now formally recording stakeholder expectations and outcomes of their engagements through an online SAP module.
The Company has rolled out the WBCSD– WASH initiative performance tool to internally map the Group Company’s performance on safe access to water, sanitation and hygiene. Periodic stakeholder meetings with SRI Investors and lenders were undertaken and the update was provided in the Group Sustainability Committee; and will be considered as a stakeholder feedback for materiality analysis. Last year, a benchmarking study with global peers was undertaken in partnership with the School of Public and Environment Affairs (SPEA), Indiana University.
It is heartening to note that the key outcomes included positive validation of our sustainability model is in line with global practices on engaging with civil society, communicating performance on community development, human rights as well as addressing legacy issues. The Confederation of Indian Industry (CII) ranked Vedanta among India’s top 10 sustainable companies. This validates our focus on creating the Zero Harm culture within the organisation.
As part of our governance philosophy and in order to ensure a robust risk management system and also in line with the applicable laws, the Board of Directors of the Company has formed a Risk Management Committee. The details of Committee and its terms of reference are set out in the Corporate Governance Report, which is part of the Board’s Report.
Our businesses are exposed to a variety of risks, which are inherent to an international mining and resources organisation. Our risk–management framework is designed to be simple, consistent and clear for managing and reporting risks from the Group’s businesses to the Board. Our management systems, organisational structures, processes, standards, and code of conduct together form the system of internal controls that govern how we conduct the Group’s business and manage associated risks. We have a multi–layered risk management framework to effectively mitigate the various risks, which our businesses are exposed to in the course of their operations.
The Risk Management Committee supports the Audit Committee and the Board in developing the group–wide risk–management framework. Risks are identified through a consistently applied methodology. The Company has put in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives.
Major risks identified by businesses and functions are systematically addressed through mitigating actions. Risk officers have also been formally nominated at operating businesses, as well as at Group level, to develop the risk management culture within the businesses.
Our Risk Management Framework is designed to help the organisation meet its objectives through alignment of operating controls with the Group’s mission and vision.
Corporate Social Responsibility
As a responsible corporate citizen, we continue to be partners in growth, aligning our initiatives with the local government’s campaigns for social empowerment, such as Swachh Bharat, Beti Bachao Beti Padhao and Digital India. The Company believes that the ultimate objective of your Company is to benefit local communities through initiatives, which contribute to nation–building. Our leadership takes active responsibility in our outreach and engagement initiatives.
Our core purpose and values envision your Company’s continuous commitment to people, planet and prosperity. This is also reflected in our refreshed logo with the symbol of a leaf embedded into the Vedanta globe. The logo symbolises Vedanta’s ethical credentials; and its continued commitment to environmental sustainability and economic prosperity in its areas of operations.
We maintain a transparent dialogue with our stakeholders to build strong relationships that will allow our business to succeed; and to preserve our social license to operate. This approach continues to be embedded in all business decisions and has helped us re–evaluate our community investment programmes. The Company complies with Section 135 of the Act; and the approach is focused on long term programmes aligned with business imperatives.
There is a strong governance of CSR projects through SAP based reporting system with dashboards for CEOs. Uniform practices across the Group have been engaged with the adoption of CSR SoP in alignment with VSAP and the Act.
We are collaborating with businesses through synergies in NGO selection; and focusing on proven methodologies. Our CSR focus areas comprise healthcare, education, skill development, empowerment of women and generation of livelihood. The outcomes of our efforts were several. The key project for skill development (Yuva Pragati Kendra) at Lanjigarh is enabling the tribal youth to find gainful employment through counselling and skills training. As a responsible corporate citizen, the Company provided immediate aid and relief to over 14,000 people in and around Thootkudi (Tuticorin) in Tamil Nadu, following heavy rains and flood. Our initiatives (Subalakshmi and Sakhi projects at Jharsuguda and Tuticorin, respectively) to empower women have enabled us to engage an additional 1,400 members into these programmes. The women have a combined saving corpus of ~ Rs. 2.22 Crore.
Last year, our businesses completed a need–based assessment across operations. Each unit has adopted many villages and strategized a three–year roadmap for the Model Village development programme. Project Nandghar has been kicked off in three states (Rajasthan, Uttar Pradesh and Madhya Pradesh). Nearly 100 state–of–the–art Nandghars are expected to be ready by 2016.
Our approach was also recognised by Oxfam International’s India Responsible Index report. It named your Company as a leader in the ‘Community as stakeholder’ category, alongside India’s top companies.
During the year, the Company’s divisions spent Rs. 17.54 Crore on CSR activities, while on a consolidated basis it spent about Rs. 152.39 Crore on CSR in India.
A brief overview of CSR initiatives in the Annual Report on CSR forms part of the Directors Report and is annexed hereto as ‘Annexure A’.
Your Company’s CSR Policy addresses the Company’s commitment to conduct its business in a socially responsible, ethical and environmentally friendly manner; and to continuously work towards improving the quality of life of the communities in the areas where it operates.
The policy may be viewed here: http://www.vedantalimited. com/media/85867/csr_policy_final.pdf
Directors/Key Managerial Personnel (KMP) Details
On April 27, 2015, the Board of Directors approved the appointment of Ms. Anuradha Dutt (DIN: 00145124), a prominent member of the legal community who has made a substantial contribution to her field, as an Additional Independent Director for a fixed term of three (3) years effective April 27, 2015 to April 26, 2018. This was approved by the Company’s shareholders at its meeting held on July 11, 2015.
All Independent Directors have provided declarations that they meet the criteria of independence as laid out under Section 149(6) of the Act and the SEBI Listing Regulations.
In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Tarun Jain (DIN: 00006843), Whole–Time Director, is retiring by rotation and has offered himself for re–appointment.
Company Policy on Directors Appointments and Remuneration
The Company has a Nomination and Remuneration Committee (NRC) and the details of the Committee and the terms of reference of the NRC Charter are set out in the Corporate Governance Report, which is part of the Board’s Report. The Company’s Policy for selection and appointment of Directors and their remuneration is based on its NRC policy which, inter alia, deals with the manner of selection of the Board of Directors and such other matters as provided under section 178(3) of the Act and SEBI Listing Regulations. This Policy is accordingly derived from the said Charter and the scope of NRC is set out in the Corporate Governance Report.
The Company’s shareholders may refer the Company’s website for the detailed Nomination & Remuneration Policy of the Company on the appointment and remuneration of Directors including criteria for determining qualifications, positive attributes, independence of a Director; and other matters provided under sub–section (3) of section 178.
Evaluation of Performance of the Board, its Committees and Individual Directors
As part of good governance and Board process and also in accordance of the requirement of the Act and SEBI Listing Regulations, the Company carried out the Board, its Committee(s) and Directors’ evaluation during the year. As per the requirement of the Act, the Board Report includes a statement indicating how the Board has evaluated its performance; and that of its committees and individual directors.
Feedback was sought by way of structured questionnaires covering various aspects of the Board’s functioning/ effectiveness, such as Board Structure, Business Excellence, Strategic Review, Managing Stakeholders,
Business Performance Evaluation, Internal Controls and Risk Management, People Development and Process and Procedures and the evaluation was carried out based on responses received from the Directors.
A separate exercise was carried out for the evaluation of Individual Directors (both Executive and Non–Executive/ Independent Directors), Board Committees and the Chairman. The Directors evaluation was broadly based on parameters such as, meeting the expectation of stakeholders, guidance and review of corporate strategy, risks, participation and attendance at Board/Committee meetings; interpersonal skills. The performance evaluation of the Chairman of the Company was undertaken by the Independent Directors taking into account the views of Executive Directors and Non–executive Directors.
The Independent Directors also assessed the quality, quantity and timeliness of flow of information between the Company’s management and the Board. The Directors expressed their overall satisfaction on the evaluation process and that the Board, the Committees and the Directors are functioning well. Based on the feedback of the Board Evaluation process, appropriate measures were taken to further improve the process and other aspects. None of the Independent Directors are due for reappointment.
Human Resources (HR)
As a part of the Company’s drive to continue to nurture talent, your Company has undertaken multiple noteworthy initiatives to create a huge talent pool and future leadership. The significant focus areas during the year comprised the following:
A robust performance management system and strong linkage between performance and rewards have resulted in improving accountability. Weightage–based deliverables and a scorecard–linked appraisal system have led to an output–driven culture in the organisation.
The remuneration mix also has a substantial variable component which is payable depending upon organisational/individual performance. Promoting internal talent to develop a pipeline of effective leaders is the forte of your organization. Your Company resolved to push the envelope further, with an extensive and structured process of identifying potential successors for all key & critical positions and chartering out structured paths of development for such individuals.
In line with this philosophy to nurture talent from within, during the year, the Company organised “Internal Growth Workshops” across the businesses to identify, develop & promote ‘New Leaders’ in core functions (Technical & Enabling). The initiative was anchored by the Chairman where the new leaders were identified through a structured process of identification and evaluation by panel members comprising of CEOs and other senior leaders. The identified leaders were given accelerated growth opportunities by way of transformational roles for delivering business goals.
As a global enterprise, the diversity of its people is fundamental to Vedanta’s success. The Company values innovation and creativity that a diverse workforce brings on board; and strives to reinforce it through an inclusive workforce.
The Company embraces innovation and R&D as a core cultural value; and passionately pursues these efforts across the organisation. While there were already some on–going R&D efforts and pockets of excellence in the businesses, Vedanta launched an initiative to institutionalise the practice by forming an Innovation & Technology Organisation. The initiative focuses on fostering creativity and research for sustainable and profitable industry growth.
As part of its continued efforts to improve operational efficiency and enhance productivity, the Company aims to optimise its workforce utilisation; and hire the right talent from best–in–class organisations. Promoting and maintaining proactive relations with key stakeholders is of prime importance. Continuous efforts have been made to remove restrictive practices; and create a harmonious work environment for all strata of employees.
Furthermore your company continues to thrive towards becoming the Best Employer Brand and has taken up some key HR projects for the upcoming financial i.e. 2016–17. These projects are: Building an Engaged Workforce; Building a Performance Driven Culture and Building Best–in–Class Human Resources function at Vedanta.
Employee Information and Related Disclosures
The statement containing employee information as required under Section 197(12) of the Act, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. It is available for inspection at the Company’s Registered Office in line with Section 136 of the Act. This statement’s copies may be obtained by shareholders by writing to the Company Secretary. The full Annual Report including the above mentioned information is being sent electronically to all shareholders who have registered their email addresses. It is also available on the Company’s website.
The ratio of remuneration of each Director to the median employee’s remuneration and other details in accordance with sub–section 12 of Section 197 of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, form part of this report as ‘Annexure B’
Corporate Governance Report
The Corporate Governance Report detailing inter alia the following is attached and forms part of the Board’s Report: (i) all elements of the remuneration package such as salary, benefits, bonuses, stock options and pension, among others of all Directors;
(ii) details of fixed component and performance–linked incentives, along with the performance criteria;
(iii) service contracts, notice period and severance fees;
(iv) stock option details, if any, and whether these have been issued at a discount, as well as the period over which they accrued and how they are exercisable;
(v) number of meetings of the Board and its committees
As reported last year, the Company has discontinued the renewal of its fixed deposits on maturity. As at March 31, 2016, all fixed deposits had matured, while deposits amounting to Rs. 54,000 remained unclaimed. Since the matter is sub judice, the Company is maintaining status quo.
Extract of Annual Return
The details forming part of the extract of the Annual Return in form MGT 9 is annexed hereto as ‘Annexure C’
Subsidiaries/Joint Ventures/Associate Companies
A separate section on the performance and financial position of each of the subsidiaries, associates and joint venture companies in Form AOC–1 is part of the report. It is included in the consolidated financial statement.
As per the SEBI Listing Regulations, a policy on material subsidiaries as approved by the Board of Directors, may be accessed on the Company’s website: www.vedantalimited.com.
Internal Financial Controls
The Board of Directors (Board) has devised systems, policies and procedures / frameworks, which are currently operational within the Company for ensuring the orderly and efficient conduct of its business, which includes adherence to Company’s policies, safeguarding assets of the Company, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. In line with best practices, the Audit Committee and the Board reviews these internal control systems to ensure they remain effective and are achieving their intended purpose. Where weaknesses, if any, are identified as a result of the reviews, new procedures are put in place to strengthen controls. These controls are in turn reviewed at regular intervals.
The systems/frameworks include proper delegation of authority, operating philosophies, policies and procedures, effective IT systems aligned to business requirements, an internal audit framework, an ethics framework, a risk management framework and adequate segregation of duties to ensure an acceptable level of risk. Documented controls are in place for business processes and IT general controls. Key controls are tested by entities to assure that these are operating effectively. Besides, the Company has also adopted an SAP GRC (Governance, Risk and Compliance) framework to strengthen the internal control and segregation of duties/access. It also follows a halfyearly process of management certification through the Control Self–Assessment framework, which includes financial controls/exposures.
The Company has documented Standard Operating Procedures (SOP) for procurement, project / expansion management capital expenditure, human resources, sales and marketing, finance, treasury, compliance, safety, health, and environment (SHE), and manufacturing.
The Group’s internal audit activity is managed through the Management Assurance Services (‘MAS’) function. It is an important element of the overall process by which the Audit Committee and the Board obtains the assurance on the effectiveness of relevant internal controls.
The scope of work, authority, and resources of MAS are regularly reviewed by the Audit Committee. Besides, its work is supported by the services of leading international accountancy firms.
The Company’s system of internal audit includes: covering monthly physical verification of inventory, a monthly review of accounts and a quarterly review of critical business processes. To enhance internal controls, the internal audit follows a stringent grading mechanism, focusing on the implementation of recommendations of internal auditors. The internal auditors make periodic presentations on audit observations, including the status of follow–up to the Audit Committee.
The Company is required to comply with the provisions of the Companies Act, 2013, as regards maintaining adequate internal financial controls over financial reporting (ICOFR). The Company is also required to comply with the Sarbanes Oxley Act Sec 404, which pertains to ICOFR. Through the SOX 404 compliance programme, which is aligned to the COSO framework, the Audit Committee and the Board also gains assurance from the management on the adequacy and effectiveness of ICOFR. In addition, as part of their role, the Board and its Committees routinely monitor the Group’s material business risks. Due to the limitations inherent in any risk management system, the process for identifying, evaluating, and managing the material business risks is designed to manage, rather than eliminate risk. Besides it is created to provide reasonable, but not absolute assurance against material misstatement or loss.
Since the Company has strong internal control systems which get further accentuated by review of SEBI Regulations, Companies Act, 2013 & SOX compliance by the Statutory Auditors, the CEO and CFO give their recommendation for strong internal financial control to the Board.
Based on the information provided, nothing has come to the attention of the Directors to indicate that any material breakdown in the function of these controls, procedures or systems occurred during the year under review. There have been no significant changes in the Company’s internal financial controls during the year that have materially affected, or are reasonably likely to materially affect its internal financial controls.
There are inherent limitations to the effectiveness of any system of disclosure, controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their objectives. Moreover, in the design and evaluation of the Company’s disclosure controls and procedures, the management was required to apply its judgment in evaluating the cost–benefit relationship of possible controls and procedures.
Details of Loans/Guarantees/Investment made by the Company
The full particulars of the loans given, investments made, guarantees given or security provided – and the purpose for which the loan or guarantee or security is proposed to be utilised as per the provisions of Section 186 of the Act – can be found in the notes to the Financial Statements (Refer note no. 49).
Related Party Transactions
The Company has formulated a Policy on Related Party Transaction (RPT) which is available on Company’s website (http://www.vedantalimited.com/investor–relations/ corporate–governance.aspx).
All RPTs, including those relating to the Company’s overseas direct/indirect subsidiaries, are done on an arm’s length basis and in the ordinary course of business. The Company presents a detailed landscape of all RPTs to the Audit Committee, specifying the nature, value and terms and conditions of the transaction. The Company has developed a Related Party Transactions Manual–Standard Operating Procedures to identify and monitor all such transactions. All RPTs entered during the financial year by the Company are in ordinary course of business and on an arms’ length basis. No material RPTs were entered during the financial year. Accordingly, the disclosure required u/s 134(3)(h) of the Act in Form AOC–2 is not applicable to your Company.
Material changes affecting the Company
There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year to which the financial statements relate and the date of the report. There has also been no change in the nature of business of the Company.
The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the Company’s operations are as follows:
1. a) Iron–Ore Division – Goa Operations
Following allegations of illegal mining and based on Justice M.B. Shah Commission Report, the Hon’ble Supreme Court of India on October 5, 2012 had suspended the Iron–ore mining operations and transportation of material of all miners in Goa (including the Company). Separately, the Government of Goa also banned all mining and transportation of iron ore in Goa, and the Ministry of Environment and Forest (MOEF) suspended Environmental Clearances (ECs) of all mining leases within Goa.
On April 21, 2014, the Hon’ble Supreme Court lifted the ban, subject to certain conditions, limiting the maximum annual excavation to 20 million tonnes, subject to the determination of final capacity by the Expert Committee appointed by the Court; and 10% of the sale proceeds of the iron ore to be appropriated towards a sustainability fund (Goa Mineral Iron Ore Fund). The Supreme Court has held that all mining leases in Goa, including those of the Company, expired in 2007 and, consequently, no mining operations could be carried out until the renewal/execution of mining lease deeds by the Government of Goa.
On August 13, 2014, the High Court of Goa passed a common order directing the State of Goa to renew the mining leases for which stamp duty was collected in accordance with the Goa Mineral Policy (2013), and to decide the other applications for which no stamp duty was collected within three months thereof.
In January 2015, the Goa State Government revoked the order suspending mining operations in Goa and by a subsequent order of March 2015, MOEF revoked the suspension of Environment Clearance (EC). Lease deeds for all working leases of the Company in Goa have been executed and registered.
The Company has obtained Consent to Operate under the Air (Prevention of Pollution) Act and Water (Prevention of Pollution) Act from the Goa State Pollution Control Board and mining plan approval from IBM for the said leases, thereby paving way for commencing mining operations of the Company in Goa. The mining operations resumed in phases during the financial year under review.
b) Iron–Ore Division– Karnataka Operations
Mining operations in Karnataka were banned in July 2011 following allegations of illegal mining. The Hon’ble Supreme Court allowed the Company to resume mining operations in Karnataka in April 2013 an annual cap of 2.29 million tonnes. The Company resumed operations on December 28, 2013, which resulted in the production of 1.5 million tonnes in FY 2014. The mining was stopped in August 2014; however, following the renewal of the mining lease and the receipt of statutory clearances in March 2015, the mining has resumed.
2. Aluminium Division – Lanjigarh – Bauxite and Alumina Operations
a. Bauxite Sourcing
The Company has signed a Memorandum of Understanding (MoU) with the Government of Odisha for the supply of bauxite for the alumina plant at Lanjigarh. The Company has also entered into a separate MoU and Joint Venture (JV) Agreement with Orissa Mining Corporation (OMC) for supply of bauxite. During the year, OMC has, by a separate action, terminated the JV Agreement for which the Company is pursuing the appropriate course of action.
The Company is presently sourcing bauxite from alternate sources including imports. The Company is also looking at bauxite mines which may come up for auction and at other alternatives.
b. Alumina Operations
The Company has received requisite environmental clearances regarding the expansion of its Lanjigarh alumina refinery from 1MTPA to 6MTPA. The consent to expand has been revalidated for another five years. A challenge has been filed by an individual against MOEF, Odisha Pollution Control Board (OSPCB) and the Company before National Green Tribunal (NGT) disputing the grant of this environmental clearance. No adverse orders have been made by the NGT.
Directors Responsibility Statement
Pursuant to section 134 of the Act, with respect to Directors’ Responsibility Statement it is hereby confirmed that:
(a) in the preparation of the annual accounts, the applicable accounting standards has been followed and there is no material departures from the same;
(b) the Directors selected such accounting policies and applied them consistently and made judgments and estimates that are 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, i.e., March 31, 2016 and of the profit and loss of the Company for that period;
(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the Company’s assets and for preventing and detecting fraud and other irregularities;
(d) the Directors have prepared the annual accounts on a going concern basis;
(e) the Directors have implemented internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Employees Stock Option Plan
The Company’s shareholders by way of postal ballot on March 30, 2015 approved the Vedanta Employees Stock Option Scheme (ESOS) and issue of securities to the employees of Vedanta Limited, India (VEDL, India) and that of the Holding/Subsidiary Company(ies) of VEDL, India. It also authorised the ESOS trust for Secondary Acquisition. No options have been granted to any employee under the scheme to date.
The Company has in place a robust vigil mechanism for reporting genuine concerns through the Company’s Whistle Blower Policy. As per the Policy adopted by various businesses in the Group, all complaints are reported to the Director – Management Assurance, who is independent of operating management and the businesses. In line with global practices, dedicated email IDs and a centralised database has been created to facilitate receipt of complaints. A 24x7 whistle blower hotline and a web–based portal was also launched during the year. All employees and stakeholders can register their integrity related concerns either by calling the toll free number or by writing on the web based portal, which is managed by an independent third party. The hotline provides multiple local language options.
After the investigation, established cases are brought to the Group Ethics Committee for review and decision–making. All cases reported as part of whistle blower mechanism are taken to their logical conclusion within a reasonable timeframe. All Whistle Blower Cases are periodically presented and reported to the Audit Committee of the Company. The details of this process are also provided in the Corporate Governance Report and the Whistle Blower Policy is posted on the Company website.
Prevention of Sexual Harassment at Workplace
As part of Vedanta Group, the Company is an equal opportunity employer and believes in providing opportunity and key positions to women professionals. The Group has end eavoured to encourage women professionals by creating proper policies to tackle issues relating to safe and proper working conditions, and create and maintain a healthy and conducive work environment that is free from discrimination.
This includes discrimination on any basis, including gender, as well as any form of sexual harassment. During the year, there were two complaints received, all of which were resolved. Your Company has constituted Internal Complaints Committee (ICC) for various business divisions and offices, as per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
The Statutory Auditors of the Company, M/s Deloitte Haskins & Sells, LLP Chartered Accountants (FRN 117366W/W–100018) hold office till the conclusion of the ensuing Annual General Meeting (AGM) of the Company.
The Board of Directors on the recommendation of the Audit Committee has proposed to appoint, M/s S.R. Batliboi & Co. LLP, Chartered Accountants (FRN: 301003E) as Statutory Auditors in place of the retiring auditors. The Company has received a Special Notice under Section 115 of the Act from a member, proposing appointment of M/s S.R. Batliboi & Co. LLP, Chartered Accountants in place of M/s Deloitte Haskins & Sells, LLP Chartered Accountants, the retiring auditors. It is proposed to appoint M/s S.R. Batliboi & Co. LLP, Chartered Accountants as the Company’s statutory auditors, who shall hold the office from the conclusion of the 51st Annual General Meeting for a term of five consecutive years, i.e., until the conclusion of the 56th Annual General Meeting (subject to ratification by members at every Annual General Meeting, if required, under the prevailing law at that time).
The proposed Auditors have confirmed their willingness and eligibility in terms of provisions of section 141 and other relevant provisions of the Act, the Chartered Accountants Act, 1949 and the Rules and Regulations made there under.
M/s S.R. Batliboi & Co. LLP, Chartered Accountants have in the past handled audit of companies with large scale operations and have maintained high level of governance, rigour and quality in audit and audit process. The Board places on record its appreciation for the services rendered by M/s Deloitte Haskins & Sells, LLP Chartered Accountants, as Statutory Auditors of the Company.
The Notes on Financial Statements referred to in the Auditors Reports are self–explanatory and do not call for any comments and explanation.
During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
During the year under review, M/s Ramnath Iyer & Co., Cost Accountants, M/s R. J. Goel & Co., Cost Accountants and M/s Chandra Wadhwa & Co., Cost Accountants carried out the Cost Audit for the Copper, Iron–Ore and Aluminium and Power division respectively. M/s Ramnath Iyer & Co., Cost Accountants, were appointed as the Company’s Lead Cost Auditor.
The Board had appointed M/s PI & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report for the Financial Year 2015–16 in the Form MR–3 is annexed herewith as ‘Annexure D’
Depository System and Listing of shares
Details of the depository system and listing of shares are given in the section ‘Additional Shareholder Information’, which forms a part of the Corporate Governance Report and is attached with the Annual Accounts.
The Company has paid the listing fee for the year 2016–17 to BSE and NSE.
Registrar and Share Transfer Agent
M/s. Karvy Computershare Private Limited, Hyderabad, is the Registrar and Share Transfer Agent of the Company. Details of the depository system and listing of shares are given in the section ‘Additional Shareholder Information’, which forms a part of the Corporate Governance Report and is attached with the Annual Accounts.
Your Company has maintained healthy, cordial and harmonious relations at all levels throughout the industry. The enthusiasm and determined efforts of the employees have enabled the Company to remain at the forefront of the industry. The Directors place on record their sincere appreciation for the significant contribution made by employees through their dedication, hard work and commitment to ensure the Company’s long–term growth and sustainability.
The Board places on record its appreciation for the support and cooperation your Company has received from its customers, suppliers, business partners, who are our partners in progress. The Directors acknowledge the support and assistance extended to us by the Government of India, various State Governments and government departments, financial institutions, bankers, stock exchanges, communities, shareholders and investors at large and look forward to their support in our future endeavours.
For and on behalf of the Board of Directors
Date : April 28, 2016
Place : Gurgaon