Welspun India Ltd.
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ISIN No INE192B01031 52Wk High (Rs.) 78 BV (Rs.) 25.93 FV (Rs.) 1.00
Bookclosure 29/06/2018 52Wk Low (Rs.) 46 EPS (Rs.) 3.83 P/E (X) 15.80
Mkt Cap. (Rs. Cr.) 6,083.61 P/BV (X) 2.33 Div Yield (%) 1.07 Mkt Lot 1
2018-03

To,

The Members,

Welspun India Limited

The Directors have pleasure in presenting the 33rd Annual Report of your Company along with the Audited Financial Statements for the financial year ended March 31, 2018.

1. Financial highlights:

Rs.Million

Particulars

Consolidated

Standalone

FY 2017-18

FY 2016-17

FY 2017-18

FY 2016-17

Revenue from Operations

60,506

66,405

49,959

57,216

Other Income

812

806

556

719

Total Revenue

61,318

67,211

50,514

57,935

EBITDA

12,046

16,639

9,492

14,414

EBITDA Margin (%)

19.91

25.06

19.00

25.19

Finance Cost

1,408

1,583

880

872

Depreciation and amortization

5,042

5,054

4,673

4,663

Profit before exceptional items and tax

5,597

10,003

3,939

8,879

Exceptional items (Net)

-

4,648

-

4,606

Profit before tax

5,597

5,355

3,939

4,273

Tax Expense

1,615

1,731

898

1,208

Profit for the year

3,982

3,624

3,041

3,066

Earnings per share (Basic & Diluted)

3.83

3.56

3.03

3.05

2. Performance and Outlook:

During the year under review, your Company’s total revenue on standalone basis decreased to Rs.50,514 million, a decline of 12.81% and on consolidated basis it decreased to Rs.61,318 million, a decline of 8.77% over the previous year.

Destocking by the Retailers, impact of currency and revision in rates for duty drawback and Rebate State Levies resulted into degrowth in topline. The EBITDA on standalone basis it was Rs. 9,492 million i.e. 34.15% lower than last year and on consolidated basis was Rs. 12,046 million i.e. 27.6% lower than last year. EBITDA margin was impacted due to higher cost of raw material, higher energy cost and lower volumes. Profit before tax was Rs. 3,939 million i.e. 7.82% lower than last year on standalone basis and it was Rs. 5,597 million i.e. 4.52% higher than last year on consolidated basis. Profit after tax (“PAT”) is Rs. 3,041 million i.e. 0.80% lower than last year on standalone basis and Rs. 3,982 million i.e. 9.88% higher than last year on consolidated basis. You may refer to ‘Management Discussion & Analysis’(“MDA”) Section of this Report for further details of your Company’s performance.

3. Dividend:

i. Dividend Distribution Policy:

The Board of Directors approved Dividend Distribution Policy of the Company, as required under Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Regulations 2015”). The Board will endeavor to achieve distribution of 25% of PAT for a financial year, on standalone basis, with equity shareholders (including by way dividend and Dividend Distribution Tax thereon). The Policy is attached as Annexure - 1 to this Report and it is also available on your Company’s website and the web link thereto is as given below. http://www.welspunindia.com/policy/WIL-Dividend%20Distribution%20Policy.pdf

ii. Dividend for Financial Year 2017-18: Considering your Company’s performance during the Financial Year (“FY”) 2017-18, the Board of Directors has recommended, for approval of the members, a dividend of Rs. 0.65 per share (face value of Re. 1 per share) for FY 2017-18. The dividend, if approved by the members, would result in cash outflow of Rs.787.34 million including Dividend Distribution Tax (“DDT”) i.e. 25.89% of standalone PAT.

Dividend will be paid to those members, who will hold shares on the last day of book-closure i.e. June 29, 2018.

A snapshot of the dividend track record of your Company for previous financial years is given below.

Rs.million

Financial

Total

Cash Outflow

Year

Dividend (%)

(including DDT)

2017-18

65%

787

2016-17

65%

786

2015-16

130%

1,558

4. Subsidiaries:

During the year, the Company formed a wholly owned subsidiary viz. Welspun Nexgen Inc. in USA as a holding company for investment in next generation and new age technology which are startups synergistic in various geographies.

A report on the performance and financial position of each of the subsidiary companies of your Company is included in the consolidated financial statement presented in Form AOC-1 attached as Annexure - 2 to this Report. Your Company’s policy on Material Subsidiary as approved by the Board is hosted on your Company’s website and the web link thereto is as given below.

http://www.welspunindia.com/policy/material_subsidiary_policy.pdf

5. Auditors and Auditors’ Report:

i. Statutory Auditors:

Your Company’s Auditors, SRBC &CO LLP, who were appointed up to the conclusion of the 37th Annual General Meeting subject to ratification by the Members of your Company at every Annual General Meeting, have given their consent to continue to act as the Statutory Auditors of your Company for the remaining tenure. The Auditors are holding a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Members are requested to ratify their appointment as the Auditors of your Company by passing an ordinary resolution under Section 139 of the Companies Act, 2013 (“the Act”).

The Auditors’observation read with Notes to Accounts are self-explanatory and therefore do not call for any comment.

ii. Cost Auditors:

As per Section 148 and other applicable provisions, if any, of the Act read with Companies (Audit and Auditors) Rules, 2014, the Board of Directors of your Company has reappointed M/s. Kiran J. Mehta & Co., Cost Accountants as the Cost Auditors of your Company for FY 2018-19 on the recommendations made by the Audit Committee.

Members are requested to ratify their remuneration by passing an ordinary resolution in the forthcoming Annual General Meeting.

iii. Secretarial Auditor:

The Secretarial Audit Report for FY 2017-18 is attached herewith as Annexure - 3 to this Report and it does not contain any qualification, reservation or adverse remark.

Pursuant to the provisions of Section 204of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed Uday Sohoni, Practicing Company Secretary, as the Secretarial Auditor of your Company for the FY 2018-19.

6. Share Capital & Listing:

i. Issue of equity shares with differential rights, sweat equity shares:

During the year, no share with differential rights was issued by your Company nor did your Company issue any equity share as sweat equity share.

ii. Issue of employee stock options:

There were no stock options outstanding during the FY 2017-18.

7. Disclosure of Shares held in suspense account:

Aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year

Number of shareholders who approached issuer for transfer of shares from suspense account during the year

Number of shareholders to whom shares were transferred from suspense account during the year

Aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year

Remarks

No of Holders

No of Shares

No of Holders

No of Shares

No of Holders

No of Shares

No of Holders

No of Shares

NA

3,831

1,354,060

-

-

-

-

-

-

The voting rights on these shares shall remain frozen until the shares have been claimed by and transferred to the rightful owner.


8. Listing with the Stock Exchanges:

Your Company’s equity shares are listed on The National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). Annual listing fees for the FY 2018-19 have been paid to NSE and BSE.

9. Finance:

i. Credit Rating:

During the year, CARE Ratings Limited (“CARE”) has revised upward your Company’s long term credit rating to AA’from earlier rating of AA-’. Short term credit rating of A1 ’has been reaffirmed by CARE. Further, your Company’s long-term issuer rating of ‘IND AA-/stable’and shortterm credit rating of ‘IND A1 ’has been reaffirmed by India Ratings & Research, a Fitch Group company.

ii. Deposits:

Your Company has not accepted any deposit within the meaning of Chapter V of the Act. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the finacial year under Report.

10. Board of Directors:

Your Company’s Board comprises of mix of Executive and Non-Executive Directors with considerable experience and expertise across a range of fields such as finance, accounts, legal, marketing, general management and strategy. Except the nominee appointed by IDBI Bank and the independent directors, all other directors are liable to retire by rotation as per the provisions of the Act. It is confirmed that, except for Balkrishan Goenka and Ms. Dipali Goenka who are husband and wife, there is no relationship between the directors inter-se. The details of the Directors, their meetings held during the year and the extracts of the Nomination and Remuneration Policy has been given in the Corporate Governance Report, which forms part of this Report.

i. Changes in Directors and Key Managerial Personnel:

In accordance with the provisions of Section 152 of the Act and the Articles of Association of your Company, Ms. Dipali Goenka is retiring by rotation at the forthcoming Annual General Meeting and being eligible, has been recommended for her re-appointment.

Details about the directors being appointed or re-appointed are given in the Notice of the forthcoming Annual General Meeting.

ii. Declaration by an Independent Director(s):

Your Company has received declarations from all the Independent Directors as per the provisions of Section 149(7) of the Act confirming that they meet the criteria of Independence as prescribed under the provisions of Section 149(6) of the Act and that there is no change in the circumstances as on the date of this Report which may affect their respective status as an Independent Director.

iii. Directors’ Evaluation:

In compliance with the Act and SEBI Regulations 2015, the Board of Directors, as per the process recommended by the Nomination and Remuneration Committee, has evaluated the effectiveness of the Board, its Committees and Directors. The evaluation process invited graded responses to a structured questionnaire, which was largely in line with the SEBI Guidance Note on Board Evaluation, for each aspect of the evaluation. All the results were satisfactory.

iv. Familiarization program for Independent Director(s):

The familiarization program aims to provide the Independent Directors with the scenario within the textile industry, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, significant development so as to enable them to take well-informed decisions in timely manner. The familiarization programme also seeks to update the Directors on the roles, responsibilities, rights and duties under the Act and other statutes.

The policy on Company’s familiarization programme for Independent Directors is hosted on your Company’s website and a web link thereto is as given below.

http://www.welspunindia.com/policy/WIL-Dividend%20Distribution%20Policy.pdf

v. Committees of the Board of Directors:

Information on the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders’Relationship, Share Transfer and Investor Grievance Committee, the Corporate Social Responsibility Committee and meetings of those committees held during the year is given in the Corporate Governance Report forming part of this Report.

11. Loans, Guarantees and Investments:

Information of amounts of investments made, loans given, guarantees given and security provided by your Company as on March 31, 2018 is as given under:

Rs.million

Particulars

Amount

Investments

9,028.21

Loans / Receivables

-

Guarantees

14,768.03

Security

-

Total

23,796.24

Corporate Guarantee of Rs. 2.20 billion was given to holders of non-convertible debentures (NCDs) issued by Welspun Captive Power Generation Limited (“WCPGL”), a subsidiary of your Company. Proceeds of NCDs were used by WCPGL in refinancing loan of equivalent amount which was availed for setting up of captive power plant. WCPGL redeemed principal amount of Rs. 1.10 billion during the FY 2017-18. Corporate guarantees of GBP 5.10 million, GBP 4.25 million and GBP 8.51 million were issued, to Bank of India, UK, Bank of Baroda, UK and Barclay’s Bank respectively, by the Company to secure repayment of working capital facilities availed by CHT Holdings Limited, a subsidiary of your Company. Similarly, the Company has issued guarantee of Rs. 4.47 billion in favour of consortium of Bankers led by erstwhile State Bank of Bikaner and Jaipur (now merged with State Bank of India) (“the Consortium”) to secure repayment of working capital facilities extended by the Consortium to Welspun Global Brands Limited (“WGBL”), a subsidiary of your Company. The Company has issued guarantee of Rs. 6.05 billion in favour of the lenders of Welspun Flooring Limited (“WFL”), a wholly owned subsidiary of your Company to secure repayment of facilities extended by those lenders to WFL. Disclosures pursuant to the Regulation 34(3) read with Para A of Schedule V of SEBI Regulations, 2015 is given at Note No. 36 of the audited financial statements.

12. Particulars of contracts or arrangements with related parties:

All related party transactions that were entered into during the year under report were on an arm’s length basis and were in the ordinary course of business, to serve mutual needs and mutual interest. Except for contracts with WGBL and WCPGL, subsidiaries of your Company, there were no materially significant related party transactions made by your Company. The Audit Committee has given its omnibus approval which is valid for one financial year. Your Company’s policy on Related Party Transactions as approved by the Board is hosted on your Company’s website and a web link thereto is as given below.

http://www.welspunindia.com/policy/related_party_transaction_policy.pdf.

Disclosures as required under the Act are given in Form AOC-2 as Annexure -4to this Report.

The details of the related party transactions as required under IND-AS 24 are set out in Note 29 to the Standalone financial statements forming part of this Report.

13. Details of Remuneration to Directors and Key Managerial Personnel:

i. Details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

(a) the ratio of the remuneration of each Executive Director and Key Managerial Personnel to the median remuneration of the employees of your Company for FY 2017-18 is as given below:

Name and Designation

Remuneration (Rs.million)

The percentage increase in remuneration

The ratio of the remuneration to the median remuneration of the employees (No. of times)

Rajesh Mandawewala Managing Director

55.99

(4.87%)

388.03

Ms. Dipali Goenka

CEO and Joint Managing Director

53.69

(4.88%)

372.09

Altaf Jiwani

Chief Financial Officer

27.59

8.00%

191.14

Shashikant Thorat Company Secretary

4.09

6.51%

28.34

(b) The percentage increase in the median remuneration of employees in FY 2017-18 was 1.63%.

(c) Your Company had 21,268 permanent employees on its payrolls as on March 31, 2018.

(d) The turnover of your Company decreased by 12.68% and EBIDTA of your Company decreased by 34.15% during FY 2017-18. Median remuneration increased by 1.63%. Increase in median remuneration was in line with the performance of your Company.

(e) Average percentage increase in the salaries of employees other than the managerial personnel in FY 2017-18 was 7.1%. The managerial remuneration decreased by 4.87% as a result of decrease in Commission payable.

The key parameters for any variable component of remuneration availed by the directors are as per the Nomination and Remuneration Policy. We affirm that the remuneration is as per the Nomination and Remuneration Policy of your Company.

ii. Details of the employees of your Company as required pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

Name, Designation, Age, DOJ, Current CTC (Rs. million), Qualification, Previous Company, Nature of Employment, % of Equity Shares held in the Company, Relative of any Director/ Manager of the Company

Altaf Jiwani, Chief Financial Officer, 51, 02.02.2015, 27.59, B.TECH, MMS, RPG Group, Permanent, 0, No; Ashok Kumar Joshi, Executive Director* & Business Head - Operations, 58, 02.07.2013, 18.47, B.TECH, Donear Industries Limited, Permanent, 0, No; Bhavin Purohit, Senior Vice President - IT, 43, 16.08.2017, 15.50, MBA, B.E., Arvind Limited, Permanent, No; Dipali Goenka, CEO & Joint Managing Director, 48, 01.04.2013, 53.69,

B.A. (Psychology),N.A., Contractual, 0.07, Yes; Milind Hardikar, Executive Director* -Advanced Textile, 56, 24.04.2012, 17.50, BE (Mech), MMS, Arvind Limited, Permanent, 0, No; Rajesh Mandawewala, Managing Director, 55, 01.12.1985, 55.99, CA, N.A., Contractual, 0, No; Rajesh Padmanbhan, Director*-HCGA, 55, 01.02.2016, 36.17, MBA (Finance/HR), Vedanta Group, Permanent, 0, No; Suneel Mohnot (resigned w.e.f. 01.09.2017), President - Commercial, 58, 26.08.2013, 11.39, M.COM, MBA, Reliance Industries Ltd., Permanent, 0, No; Swapan Nath (resigned w.e.f. 13.03.2018), Executive Director*, 57, 10.10.2016, 24.68, B.Tech, Maharaja Shree Umaid Mills Limited, Permanent, 0, No.

* Not a member of the Board.

iii. Ms. Dipali Goenka, CEO & Joint Managing Director, who is receiving remuneration and commission from your Company, receives Rs.15 million as remuneration and commission of 2% of profit also from WGBL, a subsidiary of your Company.

iv. Details of managerial remuneration and payments to other directors are given in the Corporate Governance Report forming part of this Report.

14. Extract of the Annual Return:

An extract of the annual return in Form MGT-9 of the Companies (Management and Administration) Rules, 2014 is attached as Annexure -5to this Report.

15. Business Responsibility Report (BRR):

SEBI vide Notification No. SEBI/LAD-NRO/ GN/2015-16/27 dated December 22, 2015 had mandated top 500 listed entities, based on market capitalization, to include BRR in the annual report. Since the Company is one of the top 500 listed entities, it is pleased to present its 2nd BRR for the FY 2017-18 as per SEBI Circular No. CIR/CFD/CMD/10/2015 dated November 04, 2015 which is hosted on your Company’s website and a web link thereto is as given below: http://www.welspunindia.com/environment_management/BusinessResponsibiliyReport_2017-18.pdf

16. Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo required to be disclosed pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is attached as Annexure -6to this Report.

17. Corporate Social Responsibility (CSR):

The key philosophy of all CSR initiatives of the Company is enshrined in the three E’s which have become guiding principles of the CSR initiatives - Education, Empowerment (of Women) and Environment & Health.

The CSR Policy of your Company as approved by the Board of Directors, is hosted on your Company’s website and a web link thereto is as given below: http://www.welspunindia.com/policy/csr_policy.pdf

The initiatives undertaken by your Company during FY 2017-18 in CSR have been detailed in this Report. Disclosures as required under Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 are given in Annexure - 7 to this Report.

18. Internal controls:

Your Company has adequate internal control system, which is commensurate with the size, scale and complexity of its operations. Your Company has designed and implemented a process driven framework for Internal Financial Controls (“IFC”) within the meaning of the explanation of Section 134(5)(e) of the Act, SEBI Regulations, 2015 and other relevant statutes applicable to your Company.

Your Company has well-documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted by business needs. The Internal Auditors continuously monitor the efficiency of the internal controls / compliance with the SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation’s risk management, control and governance processes.

For the year ended March 31, 2018, the Board is of the opinion that your Company has sound IFC commensurate with the nature of its business operations; wherein adequate controls are in place and operating effectively and no material weakness exists. Your Company has a process in place to continuously monitor existing controls and identify gaps and implement new and / or improved controls wherever the effect of such gaps would have a material effect on your Company’s operation.

19. Risk management:

Your Company is exposed to risks across all levels and functions of the organisation. The Board has approved Enterprise Risk Management Policy (ERMP) to effectively address financial, operational, business, compliance and strategic risk. A structured enterprise risk management program has been formulated and implemented. Refer to the MDA Section in this Report for risks and threats applicable to your Company.

20. Corporate Governance:

The Company is committed to maintain the highest standards of corporate governance requirements as set out by SEBI. The Report on Corporate Governance as stipulated under SEBI Regulations, 2015 forms an integral part of this Report. The requisite Compliance Certificate is obtained from Uday Sohoni, Practicing Company Secretary, regarding compliance of conditions of Corporate Governance as stipulated under Part E of Schedule V of SEBI Regulations, 2015, is annexed to the Corporate Governance Report.

21. Management Discussion and Analysis Report:

The MDA Report on the operation of the Company as required under the SEBI Regulations, 2015, is provided in a separate section and forms part of this Report.

22. Vigil mechanism:

Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors has formulated Whistle Blower Policy and Vigil Mechanism for its directors and employees and any director or employee may make protected disclosures to the Chairman of the Audit Committee. No personnel have been denied access to the Audit Committee.

23. Directors’ Responsibility Statement:

Pursuant to Sections 134(3)(c) & 134(5) of the Act, your Directors hereby confirm that:

a. in the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. the directors have 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 and of the profit and loss of the Company for the FY 2017-18;

c. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company 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 laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were 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.

24. Miscellaneous:

During the year, there was no change in the general nature of business of your Company. No material change or commitment has occurred which would have affected the financial position of your Company between the end of the financial year to which the financial statements relate and the date of the report. No significant and material order was passed by the regulators or courts or tribunals which would have impacted the going concern status and your Company’s operations in future. No amount was required to be transferred to General Reserve. Further, based on the Policy on Prevention, Prohibition and Redressal of Sexual Harassment of women at workplace, the Internal Complaints Committee for each location of your Company informed that no case of sexual harassments was reported during the year under review. Your Company has not made any provision of money for the purchase of, or subscription for, shares in your Company or its holding company, to be held by or for the benefit of the employees of your Company and hence the disclosure as required under Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 is not required.

25. Acknowledgements:

Your Directors thank the government authorities, financial institutions, banks, customers, suppliers, members, employees and other business associates of your Company, who through their continued support and co-operation, have helped as partners in your Company’s progress and achievement of its objectives.

For and on behalf of the Board of Directors

Balkrishan Goenka

May 16, 2018 Chairman

Mumbai DIN 00270175