DIRECTORS' REPORT  

Dear Shareholders,

Your Directors have pleasure in presenting the 19th Annual Report and the Audited Accounts of Future Consumer Enterprise Limited ["Company"], for the year ended 31st March, 2015.

BUSINESS OPERATIONS

Future Consumer Enterprise Limited has emerged as an integrated food company having businesses from farm to fork. Your Company has operations from sourcing, processing, branding and distribution.

During the year under review, your Company expanded its food portfolio by extending its brands to new categories like fruits and vegetables, canola and rice bran oils, frozen and processed food products. Your Company also further spread its wings in the Southern part of India by acquiring almost 100% stake in the 100 year of well established brand 'Nilgiris 1905'. This acquisition enabled an addition of 135 stores to the convenience store network, which has been expanded to 151 stores in fiscal 2014-15.

With the focus on integrated play, your Company has, during the year under review, consolidated its businesses by merging one of its wholly-owned subsidiary, Future Agrovet Limited which predominantly has been engaged into agro-sourcing operations. The Company has further acquired balance 30% stake of Aadhaar Wholesale Trading and Distribution Limited, the rural distribution format, pursuant to which Aadhaar Wholesale Trading and Distribution Limited is now a wholly-owned subsidiary of the Company.

With focus on enhancing core values for the business, your Company is moving towards withdrawal from non-core activities. As a step towards the same, your Company has decided to discontinue the business operations of saloon and spa services undertaken by its wholly-owned subsidiary Star and Sitara Wellness Limited. The financial statements for the fiscal ended on 31st March,2015, have taken into effect the impact of such discontinuance, details whereof are provided under note no. 44 in the notes to accounts forming part of this Annual Report.

Your Company continues to focus on food and FMCG business by spreading its distribution network though its chain of convenience stores, creating and investing in brands and exploring options to undertake new activities. As a step towards the same, your Company has entered into the business of procuring and distribution of fruits and vegetables, ready-to-eat products developed from the Food Park, which has become operational during the year under review. Your Company also has plans to enter into manufacturing activities by setting-up of flour mill and spice mill at the Food Park. Along with growing and developing its own portfolio of brands in the food space, your Company also partnered with niche players operating in product categories like oats, break-fast cereals, sauces, pastes etc. under joint venture arrangements. These initiatives are expected to yield results in financial year 2015-16.

Your Company has recorded total income of Rs. 1,119.12 Crore and EBITDA loss of Rs. 5.99 Crore in the current financial year as against a total income of Rs. 463.86 Crore and EBITDA loss of Rs. 32.71 Crore in the previous year. EBITDA loss of Rs. 32.71 Crore in the previous year excludes one time gain on sale of investment of Rs. 89.07 Crore to make it comparable.

For the financial year 2014-15, no appropriation is proposed to be made towards Reserves.

Save and except those mentioned in this Report, there were no material changes and commitments affecting the financial position of the Company between the end of financial year and the date of this Report. 

FUTURE OUTLOOK

Innovation with speed and imagination is the concept which your Company believes into creating, launching and marketing new products and brands and extends in improving shopping process, range of products with focus on improving the customer's overall experience. As Indian consumer has been increasing their aspirations and desires for consumption over the past years, their appetite to consume new and qualitative products in the home market has significantly increased.

India is the world's second largest producer of food, next to China, and has the potential of being the biggest within the food and agricultural sector. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables, Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods, Alcoholic Beverages & Soft Drinks and Grains which are important sub-sectors of the food processing industry.

The broad-based decline in retail inflation since the last quarter of 2014, depressed commodity prices and the Government's plan to step up infrastructure investments and focus on improving the ease of doing business with the concept of "Make in India" have improved the prospects for growth in the year 2015-16.

The voting rights in respect of shares maintained under the suspense account shall remain frozen till the rightful owner makes any claim over such shares.

Pursuant to the Composite Scheme of Arrangement and Amalgamation,1 equity share of Future Lifestyle Fashions Limited ("FLFL") has been alloted to shareholders of Future Consumer Enterprise Limited for every 31 shares held by them. Accordingly, 696 shares of FLFL, arising out of 21,600 unclaimed shares, have also been credited to the suspense account, which aggregates to 22,296 unclaimed shares.

DIVIDEND

Your Directors have not recommended any dividend on equity shares for the financial year under review to conserve the funds for future business growth.

INCREASE IN SHARE CAPITAL

During the year under review, the Company has issued and allotted 1,32,49,000 equity shares of the Company to eligible employees on exercise of options granted under FVIL Employees Stock Option Plan - 2011. Consequently, the issued, subscribed and paid-up share capital of the Company increased from 1,59,79,76,671 equity shares of Rs. 6 each to 1,61,12,25,671 equity shares of Rs. 6 each.

Also, the Company has issued 4,59,18,367 equity shares on preferential basis to Godrej Agrovet Limited and Anamudi Real Estates LLP towards consideration payable for acquisition of 30% stake in Aadhaar Wholesale Trading and Distribution Limited.

Consequent to said allotment of equity shares, the paid up share capital of the Company stood increased to Rs. 9,94,28,64,228 comprising of 1,65,71,44,038 equity shares of Rs. 6 each.

Consequent to amalgamation of Future Agrovet Limited ("FAL'), a subsidiary of the Company, pursuant to the Scheme of Amalgamation approved by Hon'ble High Court at Bombay, the authorised share capital of FAL comprising of Rs. 60,00,00,000 has been combined with the authorized share capital of the Company.

ISSUE OF NON-CONVETIBLE DEBENTURES

During the year under review, your Company has issued 1,000 Secured, Rated, Listed, Redeemable, Non Convertible Debentures ("NCDs") having face value of Rs. 10,00,000 each aggregating to Rs. 100 Crore, on private  placement basis. The NCDs are rated 'Care A-' by Care Limited and are listed on Wholesale Debt Market of BSE Limited.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

Pursuant to the Scheme of Amalgamation sanctioned by the Honorable High Court of Bombay, vide its order dated 30th January, 2015, Future Agrovet Limited, a  wholly-owned subsidiary has been amalgamated with the Company with effect from 1st April, 2014, being the Appointed Date under the said Scheme.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies in Form AOC 1 is attached separately to this Annual Report.

The performance and financial position of each of the subsidiaries, associates and joint venture companies is provided under Management Discussions and Analysis Report which is presented separately and forms part of this Report.

In accordance to the provisions of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein standalone and the consolidated financial statements and the audited financial statements of each of the subsidiary companies have been placed on the website of the Company -www.futureconsumer.in.

The audited financial statements in respect of each subsidiary companies shall also be kept open for inspection at the Registered Office of the Company during working hours for a period of 21 days before the date of ensuing Annual General Meeting. The aforesaid documents relating to subsidiary companies can be made available to any Member interested in obtaining the same upon a request in that regards made to the Company.

The policy for determining material subsidiaries as approved by the Board of Directors of the Company is made available on the website of the Company -http://futureconsumer.in/policies-and-code.html

EXTRACT OF ANNUAL RETURN

In terms of provisions of Section 92(3) of the Companies Act,2013, an extract of Annual Return in prescribed format is annexed to this Report as Annexure I.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Mr. Krishan Kant Rathi resigned as Chief Executive Officer of Company with effect from 31st October,2014 and has been appointed as an Additional Director of the Company with effect from 15th November, 2014. In accordance with the provisions of Section 161 of the Companies Act, 2013, Mr. Krishan Kant Rathi shall hold office only upto the date of forthcoming Annual General Meeting. Pursuant to the provisions of Section 160 of the Companies Act, 2013, the Company has received a notice from a Member proposing the candidature of Mr. Krishan Kant Rathi for the office of Director at the forthcoming Annual General Meeting.

Ms. Ashni Biyani has been appointed as Whole-time Director of the Company with effect from 15th November, 2014 for a period of 3 (three) years  pursuant to the approval accorded by the Shareholders of the Company at an Extra Ordinary General Meeting held on 12th January, 2015. In terms of the provisions of the Companies Act, 2013, Ms. Ashni Biyani retires from the Board of Directors of the Company by rotation at the ensuing Annual General Meeting and being eligible, has offered herself for re-appointment.

The Notice convening forthcoming Annual General Meeting includes the proposal for appointment / re-appointment of aforesaid Directors. A brief resume of the Directors seeking appointment /re-appointment at the forthcoming Annual General Meeting and other details as required to be disclosed in terms of Clause 49 of the Listing Agreement forms part of the said Notice. None of the Directors are disqualified for appointment / re-appointment under Section 164 of the Companies Act, 2013. None of the Directors are related inter-se to each other save and except Mr. Kishore Biyani and Ms. Ashni Biyani. Ms. Ashni Biyani is the daughter of Mr. Kishore Biyani.

During the year under review Mr. Anil Harish and Mr. B Anand have resigned from the Board of Directors of the Company with effect from 30th September, 2014 and 31st March, 2015 respectively. The Board of Directors wish to place on record their appreciation for the contributions made by Mr. Anil Harish and Mr. B Anand during their respective tenure as a member of the Board of Directors of the Company.

The Company has received individual declarations from following Independent Director(s) of the Company stating that they meet the criteria of independence as provided under Sub-section (6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement entered into with Stock Exchanges :

a) Mr. G N Bajpai

b) Mr. Jagdish Shenoy

c) Ms. Vibha Rishi

d) Mr. Frederic de Mevius

During the year under review, Mr. Gopal Bihani resigned as Chief Financial Officer of the Company with effect from 1st September, 2014. Mr. Manoj Saraf has been appointed as Chief Financial Officer of the Company with effect from 2nd January, 2015.

AUDITORS AND AUDITORS' REPORT

M/s Deloitte Haskins & Sells, Chartered Accountants, have been appointed as the Statutory Auditors of the Company for a period of three years at the 18th Annual General Meeting held on 26th August,2014. In terms of the provisions of Companies Act, 2013 their appointment will however need to be ratified by the Shareholders at the forthcoming Annual General Meeting. Notice convening the forthcoming Annual General Meeting includes a proposal for ratification of appointment of Statutory Auditors by the Shareholders of the Company.

The notes on financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments and explanations. The Auditors' Report does not contain any qualification, reservation or adverse remark.

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

The Company has appointed M/s Sanjay Dholakia & Associates, Company Secretaries to conduct Secretarial Audit of the Company for the financial year 2014-15 in terms of provisions of Section 204 of the Companies Act, 2013. The Secretarial Audit Report is annexed to this Report as Annexure II. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

PARTICULARS OF LOANS GRANTED, GUARANTEE PROVIDED AND INVESTMENTS MADE PURSUANTTO THE PROVISIONS OF SECTION 186 OF THE COMPANIES ACT, 2013

Details of loans granted, guarantees provided and investments made by the Company under the provisions of Section 186 of the Companies Act, 2013, are provided in under Note No. 46, under Notes forming part of standalone financial statements.

RELATED PARTY TRANSACTIONS

All transactions entered into with related parties during the financial year under review were in the ordinary course of business and on arm's length basis.

The particulars of contracts or arrangements with aforesaid related parties, in prescribed format is annexed to this Report as Annexure III.

The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is available on the website of the Company - http://futureconsumer.in/policies-and-code.html

RBI REGULATIONS

With shift in main business activities, the Company is in process of de-registration with the Reserve Bank of India, as a Non Banking Financial Company.

PUBLIC DEPOSITS

Your Company has not been accepting any deposits from the public and hence there are no unpaid / unclaimed deposits nor is there any default in repayment thereof.

BOARD MEETINGS

The Board of Directors met 8 (Eight) times during the financial year 2014-15. The details of board meetings and the attendance of the Directors are provided in the Corporate Governance Report which forms part of this Annual Report. 

COMMITTEES OF THE BOARD OF DIRECTORS

During the year under review, the Board has re-constituted some of its Committee(s) in terms of requirements prescribed under Companies Act, 2013 and Listing Agreement with the Stock Exchanges. During the year under review, the Board also constituted Corporate Social Responsibility Committee comprising of following members:

a) Mr. Jagdish Shenoy - Chairman

b) Mr. Kishore Biyani - Member

c) Ms. Vibha Rishi - Member

The Audit Committee comprises of following members:

a) Mr. G N Bajpai - Chairman

b) Mr. Jagdish Shenoy - Member

c) Ms. Vibha Rishi - Member

During the year under review, all recommendations made by the Audit Committee were accepted by the Board. There were no instances where the Board has not accepted any recommendation of the Audit Committee.

Details of Committees of Board of Directors along with their terms of reference, composition and meetings held during the year, are provided separately in the Corporate Governance Report, which forms part of this Annual Report.

PERFORMANCE EVALUATION OF BOARD

The Company has devised a policy for evaluation of Performance of the Board of Directors, its Committees and individual Directors ("Policy"). The evaluation involves assessment of performance individually of each of the Board Members and of the entire Board of Directors and its Committees.

The performance evaluation criteria of the entire Board of Directors inter alia comprised of the following key areas such as competencies and experience, quality of agenda notes circulated for board meetings, timelines for circulation of minutes, quality of recording board discussions, information sharing and communication, corporate governance process and disclosures.

The evaluation framework for assessing the performance of Committee(s) of Board of Directors inter-aliacomprised of the following key areas such as composition of Members, deliverance of allocated responsibilities and qualitative Assessment/Responsibility.

The performance evaluation process of individual Directors inter alia comprised of the following key areas such as attendance at Board Meetings and Committee Meetings, preparedness for the Board and Committee Meeting(s), Contribution in the Board room using expertise, knowledge, experience and wisdom, independence of views and judgement, ownership of value building.

In terms of the Policy, a process of evaluation was undertaken by the Board for its own performance and that of its Committees and individual Directors. The evaluation process focused on various aspects of the functioning of the Board and Committees. Separate exercise was carried out to evaluate the performance of individual Directors on specified parameters.

The outcome of evaluation process was shared with the Board, Chairman of respective Committees and individual Directors. Based on the outcome of the evaluation, the Board and Committees have agreed on an action plan for the identified areas.

The details of programme for familiarisation of Independent Directors with the Company, industry in which it operates, their roles, rights, responsibilities is made available on the website of the Company - http://futureconsumer.in/policies-and-code.html

CORPORATE GOVERNANCE

A report on Corporate Governance together with Auditors' Certificate as required under Clause 49 of the Listing Agreement forms part of this Annual Report.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

The Management Discussion & Analysis Report as required under Clause 49 of the Listing Agreement is presented separately and forms part of this Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Companies Act, 2013 and Accounting Standards prescribed by the Institute of Chartered Accountants of India in this regard, the audited consolidated financial statements are provided in this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism to provide a framework to promote responsible and secure whistle blowing and to provide a channel to the employee(s) and Directors for reporting to the management, concerns about unethical behavior, actual or suspected fraud or violation of the code of conduct or policy/ies of the Company, as adopted / framed from time to time. The details of said vigil mechanism is given in Corporate Governance Report, which forms part of this Annual Report.

PARTICULARS OF EMPLOYEE STOCK OPTION PLAN

The Company has formulated following employee stock options schemes:

a. FVIL Employees Stock Option Plan-2011 ("FVIL ESOP-2011")

b. Future Consumer Enterprise Limited Employee Stock Option Plan - 2014 ("FCEL ESOP-2014")  FCEL ESOP - 2014 has been approved by the Shareholders of the Company vide resolution passed at an Extra Ordinary General Meeting held on 12th January, 2015. The Shareholders of the Company have at aforesaid Extra Ordinary General Meeting also approved formation of Future Consumer Enterprise Employees Welfare Trust for implementation of FCEL ESOP-2014.

The details of options granted and exercised under FVIL ESOP-2011 are provided in Annexure IV, which is annexed to this Report.

No options have been granted under FCEL ESOP-2014 during the year under review.

PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, EXPENDITURE ON RESEARCH AND DEVELOPMENT, FOREIGN EXCHANGE EARNINGS AND OUTGO ETC

Considering the nature of activities in which the Company operates, energy consumption is in accordance to the normal business practices and does not require any specific installations. In its regular course of business, the Company is always vigilant to conserve the resources and continuously implements measures required to save energy.

The business activities of the Company is not specific to any technology requirements. In the course of its operations, processes are formed and implemented to achieve operational efficiencies which provide maintaining product quality and cost control.

The details in respect of Foreign Exchange earnings/ outgo during the year under review, is provided in Note No. 33 under Notes forming part of standalone financial statements.

RISK MANAGEMENT POLICY AND INTERNAL ADEQUACY

Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. Your Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested by Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee.

CORPORATE SOCIAL RESPONSIBILITY

The Company has constituted a Corporate Social Responsibility Committee ("CSR Committee") in accordance with the provisions of Section 135 of the Companies Act, 2013. The Board of Directors of the Company has based on recommendations made by the CSR Committee approved Corporate Social Responsibility Policy of the Company. The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is made in prescribed form which is annexed to this Report as Annexure V.

NOMINATION AND REMUNERATION POLICY

In terms of requirements prescribed under Section 178(3) of the Companies Act, 2013, the Nomination and Remuneration Policy inter-alia providing the terms for appointment and payment of remuneration to Directors and Key Managerial Personnel is annexed to this Report as Annexure VI.

PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided under Annexure VII, which is annexed to this Report.

In terms of the provisions of first proviso to Section 136 (1) of the Companies Act, 2013, information pursuant to Section 197 of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is excluded from the Annual Report being sent to the Members of the Company and is available for inspection by the Members at registered office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary and the same shall be provided.

The full Annual Report including aforesaid information is being sent electronically to all those Members who have registered their email addresses and is also available on the website of the Company.

INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial controls with reference to financial statements. During the year under review, such controls were tested and no reportable material weaknesses were observed.

GENERAL

1) The Company has not issued any equity shares with differential rights as to dividend, voting or otherwise.

2) The Whole Time Director has not received any commission from the Company nor any remuneration or commission from any of its holding or subsidiary company.

3) There are no significant / material orders passed by the regulators/courts/tribunals during the year under review which would impact the going concern status of your Company and its future operations. 

4) During the year under review, there were no reported instances of cases filed pursuant to Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 134(5) of the Companies Act, 2013, with respect to Directors' Responsibility Statement it is hereby confirmed that:

a) in the preparation of the annual accounts for the financial year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

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 as at 31st March,2015 and of the profit or 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 assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts for the financial year ended 31st March, 2015, 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.

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.

ACKNOWLEDGEMENT

Your Directors would like to thank and place on record their appreciation for the support and co-operation provided to your Company by its Shareholders, Future Group entities, and in particular, their employees, regulatory authorities and its bankers. Your Directors would also like to place on record their appreciation for the efforts put in by employees of the Company during the year.

On behalf of the Board of Directors

G. N. Bajpai

Chairman

Date: 15th May, 2015

Place: Mumbai