DIRECTORS' REPORT Your Directors have pleasure in presenting the 2nd Annual Report on the business and operations of the Company and the Audited Financial Statement of the Company for the financial year ended March 31, 2015. Operations and state of affairs of the Company During the year 2014-15, your Company posted a moderate performance with revenue and profit standing at Rs.84,602.10 lac and Rs.2,661.51 lac, respectively. This performance is particularly noteworthy when viewed against the backdrop of the challenging business environment in which this was achieved, namely, the steep increase in cost of various raw materials and subdued consumer sentiments. During the year 2014-15, your Company recorded an export turnover of Rs.31,002.12 lac and export incentive entitlement of Rs.3,974.67 lac. As per the consolidated financial statements, revenues from operations and profit for the year 2014-15 stood at Rs.92,753.96 lac and Rs.1,933.22 lac, respectively. The overall performance of the Company during 2014-15, amid a challenging economic scenario, vindicates the effectiveness of the initiatives undertaken by the Greenlam management so as to better exploit business opportunities. During 2014-15, your Company intensified its efforts in the area of product integration and market penetration. Your Company continued to expand its export markets for laminates during 2014-15. Dividend Your Directors recommend a final dividend of 10% i.e. Rs.0.50 per share (previous year nil per share) on the Company's 2,41,36,374 Equity Shares of Rs.5.00 each for 2014-15. The final dividend on the Equity Shares, if declared as above, would entail an outflow of Rs.120.68 lac towards dividend and Rs.24.57 lac towards dividend tax, resulting in a total outflow of Rs.145.25 lac. Outlook and expansion The Company's outlook remains favourable on account of its product integration capabilities, growing brand popularity and the continuous support from its employees, shareholders, creditors, consumers, dealers and lenders. The Company's vision is to be a one-stop solution for all decorative surface products (in its field of operation). The Company's pan-India distribution network ensures easy availability of products in almost every part of India. The Company has presence in over 100 countries, either directly or through its overseas subsidiaries. During the year under review, your Company has commenced the commercial production of the engineered wood flooring product line, also commonly known as multi-layer parquet at the Company's manufacturing unit in Behror, Rajasthan. With an installed capacity to manufacture 1 million square metres per annum, we have become the first to manufacture this product in India. Earlier, the entire demand for these products was being met through imports. The new products are being marketed by the Company under the brand name 'Mikasa'. Your Company has decided to set up an engineered door manufacturing unit at Behror, Rajasthan, with a capacity to manufacture 1,20,000 engineered door sets and door leafs per annum across various sizes, thicknesses, designs and specifications. The capital cost for this project would be approximately Rs.27 crore. With respect to the said project, civil construction work is already under progress, the installation of machineries for the new production lines have been completed and trial production has commenced. Commercial production is expected to start soon. Your Company has also decided to expand the manufacturing capacity for laminates at its unit at Nalagarh, Himachal Pradesh, to manufacture an additional 2 million laminate sheets per annum. The capital cost for this brownfield expansion would be approximately H20 crore. With respect to the said expansion, civil construction work is already under progress and orders for all major equipment have been placed. The progress is as per schedule. Your Directors are confident of achieving significantly better results in the coming years. Composite Scheme of Arrangement During the year under review, approval of the Hon'ble Gauhati High Court was received on October 31, 2014 to the on-going Composite Scheme of Arrangement between Greenply Industries Limited and Greenlam Industries Limited and their respective shareholders and creditors for the demerger of the Decorative Business (comprised of Laminates and Allied Products) of Greenply Industries Limited to Greenlam Industries Limited with effect from the Appointed Date i.e. April 1, 2013. The said Scheme became effective upon filing of copy of the order of Hon'ble Gauhati High Court with concerned Registrar of Companies on November 17, 2014. In consideration of the demerger and transfer of the Demerged Undertaking, Greenlam Industries Limited issued and allotted 2,41,36,374 equity shares to the eligible shareholders of Greenply Industries Limited, 1 (One) equity share of H5.00 each in Greenlam Industries Limited, credited as fully paid up for every 1 (One) equity share of H5.00 each held by them in Greenply Industries Limited. The equity shares issued and allotted by Greenlam Industries Limited pursuant to the Scheme got listed with BSE Limited and National Stock Exchange of India Limited on March 2, 2015. Credit Rating Your Company has been assigned "CARE A" and "CARE A1" in respect of its long term and short term banking facilities respectively by Credit Analysis and Research Ltd. (CARE). Your Company has also been assigned "CARE A1" for short term debt instrument (including Commercial Paper) programme carved out of the sanctioned working capital limits of the Company by CARE. Subsidiaries Your Company has six overseas subsidiaries viz. Greenlam Asia Pacific Pte. Ltd., Singapore, Greenlam America, Inc., USA, Greenlam Asia Pacific (Thailand) Co., Ltd., Thailand, Greenlam Holding Co., Ltd., Thailand, PT. Greenlam Asia Pacific, Indonesia and Greenlam Europe (UK) Ltd., UK and one subsidiary in India viz. Greenlam VT Industries Private Limited as at the end of the financial year ended March 31, 2015. Greenlam Asia Pacific Pte. Ltd., Singapore, is engaged in the business of trading of high pressure laminates and allied products. Greenlam America, Inc., USA, is engaged in the marketing and distribution of high-pressure laminates and allied products in North and South America. Greenlam VT Industries Private Limited, India, was incorporated in the year 2013 with the object to carry on the business of manufacturing and trading of Doors and High-end Doors & allied products, however, there was no business carried on by this Indian subsidiary since its incorporation. Further, two Thai step-down subsidiaries Greenlam Asia Pacific (Thailand) Co., Ltd. and Greenlam Holding Co., Ltd. are engaged in the business of marketing and distribution of high-pressure laminates and allied products in Thailand while the Indonesian step-down subsidiary PT. Greenlam Asia Pacific is engaged in the manufacture of promotional material i.e. catalogues, sample folders, chain sets, wall hooks and A4 size samples. Further, UK step-down subsidiary Greenlam Europe (UK) Limited is engaged in the business of marketing and distribution of high-pressure laminates and allied products in United Kingdom. As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board's Report has been prepared on standalone financial statements and a report on performance and financial position of each of the subsidiaries included in the consolidated financial statements is presented herewith in Form AOC-I as Annexure-I. In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements would be placed on the website of the Company at www.greenlamindustries.com Further, as per fourth proviso of the said section, audited annual accounts of each of the subsidiary companies would also be placed on the website of the Company at www. greenlamindustries.com. Shareholders interested in obtaining a copy of the annual accounts of the subsidiary companies may write to the Company Secretary at the Company's corporate office or may drop mail at investor.relations@greenlam.com In terms of the provisions of Clause 49 of the Listing Agreement, the policy for determining material subsidiaries is placed on the website of the Company at www.greenlamindustries.com Consolidated financial statements The consolidated financial statements comprising financial statements of the Company and its subsidiaries are also annexed. Transfer to General Reserve Your Directors propose to transfer Rs.100.00 lac to the General Reserve. Directors During the year under review, Mr. Vijay Kumar Chopra (DIN: 02103940), Ms. Urvashi Saxena (DIN: 02021303) and Ms. Sonali Bhagwati Dalal (DIN: 01105028) were appointed as Independent Directors of the Company at the last Annual General Meeting of the Company held on October 30, 2014. They hold office up to the 6th Annual General Meeting of the Company to be held in the calendar year 2019. Your Company has received declarations from all the Independent Directors viz. Mr. Vijay Kumar Chopra, Ms. Urvashi Saxena and Ms. Sonali Bhagwati Dalal confirming that they meet the criteria of independence as prescribed both under Sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges. During the year under review, the Board has appointed Ms. Parul Mittal (DIN: 00348783) as Additional Director as well as Director-Design & Marketing of the Company w.e.f. November 11, 2014. She holds office as an Additional Director up to the ensuing Annual General Meeting of the Company. The Company has received a notice in writing together with requisite deposit of H1 Lac under Section 160 of the Companies Act, 2013, from a member of the Company proposing her candidature for the office of a director liable to retire by rotation. In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Saurabh Mittal (DIN: 00273917), Managing Director & CEO of the Company, will retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. Further, during the year under review, Mr. Rajesh Mittal (DIN: 00240900) and Mr. Shobhan Mittal (DIN: 00347517) resigned from the Board of the Company w.e.f. the close of the working hours of November 10, 2014. None of the directors of your Company is disqualified under the provisions of Section 164(2)(a) & (b) of the Companies Act, 2013. Changes in Share Capital During the year under review, the authorised share capital of the Company has been increased from Rs.1,00,00,000/- (Rupees One Crore only) divided into 20,00,000 (Twenty Lakh) equity shares of Rs.5/-(Rupees Five only) each to Rs.1,00,00,000/- (Rupees One Crore only) divided into 20,00,000 (Twenty Lakh) equity shares of 15,00,00,000/- (Rupees Fifteen Crore only) divided into 3,00,00,000 (Three Crore) equity shares of Rs.1,00,00,000/- (Rupees One Crore only) divided into 20,00,000 (Twenty Lakh) equity shares of 5/- (Rupees Five only). Further, pursuant to composite Scheme of Arrangement the Company issued and allotted 2,41,36,374 Equity Shares of Rs.5/- each to the eligible shareholders of Greenply Industries Limited and cancelled 1,00,000 equity shares of Rs.5/- each held by Greenply Industries Limited. key Managerial Personnel Mr. Saurabh Mittal, Managing Director and CEO, Ms. Parul Mittal, Director-Design & Marketing, Mr. Ashok Kumar Sharma, Chief Financial Officer and Mr. Prakash Kumar Biswal, Company Secretary & Asst. Vice President-Legal are the Key Managerial Personnel of the Company. Mr. Saurabh Mittal was appointed as Managing Director and CEO w.e.f. November 11, 2014. Ms. Parul Mittal was appointed as Director-Design & Marketing w.e.f. November 11, 2014. Mr. Ashok Kumar Sharma was appointed as Chief Financial Officer w.e.f. November 17, 2014 and Mr. Prakash Kumar Biswal was appointed as Company Secretary & Asst. Vice President-Legal w.e.f. November 17, 2014. Meetings of the Board Six (6) Board Meetings were held during the financial year ended March 31, 2015. The details of the Board Meetings with regard to their dates and attendance of each of the Directors thereat have been provided in the Corporate Governance Report. Performance Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Equity Listing Agreement, the Independent Directors have evaluated the performance of non-independent directors, chairperson of the Company after considering the views of the other directors, board as a whole and assessed the quality, quantity and timely flow of information between the Company's management and the Board and the Nomination and Remuneration Committee also has carried out evaluation of performance of every director. On the basis of evaluation made by the Independent Directors and the Nomination and Remuneration Committee and by way of individual and collective feedback from the non-independent Directors, the Board has carried out the annual performance evaluation of the Directors individually as well as evaluation of the working of the Board and of the Committees of the Board. The followings were the Evaluation Criteria: a. For Independent Directors: Knowledge and Skills Professional conduct Duties, Role and functions Compliance with Code of Business Ethics and Code of Conduct of the Company Rendering independent and unbiased opinion Attendance and presence in meetings of Board and Committees Assistance in implementing corporate governance practices Independent view on key appointments and strategy formulation Review of integrity of financial information and risk management Updation of skills and knowledge Information regarding external environment Raising of concerns, if any, to the Board Reporting of frauds, violation etc. b. For Executive & Non- Executive Directors: Performance as Team Leader/Member. Evaluating Business Opportunity and analysis of Risk Reward Scenarios Professional Conduct and Integrity Sharing of Information with the Board Extent of participation during Board and Committee Meetings Whether difference of opinion was voiced in the meeting Whether executive directors were able to answer the queries raised by Independent Directors Compliance with Code of Business Ethics and Code of Conduct of the Company Assistance in implementing corporate governance practices Independent view on key appointments and strategy formulation Review of integrity of financial information and risk management Updation of skills and knowledge Information regarding external environment Raising of concerns, if any, to the Board Reporting of frauds, violation etc. c. For Committees of the Board: Adequate and appropriate written terms of reference Volume of business now handled by the committee (particularly the audit committee) set at the right level? Whether the committees work in an 'inclusive' manner Effectiveness of the Board's Committees with respect to their role, composition and their interaction with the Board Are the committees used to the best advantage in terms of management development, effective decision etc. d. For Board of Directors: Setting of clear performance objectives and how well it has performed against them Contribution to the testing and development and strategy Contribution to ensuring robust and effective risk management Composition of the board and its committees appropriate with the right mix of knowledge and skills sufficient to maximise performance in the light of future strategy Effectiveness of inside and outside board relationship Responding to the problems or crises that have emerged Relationship between Board and its Committees and between committees themselves Communication with employees and others Updation with latest developments in regulatory environments and the market in which the Company operates The Directors expressed their satisfaction with the evaluation process. Audit Committee The Audit Committee consists of three independent directors with Ms. Urvashi Saxena as Chairperson and Mr. Vijay Kumar Chopra and Ms. Sonali Bhagwati Dalal as members and also one promoter director Mr. Saurabh Mittal, Managing Director & CEO of the Company. The Committee inter alia reviews the Internal Control System and reports of Internal Auditor and compliance of various regulations. The brief terms of reference of the Committee is provided in the Corporate Governance Report. The Committee also reviews the Financial Statements before they are placed before the Board. Nomination and Remuneration Committee The Nomination and Remuneration Committee consists of two independent directors with Mr. Vijay Kumar Chopra as Chairman and Ms. Urvashi Saxena as member and also one non-executive director Mr. Shiv Prakash Mittal as member. The brief terms of reference of the Committee is provided in the Corporate Governance Report. Stakeholders' Relationship Committee The Stakeholders' Relationship Committee consists of one non-executive director Mr. Shiv Prakash Mittal as Chairman, one Executive Director Mr. Saurabh Mittal as member and also one Independent Director Mr. Vijay Kumar Chopra as member. The Committee, inter alia, reviews the grievance of the security holders of the Company and redressal thereof. The brief terms of reference of the Committee is provided in the Corporate Governance Report. Vigil Mechanism Pursuant to the provisions of Section 177(9) & (10) of the Companies Act, 2013 and Listing Agreements, a 'vigil mechanism' or 'Whistle Blower Policy' for directors and employees to report genuine concerns has been established. The same is also uploaded on the website of the Company. Risk Management The Company is taking necessary steps to identify, assess, monitor and mitigate various risks to key business objectives. Major risks to be identified on the businesses and functions, if any, would be systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee of the Company. The detailed steps that were undertaken by the Company as its risk mitigating initiatives are provided in the Management Discussion and Analysis Report. Internal Financial Controls with reference to the Financial Statements The Directors had laid down internal financial controls procedures to be followed by the Company which ensure compliance with various policies, practices and statutes in keeping with the organization's pace of growth and increasing complexity of operations for orderly and efficient conduct of its business. The Audit Committee of the Board, from time to time, evaluated the internal financial control of the Company with regard to- 1. Systems have been laid to ensure that all transactions are executed in accordance with management's general and specific authorization. There are well-laid manuals for such general or specific authorization. 2. Systems and procedures exist to ensure that all transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for aspects and the timely preparation of reliable financial information. 3. Access to assets is permitted only in accordance with management's general and specific authorization. No assets of the Company are allowed to be used for personal purposes, except in accordance with terms of employment or except as specifically permitted. 4. The existing assets of the Company are verified/ checked at reasonable intervals and appropriate action is taken with respect to any differences, if any. 5. Proper systems are in place for prevention and detection of frauds and errors and for ensuring adherence to the Company's policies. Corporate social responsibility Greenlam has been proactively carrying out CSR activities and funding various non-profit organisations towards honing vocational skills, preventing early marriage and pregnancy and sensitising adolescents about life skills and reproductive health. During the year under review, the compliance of the requirements of Section 135 of the Companies Act, 2013 was not applicable to the Company. Nonetheless, the Company has continued to carry out its CSR activities voluntarily which demonstrate its commitment and responsibility towards the betterment of the society. Policy on Nomination and Remuneration The contents of Nomination and Remuneration Policy of the Company prepared in accordance with the provisions of Section 178 of the Companies Act, 2013 and Clause 49 (IV) of the Listing Agreements are provided in the Corporate Governance Report. Related Party Transactions Related party transactions that were entered into during the financial year were on arm's length basis and were in ordinary course of business. The particulars of material related party transactions which were entered into on arm's length basis are provided in Form AOC- 2 as required under Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 which is annexed herewith as Annexure-II. There are no materially significant related party transactions made by the Company which may have potential conflict with the interest of the Company. The Board has approved a policy for material related party transactions which has been uploaded on the Company's website. The web-link as required under Listing Agreement is as under: <http://www.greenlamindustries.com/pdf-file/> Related_Party_Transaction_Policy.pdf. Directors' responsibility statement In terms of the provisions of Section 134 (3)(c) of the Companies Act, 2013, the Directors state that: a) in preparation of the annual accounts for the financial year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the directors have selected such accounting policies as listed in Note 1.00 to the financial statements and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year as on March 31, 2015 and of the profit of the Company for that period. c) the directors have taken proper and sufficient care for 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 on a going concern basis; and 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. Material Changes There have been no material changes and commitments affecting the financial position of the Company since the close of financial year i.e. since March 31, 2015. Further, it is hereby confirmed that there has been no change in the nature of business of the Company. Insurance Your Company's properties, including building, plant, machineries and stocks, among others, are adequately insured against risks. Public deposits During 2014-15, the Company did not invite or accept any deposits from the public. Listing of shares The Equity Shares of the Company are listed on the BSE Limited (BSE) with scrip code No. 538979 and on National Stock Exchange of India Limited (NSE) with scrip symbol GREENLAM. The Company confirms that the annual listing fees to both the stock exchanges for the financial year 2015-16 have been paid. Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013 Details of Loans granted, Guarantees given and Investments made during the year under review, covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Financial Statement of the Company. Auditors and their report (a) Statutory Auditors: In compliance with the Companies (Audit and Auditors) Rules, 2014, M/s. D. Dhandaria & Company, Chartered Accountants, has been appointed as Statutory Auditors of the Company till the conclusion of 6th Annual General Meeting (AGM) as approved by the members at their 1st Annual General Meeting held on October 30, 2014. Further, pursuant to the requirement of Section 139 of the Companies Act, 2013, the appointment of Statutory Auditors is to be ratified by the members at every Annual General Meeting. Based on their declaration received by the Company under Section 139 and 141 of the Companies Act, 2013, they are eligible for the appointment. Members are requested to ratify their appointment for the F. Y. 2015-16. (b) Secretarial Auditors: The Board of Directors of the Company appointed Ms. Manju Pathak, Practicing Company Secretary of M/s. L. G. Corp Law having office at D-12 LGF, Lajpat Nagar, New Delhi - 110024, to conduct Secretarial Audit for the F.Y. 2014-15. The Secretarial Audit Report in Form MR-3 for the financial year ended March 31, 2015, is annexed herewith as Annexure-III. (c) Cost Auditors: Your Company was not required to appoint Cost Auditor for the financial year ending March 31, 2015. (d) Internal Auditor: During the year under review, the Board of Directors has appointed Mr. Rakesh Kumar Budhiraja, President-Finance of the Company as Internal Auditor of the Company to carry out internal audit of Branches, offices and manufacturing units of the Company. Response to Auditors' Remarks There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their report or by the Secretarial Auditor in their Secretarial Audit Report and hence no explanation or comments of the Board is required in this matter. Extract of Annual Return: The extract of Annual Return required under Section 134(3)(a) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, is provided in Form MGT- 9 as Annexure-IV to this report. Corporate Governance report A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, along with an Auditors' Certificate on compliance with the conditions of Corporate Governance, is annexed to this report. Management discussion and analysis report The Management discussion and analysis report for the year 2014-15, pursuant to Clause 49 of the Listing Agreement with Stock Exchanges is given as a separate statement in the annual report. CEO and CFO certification Pursuant to Clause 49 of the Listing Agreement, the CEO and CFO certification is attached with the annual report. The Managing Director and CEO and the Chief Financial Officer also provide quarterly certification on financial results while placing the financial results before the Board in terms of Clause 41 of the Listing Agreement. Code of Conduct for Directors and senior management personnel The Code of Conduct is posted on the Company's website. The Managing Director & CEO of the Company has given a declaration that all directors and senior management personnel concerned affirmed compliance with the code of conduct with reference to the year ended on March 31, 2015. Declaration is attached with the annual report. Conservation of energy, Technology Absorption, Foreign Exchange earnings and outgo The information required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure-V. Particulars of employees The information required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as Annexure-VI. Fraud Reporting There was no fraud reported by the Auditors of the Company to the Audit Committee or the Board of directors during the year under review. Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 No case was filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 during the year under review. Details of significant and material orders passed by the regulators / courts / tribunals impacting the going concern status and the Company's operations in future During the period under review, there were no significant and material orders passed by any regulator / court / tribunal impacting the going concern status and the Company's operations in future. Acknowledgement Your Directors place on record their sincere thanks and appreciation for the continuing support of financial institutions, consortium of banks, vendors, clients, investors, Central Government, State Governments and other regulatory authorities. Directors also place on record their heartfelt appreciation for employees of the Company for their dedication and contribution. For and on behalf of the Board of Directors S. P. Mittal Non-Executive Chairman Date: May 28, 2015 Place: New Delhi |