DIRECTORS' REPORT
TO
THE MEMBERS,
Your Directors have pleasure in presenting the Annual Report along with the Audited Accounts for the Financial Year ended March 31, 2015.
Dividend
The Board of Directors of your Company recommends a final dividend of ~ 1.75 per equity share of Re. 1/- each, aggregating ~ 58.80 crore (previous year ~ 1.75 per equity share).
Management Discussion and Analysis
There is a separate section on Management Discussion and Analysis appended as Annexure A to this Report, which includes the following:
• Industry Structure and Developments
• Discussion on financial performance with respect to operational performance
• Segment wise performance
• Human Resources and Industrial Relations
• Opportunities and Threats
• Internal Control Systems and their adequacy
• Risks and Concerns
• Outlook
Subsidiary and Associate Companies
Your Company has interests in several industries including animal feeds, poultry and agro-products, oil palm plantation, property development, personal and home care, etc. through its subsidiary and associate companies.
Godrej Agrovet Limited (GAVL)
Godrej Agrovet Limited (GAVL), a subsidiary of your company is a diversified agribusiness company dedicated to improving the productivity of Indian farmers by innovating products and services that sustainably increase crop and livestock yields.
GAVL's consolidated Total Income grew by 7% from ~ 3590 crore to ~ 3843 crore during the financial year 2014-15. The Net Profit grew by 29% at ~ 214 crore as compared to ~ 166 crore during the previous financial year 2013-14.
The Animal Feeds vertical, which is our largest agri vertical, continues to do well. Cattle feed, layer feed and shrimp feed delivered a strong performance with a growth of 19%, 25% and 23% respectively despite adverse environmental conditions in the form of erratic and deficient monsoon.
In line with the focus on building quality manufacturing capacity in Animal Feed, GAVL invested in additional capacity at Baramati (Maharashtra), Hanuman Junction (AP), Tumkur (Karnataka) and Ikolaha (Punjab) during the year under review.
GAVL also continues to invest in sustained research and development efforts. During the year under review, it had launched Nadir Godrej Centre for Animal Research & Development (R & D), a state of the art R&D facility situated near Nashik, the R&D Centre is one of the first private sector investments in the space of improving yield of Livestock in India. The Centre is spread across 9 acres of land with separate facilities for trials on broiler, layer and cattle. GAVL also proposes to invest in a state of the art manufacturing facility to manufacture crop protection chemicals and other products at Dahej, Gujarat.
GAVL continued its customer relationship building activities and organized various events such as healthy calf competitions and Godrej Knowledge series lectures to educate its end customers i.e. the farmers.
In the Oil Palm vertical GAVL continues to focus on developing additional revenue stream by enhancing the value of Biomass generated in the business and on increasing the acreage under oil palm plantations. GAVL established a new plant at Kolasib, Mizoram during the year under review. It is possibly the highest investment made by any private company in the State of Mizoram.
During the year under review the performance of GAVL's joint ventures, Godrej Tyson Foods Limited (GTFL) and ACI Godrej Agrovet Private Limited, Bangladesh (ACI Godrej) was good.
ACI Godrej registered an excellent growth of 48% in profit before tax over previous year on account of favourable input costs and improved production efficiencies. GTFL has successfully evolved the business model by reducing its dependency on volatile Live Business. Going forward GTFL will focus on strengthening its Yummiez and Real Good Chicken brands. GTFL has successfully mitigated the risk of flat to low live price and increase / enhanced inputs price by remaining profitable.
Godrej Properties Limited (GPL)
Despite the challenging macroeconomic and real estate sector environment, GPL demonstrated strong results. For the full year, GPL's total consolidated income increased by 54% to INR 1,927 crore and net profit increased by 20% to INR 191 crore. From a business development perspective, GPL added 5 new projects with a saleable area of ~8 million square feet during the year. For new projects added to the portfolio, the focus has been entirely on residential projects in target cities with favourable deal structures.
Despite a very weak market for residential real estate GPL registered its best ever year for residential sales with a growth of 69% in volume terms and 58% in value terms as compared to FY14. GPL also had the best ever year for project deliveries with 3.5 million sq. ft. of space delivered during the year. One critical project delivery was the 760,000 sq. ft. of commercial space at Godrej One in Vikhroli, which will be the new headquarters of the Godrej Group. GPL also opened its first international sales office in Dubai to further expand its sales reach.
Despite very weak market conditions, sales in Gurgaon increased by over 500%. GPL has emerged as the largest developer in Gurgaon by sales volume in 2014. Four years ago GPL had no presence in NCR. In a short period of time, it added 5 projects in NCR and has already launched 4 of these projects with tremendous success. GPL's cumulative sales in Gurgaon now stands at more than 3 million sq. ft.
Sustainability is one of the key principles underscoring GPL's design led approach and GPL witnessed another year with its multiple projects receiving green building certifications. This included IGBC Platinum precertification for Godrej Platinum in Delhi and IGBC Gold precertification for Godrej Park, Godrej Anandam and Godrej United.
GPL received significant external recognition with a total of 59 awards being received in FY15. It has been ranked 1st in the real estate sector for the fifth consecutive year in the 'Best Companies to Work For' study by the Great Places to Work Institute in partnership with the Economic Times. Attracting the best management talent and creating an environment that allows this talent to flourish is the most important priority for the company.
Natures Basket Limited (NBL)
Godrej Nature's Basket is the retail venture of Godrej Group and is today India's foremost retail destination for fine foods from across the world.
Nature's Basket continued on its growth path, much above industry standards. NBL's total income grew by 20% year-on-year from ~ 174 crore during the financial year 2013-14 to ~ 209 crore during the financial year 2014-15.
NBL continued to be the most awarded gourmet business brand winning several awards in forums like India Retail Forum, Asia Retail Congress Awards, CMO Asia Congress many of which have been received for the 3rd year in a row.
The in-store consumer experience and brand imagery was maintained at highest levels to ensure that business continues to be seen aspirational and connects instantly with discerning consumers. Much of the growth and margin can be attributed to the increase in sales in our gifting and private label business.
NBL's private label brands, L'Exclusif and Healthy Alternatives, continued to be growth drivers with sales growing nearly 6 times over previous year and the further introduction of 150+ distinctive SKUs in 2014-15 taking the total range to 306 SKUs. NBL has expanded its range significantly and it is increasing in popularity. Sales from this segment contributed to nearly 6% of its overall sales. Private label will continue to be a key driver of growth in sales and margin.
NBL has revamped its web portal with a best in class user experience and strengthened backend ecommerce functionality. With the integration of robust technology platform and experts of ekstop.com with our existing online business, E-commerce business is poised to growth exponentially in 2015-16. The loyalty program base was further increased to cross 3 lac customers and contributed 57% of the sales.
Godrej Consumer Products Limited (GCPL)
GCPL, an associate of your Company, has continued to grow ahead of the overall FMCG sector, as well as home and personal care categories that it participates in, despite a challenging macro environment.
On a consolidated basis, GCPL reported a total income of ~ 8,351 crore during the financial year 2014-15 compared to ~ 7,665 crore for the previous year 2013-14. The Net Profit grew by 19% at ~ 907 crore as compared to ~ 760 crore during the financial year 2013-14.
GCPL's expanding footprint is driven by a focused 3x3 strategy - a presence in three business categories (personal care, hair care and home care) in three geographies (Asia, Africa and Latin America) - to become an emerging markets FMCG leader. Despite challenges across geographies, its businesses have performed well, with the company's salience of international revenues at 47%.
GCPL's focus has been to accelerate innovation and back new products with strong marketing investments. In the past year, GCPL made several new launches in the domestic and international businesses, expected to further enhance the company's competitiveness, improve the equity of its brands and drive increased penetration and consumption. Over 40% of GCPL's growth now comes from new products and renovations. It was also the highest ranked Indian company (at number 24) on Forbes' list of the 'World's 100 Most Innovative Growth Companies 2015', for the second year in a row.
Today, GCPL is one of the largest household and personal care companies in India; the leader in hair colour, household insecticides and liquid detergents, the number two player in toilet soaps and a fast-growing new entrant in air care. Significant marketing investments have driven higher consumption and penetration across the board. GCPL's superior global supply chain and future-ready sales organisation leverage the latest technology for sharper execution and better decision making, thus strengthening market positions.
It was ranked the number 1 FMCG Company to work for in the 'Great Place to Work - Best Workplaces in India 2014' list; its eleventh consecutive year on the list. It was also ranked number 14 on the 'Great Place to Work - Best Workplaces in Asia 2014' list and ranked among the 'Aon Hewitt Best Employers in India - 2015' survey
Other Subsidiaries
Godrej International Limited (GINL) is a wholly owned subsidiary of Godrej Industries Ltd. and trades worldwide in vegetable oils. The year under review was marked with greater than normal volatility brought about by the sharp drop in mineral oil prices, thus affecting the usage of veg oils in bio diesel.
Godrej International Trading & Investments Pte. Limited (GITI) is also a wholly owned subsidiary of the Company and is incorporated in Singapore. The company continued to trade profitably and maintained its presence in key veg oil markets.
Godrej International Limited (Labuan) has been incorporated in the Malaysian Financial Centre of Labuan in February 2015. It is a wholly owned subsidiary of the Company and commenced its trading since April 2015. Being at the heart of the palm oil industry, it is likely to encompass the major portion of our trading activity in the near future.
Ensemble Holding and Finance Limited (EHFL), a wholly owned subsidiary of your Company, is a Non-Banking Finance Company. The total income of EHFL for the financial year 2014-15 was ~ 0.97 crore as against that of ~ 0.99 crore last year. The Net Profit before Tax of EHFL during the financial year ended March 31, 2015 was ~ 0.95 crore as against that of ~ 0.97 crore last year.
Pursuant to clause 49 of the listing agreement, your Company has formulated a policy for determining its 'material subsidiaries'. The said policy has been uploaded on the Company's website <http://www.godrej.com/godrej/GodrejIndustries/pdf/material_subsidiaries.pdf>
Amalgamation
During the year under review, Wadala Commodities Limited (WCL) has amalgamated with your Company in terms of the Scheme of Amalgamation (the Scheme) sanctioned by the Hon'ble Bombay High Court vide its order dated September 5, 2014 and by the Hon'ble High Court of Madhya Pradesh, Indore Bench on October 28, 2014. The appointed date of the Scheme was April 1, 2014 and the effective date of the Scheme was November 21, 2014 i.e. the date on which your Company and WCL filed the certified copy of the respective High Court order with the Registrar of Companies, Mumbai, Maharashtra and Registrar of Companies, Gwalior, Madhya Pradesh. Thereafter, between January and March 2015, your Company allotted equity shares to the shareholders of WCL and GIL pursuant to the scheme. Your Company has received all the necessary regulatory approvals and has also completed requisite filings.
Financial Position
The loan funds at the end of the year stand at ~ 2,022 crore as compared to ~ 1,327 crore for the previous year. The debt equity ratio is 1.16 as compared to 0.79 last year. Your Company continues to hold the topmost rating of [ICRA]A1+ from ICRA for its commercial paper program C 700 crore) (previous year ~ 600 crore). ICRA has reaffirmed an [ICRA]A1+ rating for its short term debt instruments/other banking facilities f 800 crore) (previous year ~ 900 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed [ICRA] AA rating with stable outlook for long-term debt, Non-convertible Debentures, working capital and other banking facilities f 940 crore) (previous year ~ 940 crore). This rating represents high-credit quality carrying low-credit risk. ICRA has also assigned a rating of MAA+ with stable outlook for our Public Deposit scheme. The Public Deposit scheme under the Companies Act, 1956 has been discontinued. Instruments with this rating are considered to have the high-credit quality and low credit risk.
Manufacturing Facilities
The chemicals division of your Company has manufacturing units at Ambernath and Valia.
The Ambernath factory which commenced manufacturing during the previous financial year is now fully operational. The Ambernath factory is ISO-9001:2008 and ISO 14001:2004 certified.
The Valia factory is ISO-9001:2008 and ISO 14001:2004 certified. The Valia factory won the FICCI award for Efficiency in Energy Usage in Chemical Sector.
The Vegoils Division (Wadala) continues to operate as a contract processor of edible oils and vanaspati. The division recorded a turnover of ~ 6 crore.
Research and Development (R&D)
In the year under consideration our R&D activities have resulted in the launch of few new products, each of them being high value derivatives of fatty alcohols, having specialty applications in personal care products and textile auxiliaries. Innovation in existing processes and the endeavour to develop new processes and technologies will be an ongoing activity. We continue to focus our attention on high value fractionated fatty acids and fatty alcohols for the polymer, oilfield, lubricant and paper industries. We continue our efforts in developing improved and customized specialty surfactants and bio surfactants through in house development and external consultation.
Human Resource Development and Industrial Relations
During the year under review, industrial relations at all plant locations remained harmonious.
Your Company emphasizes on the safety of people working in its premises. Structured safety meetings were held and safety programmes were organized for them throughout the year.
Business Responsibility Report
SEBI, vide its circular CIR/CFD/DIL/8/2012 dated August 13, 2012 had proposed to mandate inclusion of Business Responsibility Reports as part of the Annual Reports for listed entities. According to the proposal, the report should describe measures taken by the listed companies along with key principles enunciated in the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business' framed by the Ministry of Corporate Affairs. This is intended to be adopted by companies in India to report their Corporate Social Responsibility (CSR) activities and initiatives.
A detailed report on your Company's sustainability initiatives is published in the Business Responsibility Report, as 'Annexure B' and forms a part of this report.
Information Systems
Your Company has automated Export Benefit related Processes using SAP System. It helped the organization for managing better control on application, status of benefits, receipt of benefits and utilization of benefits. The system has helped business to have online tracking & monitoring of entire process of export benefit utilization and available for utilization.
We will continue to leverage technology and setup "Green Initiatives" through use of technology..
Employee Stock Grant Scheme 2011 (ESGS) and Employee Stock Option Plan (ESOP)
On February 11, 2015, the Nomination and Compensation Committee approved a total of 1,12,747 stock grants equivalent to 1,12,747 equity shares of the Company to eligible employees in terms of the ESGS 2011 Scheme. The exercise price is Re. 1/- per equity share. As on March 31, 2015 and in terms of the ESGS Scheme, 2011, a total of 1,58,957 grants were vested, exercised and allotted.
During the current year, The Securities and Exchange Board of India(SEBI) has issued the SEBI (Share Based Employee Benefits) Regulation, 2014, which requires that the accounting treatment for employee share based payments to be based on the Guidance Note on Accounting for Employees Share-Based Payments issued by the Institute of Chartered Accountants of India. Accordingly, the Company has not included the Financial Statements of the Godrej Industries Limited Employees Stock Option Trust (ESOP Trust) in the preparation of the Standalone financial statements of the Company for the year ended March 31, 2015, as compared to the previous year where the same were consolidated. Consequently, these financial statements do not include the assets, liabilities, income and expenditure of the ESOP Trust and to that extent, the figures for the previous year are not comparable.
Disclosure in compliance with Companies (Share Capital and Debentures) Rules, 2014 and clause 12 of the Securities and Exchange Board of India (Employees Stock Purchase Scheme) Guidelines, 1999 is given in Annexure C attached and forms a part of this report.
Fixed Deposits
Your Company is currently not accepting public deposits. The management of the Company is thankful to all the investors for their continued trust in the Company. During the year ended March 31, 2015, deposits aggregating to ~ 18.75 Crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
Depository System
Your Company's equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2015, 99.74% of the equity shares of your Company were held in demat form.
Directors
In accordance with the Articles of Association of the Company, the following directors retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment;
Provisions of Section 149 of the Companies Act, 2013 provides that every listed public company is required to have at least one-third of the total number of directors as Independent Directors who shall hold office for a term of consecutive five years. No Independent Director shall be eligible for more than two consecutive terms of five years and such Independent Director shall not be liable to retire by rotation. Consequent upon applicability of the Companies Act, 2013 w.e.f. April 1, 2014, all the above Non-Executive Directors were appointed as Independent Directors of your Company, not liable to retire by rotation, for a period of five consecutive years w.e.f. the date of last Annual General Meeting i.e. August 9, 2014.
Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with 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.
Your Company has conducted a formal Board Effectiveness Review as part of its efforts to evaluate, identify improvements and thus enhance the effectiveness of the Board, its Committees, and Individual Directors. This was in line with the requirements mentioned in the Companies Act, 2013 and the listing agreement.
The HR team of the Company worked directly with the Chairman and the Nomination and Remuneration Committee of the Board, to design and execute this process which was adopted by the Board. Each Board Member completed a confidential online questionnaire, providing vital feedback on how the Board currently operates and how it might improve its effectiveness.
The survey comprised four sections and compiled feedback and suggestions on:
• Board Processes (including Board composition, strategic orientation and team dynamics);
• Individual Committees;
• Individual Board Members; and
• the Chairman
The following reports were created, as part of the evaluation:
• Board Feedback Report;
• Individual Board Member Feedback Report; and
• Chairman's Feedback Report
The overall Board Feedback Report was facilitated by Mr. K. M. Elavia, an independent director. The Directors shared their feedback about the Board functioning and also identified areas which have scope for improvement. The Individual Committees and Board Members' feedback was shared with the Chairman. Following his evaluation, a Chairman's Feedback Report was also compiled.
On the recommendation of the Nomination & Compensation Committee, the Board had framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The details of the Remuneration Policy are stated below:
Pursuant to clause 49 of the listing agreement, a familiarisation program has been conducted for the independent directors of the Company. Under this program a visit to the Ambernath factory was arranged for the independent directors of the Company. The details of Directors familiarisation program are uploaded on the Company's website.
<http://www.godrej.com/godrej/GodrejIndustries/pdf/LtdDirectorsFamilarisationPrg.pdf>
Key Managerial Personnel
Mr. P. Ganesh has been appointed as the Chief Financial Officer and Company Secretary with effect from April 1, 2015. He shall be the compliance officer and shall ensure compliances with effect from April 1, 2015. Mr. Clement Pinto and Mr. K. R. Rajput, stepped down from their positions as Chief Financial Officer and Company Secretary respectively, with effect from March 31, 2015.
Statutory Auditors
Pursuant to section 139 of the Companies Act, 2013, your Company has appointed M/s. Kalyaniwalla and Mistry, Chartered Accountants (Firm Regn. No. 104607W) as Auditors of the Company to hold office from the conclusion of the previous annual general meeting until the conclusion of fourth consecutive annual general meeting (AGM), subject to the ratification of reappointment by the members at every AGM.
You are requested to ratify the re-appointment of Auditors and to authorise the Board to fix their remuneration. The auditors M/s. Kalyaniwalla and Mistry, Chartered Accountants, are eligible for reappointment. A certificate from the Auditors has been received to the effect that their reappointment, if made, would be within the prescribed limits.
Cost Auditors
Pursuant to directions from the Department of Company Affairs, M/s. R. Nanabhoy & Co., Cost Accountants have been appointed as Cost Auditors for the applicable products of the Company for the year 2014-15. They are required to submit the report to the Central Government within 180 days from the end of the accounting year.
Secretarial Auditors
The Board has appointed M/s A. N. Ramani & Co., Company Secretaries, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure 'G' to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
Audit Committee
The Audit Committee, constituted pursuant to the provisions of the Companies Act and the listing agreement, has reviewed the Accounts for the year ended March 31, 2015. The members of the Audit Committee are Mr. K. K. Dastur, Mr. S. A. Ahmadullah, Mr. K. N. Petigara and Mr. A. B. Choudhury, all Independent Directors.
Policy to Prevent Sexual Harassment at Work Place
Your Company is committed to creating and maintaining an atmosphere in which employees can work together without fear of sexual harassment, exploitation or intimidation. As required under the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Act'), your Company has constituted an Internal Complaints Committee. No complaints were received by the committee during the year under review. Since the number of complaints filed during the year was NIL, the Committee prepared a NIL complaints report. This is in compliance with section 22 of the Act.
Directors' Responsibility Statement
Pursuant to the provisions contained in Section 134 of the Companies Act, 2013, the Directors of your Company confirm:
a) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
b) that such accounting policies have been selected and applied consistently, and such judgments and estimates have been made 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 or loss of the Company for that period;
c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company, for preventing and detecting fraud and other irregularities;
d) that the annual accounts have been prepared on a going concern basis.
e) that the proper policies and procedures have been adopted for ensuring the orderly and efficient conduct of its business, including adherence to code of conduct and policies, the safeguarding of assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information and that such policies and procedures are adequate and were operating effectively.
f) that proper systems are in place to ensure compliance of all laws applicable to the Company and that such systems are adequate and operating effectively.
Corporate Governance
As required by the existing clause 49 of the Listing Agreements with the Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company's compliance of the requirements of Corporate Governance in terms of clause 49 of the Listing Agreement and the same is annexed to the Report on Corporate Governance.
Disclosures and Information under the Companies Act, 2013
Pursuant to section 134 and any other applicable section of the Companies Act, 2013 (the Act), following disclosures and information is furnished to the shareholders:
(a) Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo
'Annexure D' to this Report gives information in respect of Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo, required under Section 134(3)(m) of the Companies Act, 2013, and forms a part of the Directors' Report.
(b) Annual return
The extracts of the annual return as provided under sub section (3) of Section 92 of the Act is given in Form No. MGT 9 as 'Annexure E', attached and forms a part of this report.
(c) Board meetings
The Board of Directors of your Company met 6 (six) times during the year under review. The details of Board meetings and the attendance of the Directors are provided in the Corporate Governance Report.
(d) Loans, Guarantees & Investments
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.
(e) Related Party Transactions
All related party transactions entered into by your Company during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key
Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company. Prior approval of the Audit Committee was obtained for those transactions. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable. Attention of members is also drawn to the disclosure of transactions with related parties set out in Note No. 45 of Standalone Financial Statements, forming part of the Annual Report. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.
The policy on Related Party Transactions is uploaded on the Company's website <http://www>. godrej.com/godrej/GodrejIndustries/pdf/Policy-on-Related-Party-Transaction.pdf.
(f) Particulars of Employees:
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure 'F' to this Report. The information required pursuant to Section 197 of the Companies Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of your Company 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, whereupon a copy would be sent.
(g) Risk Management
Your Company had formed a Risk Management Committee consisting of the Managing Director and the Whole time Directors. The Committee identifies, evaluate business risks and opportunities. This Committee has formulated and implemented a policy on risk management to ensure that the company's reporting system is reliable and that the company complies with relevant laws and regulations. The Board of Directors of your Company are of the opinion that, at present, there are no elements of risks which may threaten the existence of the Company.
Your Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report and also posted on the website of the Company.
(h) Nomination & Remuneration Policy for Senior Management
The details relating to ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2014-15 is given in 'Annexure F' attached and forms part of this Report.
The policy of your Company on director's appointment and remuneration of the directors, key managerial personnel and other employees including criteria for determining qualifications, positive attributes, independence of a director, is stated below:
(i) Financials
There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year to which the financial statement relates and the date of the report.
There are no qualifications, reservations or adverse remarks in the Auditors Report and the Secretarial Audit Report for the financial year 2014-15.
(j) Share Capital
During the year under review your company allotted 2,67,757 equity shares of Re.1 each pursuant to the scheme of amalgamation of Wadala Commodities Limited with Godrej Industries Limited and 1,58,957 equity shares of Re.1 each upon exercise of stock option under Company's Employee Stock Grants Scheme. Consequently, the paid up share capital of your Company has increased from ~ 33,54,55,260/- divided into 33,54,55,260 equity shares of Re.1 each to ~ 33,58,81,974 divided into 33,58,81,974 equity shares of Re.1 each.
(k) Significant Court Order received
During the year under review the Hon'ble High Court of judicature at Bombay had, on September 5, 2014, passed an order approving the scheme of amalgamation of Wadala Commodities Limited with Godrej Industries Limited.
Additional Information
The consolidated financial statements of the Company forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries. The Audited Annual Accounts and related information of the Company's subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company's registered office in Mumbai, India. The subsidiary companies' documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.
Acknowledgement
Your Directors thank the Union Government, the Governments of Maharashtra and Gujarat as also all the Government agencies, banks, financial institutions, shareholders, customers, employees, fixed deposit holders, vendors and other business associates, who, through their continued support and co-operation, have helped as partners in your Company's progress.
For and on behalf of the Board of Directors
A. B. Godrej
Chairman
Place : Mumbai,
Date : May 27, 2015.
Directors' Report
To the Shareholders,
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2014.
The Board of Directors of your Company recommends a final dividend of Rs. 1.75 per equity share of Rs. 1/- each, aggregating Rs. 58.70 crore (previous year Rs. 1.75 per equity share).
GAVL continued on its growth path during the year under review. GAVL's consolidated total revenue and net profit increased by 16% and 80% respectively, over last year.
The Animal Feed business recorded a growth of 10% in revenues and 19% in profitability. The strong performance in sales revenue and profitability was on account of increased volumes, innovative products backed by R&D efforts and efficiency in buying. This division of GAVL undertook Brand Consolidation with few strong brands having national presence. This division of GAVL arranged Calf competitions during the fiscal to support Heifer feed sales.
GAVL was the first company to organize such an event which created an impact at village level.
GAVL's Vegetable Oil operations registered a growth of 31% in revenues and 23% in rofitability despite adverse impact of new formula for pricing of Fresh Fruit Bunches (FFB) on account of healthy growth in arrivals of FFBs, control over fixed costs and high Crude Palm Oil prices. This division of GAVL has completed the construction of oil mill in Mizoram and commercial production has started in April 2014.
The Agri inputs division of GAVL reported a growth of 38% in revenues and 34% in profitability over the previous year on account of healthy margins in plant growth promoters and herbicides. During the year, the Company launched new products, viz.,"Impool" a herbicide and variants of "Zymegold", a micronutrient, which are innovative products.
GAVL continues to be the holding company of Godrej Seeds & Genetics Limited (GSGL). GSGL recorded a sales of Rs. 36 crore during the year under review. GAVL is also the holding company of Godvet Agrochem Limited (GAL), which was incorporated on January 22, 2014 and entire paid-up equity share capital of GAL is held by GAVL. Goldmuhor Agrochem & Feeds Limited and Golden Feed Products Limited have merged with GAVL.
GAVL continues to have joint venture arrangement with ACI Godrej Agrovet Private Limited, Bangladesh (ACI Godrej) and Godrej Tyson Foods Limited (GTFL). ACI Godrej achieved a turnaround despite volatile external environment on account of political uncertainty through premium pricing and innovative logistics solutions. GTFL also achieved a complete turnaround and registered a growth of 23% in total income and 195% in profit before tax over previous year on account of lower feed costs and control over fixed costs.
GPL is the real estate development arm of the Godrej Group, with a pan-India presence. Despite the current uncertainties and challenges in the real estate environment, GPL has successfully demonstrated strong value addition to its development portfolio. GPL posted a total income of Rs. 1254 crore during the financial year ended March 31, 2014.
During the said year, GPL added 8 new projects with a saleable area of 13.42 million sq. ft. to its portfolio. The new projects signed are located in Mumbai, the National Capital Region, Pune, Bengaluru and Chennai. The projects added are of substantial size and are in line with GPL's long term strategy of focusing on value accretive and risk efficient models. While real estate supply continues to outpace growth in demand across most cities in the country, GPL achieved its highest ever quarterly sales in the fourth quarter of the fiscal year, driven by successful new launches in Mumbai and Bengaluru. The highlight of the year was the successful launch of
in Mumbai, which registered bookings of over 200 apartments valued at over Rs. 400 crore on the day of its launch. Another milestone for GPL was the launch of Godrej United in Bengaluru. This launch was achieved within 12 months of the Development Agreement being signed. This project also witnessed strong uptake in the market, registering bookings worth over Rs. 100 crore over the span of a few weeks.
Despite the current challenges facing the Indian economy dampening commercial real estate sales across major cities in the country, GPL registered over 800,000 sq. ft. of bookings across three commercial projects in Mumbai and Kolkata.
Delivering on its customer commitments, GPL handed over 624 apartments across 13 towers in Godrej Garden City, GPL's first township project. The Global Indian International School at Godrej Garden City, Ahmedabad was also inaugurated in the fiscal year. This is the first school that GPL has built and marks an important milestone for the township.
GPL continues to deliver on its vision of being the most trusted name in the real estate industry, and has been recognized as such, winning the 'Developer of the Year' award at the Indian Realty Awards 2013 and the 'Ethical Brand for Real Estate' award by CMO Asia.
GPL also continues its focus to deliver on its commitments on the sustainability front, aiming for green building certifications for all ongoing and future projects. Godrej BKC is the first multi-occupant project in BKC to be awarded the LEED Platinum pre-certification. GPL also received the 'Sustainability Award' from the CII for its contribution to green building mission at the GreenCo Summit 2013.
NBL which operates in the gourmet food retail segment and is a wholly owned subsidiary of your Company has been increasing its foothold across cities. NBL is 'the' retail destination for gourmet and fine food in India. NBL had extended its footprint from 27 stores in Financial Year 2012-13 to 33 stores by the end of Financial Year 2013-14.
NBL's business grew by 36% and achieved a total income of Rs. 174 Crore. Greater focus on strengthening the gifting portfolio both in terms of dedicated presence in stores as well as creation of a distinctive and appealing gifting portfolio ensured that sales through gifting grew at a very healthy clip of 82% over last year.
NBL introduced 2 distinct brands - l'exclusif and Healthy Alternatives to introduce its own range of indulgence and health products respectively. About 150 SKUs introduced so far under these 2 labels have been well received by consumers and holds out great hope for FY 14-15.
The business was rewarded across retail platforms with wins at the Coca Cola Golden Spoon awards, India Retail Forum, Asia Retail Congress and several others as well.
Godrej Consumer Products Limited (GCPL
GCPL, an associate of your Company, has continued to grow ahead of the overall FMCG sector, as well as home and personal care categories that it participates in, despite a challenging macro environment. On a consolidated basis, GCPL reported Income from Operations of Rs. 7,583 crore and a Net Profit (after minority interest) of Rs. 760 crore for Financial Year 2013-14, compared to Rs. 6,400 crore and Rs. 796 crore respectively, for the previous year.
While GCPL's salience of international revenues increased to 47%, it also ensured strong growth momentum in its domestic business with a healthy 14% growth. GCPL's focus has been to accelerate innovation and back new products with strong marketing investments. In the past year, GCPL had several new launches in the domestic and international businesses. These launches, we believe, will further enhance GCPL's competitiveness, improve the equity of its brands and drive increased penetration and consumption.
Today, GCPL is one of the largest household and personal care companies in India; the leader in hair colour, household insecticides and liquid detergents, the number two player in toilet soaps and a fast-growing new entrant in air care. Over a third of GCPL's growth now comes from new products and renovations, having invigorated its product portfolio with 12 launches and relaunches in India alone, in just over 18 months. Significant marketing investments have driven higher consumption and penetration across the board. GCPL's superior global supply chain and future-ready sales organisation leverage the latest technology for sharper execution and better decision making, thus strengthening market positions. It was ranked the number 1 FMCG Company to work for in the Great Place to Work survey 2014; its tenth consecutive year on the list.
GCPL's expanding footprint is driven by a focussed 3x3 strategy - a presence in three business categories (personal wash, hair care and home care) in three geographies (Asia, Africa and Latin America) - to become an emerging markets FMCG leader. GCPL has made good progress in the next phase of the integration of its Darling businesses, thus taking its presence in Africa to the next stage. It is now strengthening and building processes and talent infrastructure for sustainable growth. The UK business continues to outperform, while the Indonesia and Latin America businesses have also performed well, despite market challenges.
Godrej International Limited (GINL), a wholly owned subsidiary of your Company, trades in vegetable oils worldwide. GINL continued its strong operating profit growth with a rise in turnover by 15% to US $ 282 million. Palm oil prices did not fall as expected and were supported by greater use of palm in the manufacture of bio diesel.
Godrej International Trading & Investments Pte. Limited (GITI), a wholly owned subsidiary of your Company, incorporated in the Republic of Singapore, also continued to trade profitably. It has not been possible to expand its turnover and activity in the past year. The long term aim remains to consolidate all our vegetable oil trading activity in this geographic region.
Ensemble Holdings and Finance Limited (EHFL), a wholly owned subsidiary of your Company, is a Non-Banking Finance Company. The Gross Income of EHFL for the Financial Year ended March 31, 2014 was Rs. 0.99 crore as against that of Rs. 3.35 crore last year. The Net Profit of EHFL during the Financial Year ended March 31, 2014 was Rs. 0.82 crore as against that of Rs. 0.27 crore last year.
During the year under review, Swadeshi Detergents Limited (SDL) a wholly owned subsidiary of your Company, had been amalgamated with your Company in terms of the Scheme of Amalgamation sanctioned by the Hon'ble Bombay High Court vide its order dated August 16, 2013. The appointed date of the Scheme was April 1, 2013 and the effective date of the Scheme was September 6, 2013 i.e. the date on which your Company and SDL had filed a certified copy of the said High Court order with the Registrar of Companies, Maharashtra.
During the year under review, the Board of Directors of your Company had on February 7, 2014 approved the proposal of scheme of amalgamation of Wadala Commodities Limited (WCL) with your Company. BSE Limited and National Stock Exchange of India Limited had conveyed their 'No objection' for the said scheme of amalgamation. Your Company had approached the Hon'ble High Court of judicature at Bombay and the High Court had directed to seek the approval of the equity shareholders for the scheme of amalgamation. Accordingly, a court convened meeting of the equity shareholders of your Company has been called on June 13, 2014. Also pursuant to the terms of para 5.16 of Circular Number CIR/CFD/DIL/5/2013 dated February 4, 2013 issued by Securities and Exchange Board of India (SEBI) read with para 7 of Circular Number CIR/CFD/ DIL/8/2013 dated May 21, 2013 issued by SEBI ("SEBI Circular") and Pursuant to Section 110 of the Companies Act, 2013 and applicable rules thereunder, your Company is seeking the approval of the equity shareholders for the scheme by way of Postal Ballot. The results of the said postal ballot will be declared by the Chairman of the Company on June 3, 2014.
The loan funds at the end of the year stand at Rs. 1,327 crore as compared to Rs. 926 crore for the previous year. The debt equity ratio is 0.82 as compared to 0.56 last year. Your Company continues to hold the topmost rating of [ICRA]A1+ from ICRA for its commercial paper program (Rs. 600 crore) (enhanced from Rs. 410 crore). ICRA has reaffirmed an [ICRA]A1+ rating for its short term debt instruments/other banking facilities (Rs. 900 crore) (enhanced from Rs. 850 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed [ICRA]
AA rating with stable outlook for long-term debt, working capital and other banking facilities (Rs. 940 crore) (enhanced from Rs. 640 crore). This rating represents high-credit quality carrying low-credit risk. ICRA has also assigned a rating of MAA+ with stable outlook for our likely Public Deposit scheme (under the Companies Act, 2013) for Rs. 100 crore. The Public Deposit scheme under the Companies Act, 1956 has been discontinued. Instruments with this rating are considered to have the high-credit quality and low credit risk.
The manufacturing operations of your Company at Vikhroli were discontinued with effect from February 28, 2014. Your Company has set up a state of the art new manufacturing facility at Ambernath, Maharashtra and the production has commenced. This factory has the facility to manufacture Surfactants, Fatty Acids (including specialty grades) and Refined Glycerin.
The Valia factory is ISO-9001:2008 and ISO 14001:2004 certified. It has also got OHSAS18001:2007 certificate of Bureau Veritas and ISO 27001:2005 certificate of British Standard Institution. The Valia factory won the CII Environmental Best Practices Award 2013 for Innovation for the Effluent Treatment Plant sludge reduction project.
The Vegoils Division (Wadala) continues as a contract processor of edible oils and vanaspati. The division recorded a turnover of Rs. 6 crore.
In the year under consideration the R&D activities have resulted in the launch of two new products, each of them being high value derivatives of fatty alcohols, having specialty applications in personal care products and textile auxiliaries. Innovations in existing processes and the endeavor to develop new processes and technologies will be an ongoing activity. So too, will be our efforts to manufacture premium quality fatty acids and fatty alcohols from alternate raw materials. Your Company will also continue to focus its attention on high value fractionated fatty acids and fatty alcohols for the polymer, oilfield, lubricant and paper industries. Parallel to all the above oleo chemicals projects, R&D continues its efforts in developing improved and customized specialty surfactants, focusing on the home, oral and personal care markets, thus delivering customer delight.
Your Company has been ranked 4th in Manufacturing & Production industry, and 57th in overall India's Companies To Work For 2013, in a survey conducted by Great Place To Work® Institute.
Industrial Relations at all plant locations remained harmonious. Your Company's one of the oldest manufacturing unit based at Vikhroli has been smoothly relocated to Ambernath. The transition has happened swiftly and the cutting edge technology at Ambernath will soon start reaping benefits. At Valia manufacturing unit, your Company has entered into a Long Term Wage settlement with workers' union.
Your Company emphasises on the safety of people working in its premises. Structured safety meetings were held and safety programmes were organized for them throughout the year. These efforts were recognized by an award for 'Meritorious Performance in Industrial Safety' at the Maharashtra Safety Awards won by Vikhroli Factory given away by 'National Safety Council -Maharashtra Chapter'.
SEBI, vide its circular CIR/CFD/DIL/8/2012 dated August 13, 2012 had proposed to mandate inclusion of Business Responsibility Reports as part of the Annual Reports for listed entities. According to the proposal, the report should describe measures taken by the listed companies along with key principles enunciated in the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business' framed by the Ministry of Corporate Affairs. This is intended to be adopted by companies in India to report their Corporate Social Responsibility (CSR) activities and initiatives. Your Company had voluntarily published its first Sustainability Report last year. This year too your Company is publishing the Business Responsibility Report.
A detailed report on your Company's sustainability initiatives is published in the Business Responsibility Report, as Annexure B and forms a part of this report.
Your Company has initiated implementation of new age Business Intelligence (BI) software for generation of reports, queries and executive dashboards. We have completely revamped our existing customer relationship portal to provide refreshing experience to our customers by providing online access of order status, dispatch details, financial history and analytical trend graphs. Customers can also access the information on the move by our new Mobile application.
Your Company is aggressively looking for new age technology solutions like Cloud Computing, Mobility Solutions & Business Analytics to leverage technology for smooth and efficient business operations. We integrated our new production facility at Ambernath with existing systems and processes.
Your Company is using technology for various business activities including HR processes. We will continue to leverage technology and setup "Green Initiatives" through use of technology.
On May 28, 2013 and August 10, 2013, the Compensation Committee approved a total of 1,73,560 stock grants equivalent to 1,73,560 equity shares of the Company to eligible employees in terms of the ESGS Scheme 2011. The exercise price is Rs. 1/- per equity share. As on March 31, 2014 and in terms of the ESGS Scheme, 2011, a total of 2,89,343 grants were vested, exercised and allotted.
During the financial year 2013-14, no ESOP's were granted. In the current year, in accordance with the opinion issued by the Expert Advisory Committee (EAC) of the ICAI in 2014 on Consolidation of ESOP Trust in the standalone financial statements, the Company has included the financial statements of the ESOP trust for preparation of the standalone financial statements. Consequently, the assets and liabilities of the Trust have been included in the financial statements of the Company and investments in the equity shares of the Company held by the Trust has been reduced from the share capital and reserves & surplus.
Disclosure in compliance with clause 12 of the Securities and Exchange Board of India (Employees Stock Purchase Scheme) Guidelines, 1999 is given in Annexure C attached and forms a part of this report.
Public Deposits
Your Company stopped accepting public deposits. The management of the Company is thankful to all the investors for their continued trust in the Company. During the year ended March 31, 2014, deposits aggregating to Rs. 15 crore have been mobilised and deposits aggregating to Rs. 37 crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
Your Company's equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2014, 99.78% of the equity shares of your Company were held in demat form.
Mr. J. N. Godrej and Ms. T. A. Dubash, both Director, retire by rotation at the Annual General Meeting and being eligible offer themselves for re-appointment. The Board of Directors recommend their re-appointment.
The Company had appointed Mr. S. A. Ahmadullah, Mr. A. B. Choudhury, Mr. K. K. Dastur, Mr. K. M. Elavia, Dr. N. D. Forbes and Mr. K. N. Petigara as Non-Executive Directors, liable to retire by rotation. They are also the Independent Directors pursuant to the provisions of Clause 49 of the Listing Agreements entered into with Stock Exchanges.
As per section 149 of the Companies Act, 2013 (Act), which came into effect from April 1, 2014, every listed public company is required to have at least one-third of the total number of directors as Independent Directors. These Independent Directors are not liable to retire by rotation. Accordingly, it is proposed to appoint Mr. S. A. Ahmadullah, Mr. A. B. Choudhury, Mr. K. K. Dastur, Mr. K. M. Elavia, Dr. N. D. Forbes and Mr. K. N. Petigara as Independent Directors, in accordance with the provisions of section 149 of the Act, to hold office as per their tenure of appointment mentioned in the Notice of the Annual General Meeting of the Company.
Auditors
You are requested to appoint Auditors and to authorise the Board to fix their remuneration. The retiring auditors Kalyaniwalla and Mistry, Chartered Accountants, are eligible for reappointment. A certificate from the Auditors has been received to the effect that their reappointment, if made, would be within the prescribed limits.
The Audit Committee, constituted pursuant to the provisions of the Companies Act and the listing agreement, has reviewed the Accounts for the year ended March 31, 2014. The members of the Audit Committee are Mr. K. K. Dastur, Mr. S. A. Ahmadullah, Mr. K. N. Petigara and Mr. A. B. Choudhury, all Independent Directors.
Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your Company confirm:
a) that in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;
The Directors of your Company further confirm that proper systems are in place to ensure compliance of all laws applicable to the Company.
Annexure D to this Report gives information in respect of Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forms a part of the Directors' Report.
In the context of a globalizing Indian economy, increased number of subsidiaries and the introduction of accounting standards on consolidated financial statements, the Ministry of Corporate Affairs vide its general circular no.2/2011 dated February 8, 2011 has granted a general exemption from publishing the accounts of subsidiaries provided certain conditions are fulfilled. In line with the above circular and as per the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial statements of the Company forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries. The Audited Annual Accounts and related information of the Company's subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company's registered office in Mumbai,
India. The subsidiary companies' documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.
The Ministry of Corporate Affairs (MCA) has vide its Circular No.8/2014 dated April 4, 2014 has clarified that the financial statements (and documents required to be attached thereto), auditors report and Board's report in respect of financial years that commenced earlier than April 1, 2014 shall be governed by the relevant provisions/schedules/rules of the Companies Act, 1956.
Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors' Report. As per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees under section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office of the Company.
Mumbai, May 28, 2014.
DIRECTORS' REPORT:
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2013.
The Board of Directors of your Company recommends a final dividend of Rs. 1.75 per equity share of Rs. 1 each, aggregating to Rs. 58.69 crore (previous year Rs.1.75 per equity share).
Raising of Funds Pursuant to Institutional Placement Programme
During the financial year ended March 31, 2013, your Company issued and allotted 1,72,33,407 equity shares of Rs. 1 each at a premium of Rs. 214 per equity share, aggregating to Rs. 370.52 crore, to eligible qualified institutional buyers pursuant to an Institutional Placement Programme ("IPP") in terms of Chapter VIII-A of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended. The public shareholding in your Company, has increased to 25% of its issued and paid up equity share capital pursuant to the IPP. The equity shares allotted pursuant to the IPP were admitted for listing and trading on BSE Limited and The National Stock Exchange of India Limited with effect from July 30, 2012. The net issue proceeds have been partially utilised for investment and balance unutilised amount has been temporarily invested in mutual funds schemes and fixed deposit with banks.
1. Industry Structure and Developments
2. Discussion on financial performance with respect to operational performance
3. Segmentwise performance
4. Human Resources and Industrial Relations
5. Opportunities and Threats
6. Internal Control Systems and their adequacy
7. Risks and Concerns
8. Outlook
Your Company has interests in several industries including animal feeds, poultry and agro-products, oil palm plantation, property development, personal and home care, etc. through its subsidiary / associate / joint venture companies.
GAVL continued on its growth path during the year under review. GAVL's consolidated revenue and profits increased by 26% and 22% respectively, over last year.
The Animal Feed business recorded a growth of 33% in revenues and 30% in profitability. The strong performance in sales revenue and profitability was on account of increased volumes, innovative products backed by R&D efforts and efficiency in buying. This division of GAVL commissioned new plants at Erode (Tamil Nadu), Khanna (Punjab) and Kharagpur (West Bengal). This division also introduced two new Cattle Feed products, viz., Bovino Calf Grower and Bovino Heifer Feed.
GAVL's Vegetable Oil operations registered a creditable growth in the Fresh Fruit Bunches arrival of 19% over F.Y. 2011-12. Sales during the year under review recorded a growth of 23% over the previous year. This division of GAVL established a new plant at Chintampalli, Andhra Pradesh.
The Agri inputs division of GAVL reported a sales growth of 17% despite adverse environmental conditions in the form of a highly erratic and deficient monsoon. GAVL has been able to penetrate into new markets and crops with the help of innovative products i.e. 'Double', a new generation Plant Growth Regulator and additional variants of 'Zymegold', a micronutrient.
GAVL continues to be the holding company of Golden Feed Products Limited and Godrej Seeds & Genetics Limited (GSGL). GSGL recorded a sales of Rs. 19 crore during the year under review. During the year under review, GAVL acquired 100% stake in Goldmuhor Agrochem & Feeds Limited. GAVL continues to have joint venture arrangement in ACI Godrej Agrovet Private Limited (Bangladesh) and Godrej Tyson Foods Limited. During the year under review, V-Sciences Investments Pte. Limited, a Temasek Group company, acquired 19.99% stake in GAVL.
GPL is the real estate development arm of the Godrej Group, with a pan-India presence and an asset light business model. In spite of the current uncertainties and challenges in the real estate environment, GPL successfully demonstrated strong value addition to its development portfolio. During the financial year ended March 31, 2013, GPL signed 8 new projects totalling approximately 13 million sq. ft. of saleable area. GPL successfully created a residential co-investment platform along with an investment consortium headed by the APG Asset Management, a Dutch Pension Fund Management Company, with a total corpus of over Rs.1,000 crore. This fund will enable GPL to source value accretive deals with large capital requirements. GPL will receive development management fees for all projects undertaken under the fund plus a share of equity profits from the projects. GPL continued to make significant progress in the Mumbai re-development space by signing five new re-development projects in Mumbai.
GPL launched 13 new projects and phases across the country. While volumes for the real estate sector have declined for the second consecutive year, GPL has delivered 58% growth in booking volume and 78% growth in booking value driven by successful new launches in Gurgaon, Bangalore, Kolkata, Pune, Ahmedabad and Mumbai. The highlight of the year was the successful launch of Godrej Summit in Gurgaon where GPL sold 695 apartments aggregating to 1 million sq. ft. of saleable area in 1 day. During the year under review, GPL sold approx. 4.1 million sq. ft. of area with a total booking value of approx. Rs. 2761 crore, spread across all its locations. Another milestone GPL achieved during the year was the handover of 535 apartments in Phase I of Godrej Prakriti in Kolkata within the time period committed to the customers.
GPL continues to be at the forefront of sustainable development. 74% of GPL's inventory launched in the last financial year was registered/pre-certified as green by the Indian Green Building Council; up from 67% in FY 12 and 26% in FY 11. Key achievements in this area include numerous sustainable design certifications received during the year. These include Gold Pre-certifications for Godrej Horizon in Pune, Serenity in Mumbai and Gold County in Bangalore, all under the IGBC Green Homes rating system v. 1.0. Godrej Central in Mumbai, which is yet to be launched, has been awarded Silver Pre-certification under the IGBC Green Homes rating system v 2.0. Under Green operations, GPL is working on reducing energy, water consumption and waste generated at its administrative offices in accordance with the Group wide Good & Green Initiative.
NBL which operates in the gourmet food retail segment and is a wholly owned subsidiary of your Company has been increasing its foothold across cities. NBL is 'the' retail destination for gourmet and fine food in India. NBL scaled up its business by adding 8 new stores this fiscal year to take up the count to 27 stores, all located at premium residential areas, across 6 key metros - Mumbai, Delhi, NCR, Pune, Hyderabad and Bengaluru.
NBL's business growth continued to outpace other food and grocery retailers and it was recognized as the finest retailer in multiple forums. NBL's gross turnover for the fiscal year 2013 was Rs. 136 crore, with a growth of 55% over the previous year. More than 2,500 new products were introduced in the year to take up the contribution from new products to 9%. Sales throughput continues to be one of the highest within the food and grocery industry.
NBL introduced new sections such as healthy alternatives, gifting and premium chocolates. NBL won the Coca Cola Golden Spoon Award for the Most Admired Specialty Retailer of the Year for the third successive year and also bagged the award for the Most Admired National Supermarket Chain of the year at the prestigious Food and Grocery Forum. NBL also won awards across multiple forums like Asia Retail congress, IMAGES Retail Forum, CMO Asia etc.
GCPL, an associate of your Company had a good year, inspite of tough market conditions and is well underway towards becoming an emerging markets FMCG company. On a consolidated basis, GCPL reported Income from operations of Rs. 6,407 crore and Net Profit (after minority interest) of Rs. 796 crore as against Rs. 4,866 crore of Income from Operations and Net Profit (after minority interest) of Rs.727 crore for the previous year.
While GCPL's salience of international revenues increased to 44%, it also ensured strong growth momentum in its domestic business with a healthy 20% organic growth. GCPL focus has been to accelerate innovation and back new products with strong marketing investments. In the past year, GCPL had several new launches in the domestic and international businesses. These launches, we believe, will further enhance GCPL's competitiveness, improve the equity of its brands and drive increased penetration and consumption.
GCPL has gained both volume and value share and grown well ahead of the market in its domestic business. The performance in household insecticides and soaps in particular has been excellent and well ahead of the category. In hair colors, while the Company faced some challenges, the Company turned the corner with growth in the last quarter far ahead of category growth. GCPL continues to realize synergy benefits from the merger with the erstwhile Godrej Sara Lee Limited and is rapidly expanding and deepening its distribution. GCPL is also investing significantly in a future ready sales system and making its supply chain more agile.
On the international front, growth in GCPL's Indonesian business has been very strong and it remains very optimistic about the long-term prospects of the business. The potential of its Africa business is also tremendous and the integration of Darling acquisition is on track. In its Latin America business, while top line growth has been strong, there were some near term margin pressures given the economic environment. GCPL's UK business has grown ahead of a generally weak market environment.
Other Subsidiaries and Joint Venture
Godrej International Limited (GINL), a wholly owned subsidiary of your Company trades in vegetable oils worldwide. GINL turnover increased by 19% to US$ 245 million.
Godrej International Trading & Investments Limited (GITI), a wholly owned subsidiary of your Company, was incorporated in Singapore for the purpose of trading in vegetable oils. GITI increased turnover and profits in its second full year of trading. During the year under review, the turnover was US$ 14 million and after-tax profit was US$ 0.12 million. GITI is already a recognised and well established player in the vegetable oils market in Asia.
Ensemble Holdings & Finance Limited (EHFL), a wholly owned subsidiary of your Company, is a Non-Banking Finance Company. The Gross Income of EHFL for the financial year ended March 31, 2013 was Rs.3.35 crore as against that of Rs. 1.29 crore last year. The net profit of EHFL during the financial year ended March 31, 2013 was Rs. 2.71 crore as against that of Rs.1.08 crore last year.
Swadeshi Detergents Limited (SDL), an associate of your company became a wholly owned subsidiary of your Company during the year. Your Company has filed a Company Petition with the High Court, Bombay for amalgamation of SDL into your Company.
Godrej Hershey Limited (GHL) and its subsidiary Nutrine Confectionery Company Limited (NCCL) are no longer a joint venture. During the year under review, your Company divested its entire 43.37% stake in GHL to the Hershey Group and thus GHL and NCCL ceased to be a part of the Godrej Group.
The financial position of your company continues to be sound. The loan funds at the end of the year stand at Rs.926.21 crore as compared to Rs.506.72 crore for previous year. The debt equity ratio is 0.56 as compared to 0.40 last year. Your Company continues to hold the topmost rating of A1 + from ICRA for its commercial paper program of Rs.410 crore (enhanced from Rs.260 crore). ICRA has reaffirmed an A1+ rating for its short term debt instruments/other banking facilities of ^850 crore (enhanced from Rs.Rs.750 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed LAA rating for long-term debt, working capital and other banking facilities of Rs. 640 crore (enhanced from Rs.540 crore). This rating represents high-credit quality carrying low-credit risk.
The chemicals division of your Company has manufacturing units at Vikhroli and Valia.
The Vikhroli factory is ISO-9001:2008 and ISO 14001:2004 certified. It has also got OHSAS18001:2007 certificate of Bureau Veritas and ISO 27001:2005 certificate of British Standard Institution.
The Valia factory is also ISO-9001:2008 and ISO 14001:2004 certified. It has also got OHSAS18001:2007 certificate of Bureau Veritas and ISO 27001:2005 certificate of British Standard Institution. The specialty fatty acid plant commissioned in the fourth quarter of FY 2011-12 has delivered excellent product quality and efficiency in variable cost. In surfactant category, this factory produces high quality SLS granules which is used in oral care applications by our customer. This factory strictly follows Current Good Manufacturing Practices.
The Vegoils Division (Wadala) continues as a contract processor of edible oils and vanaspati. The division recorded a turnover of Rs. 6.48 crore as against Rs. 6.26 crore in the previous year.
A new manufacturing facility at Ambernath is being set-up for our chemicals business. Civil foundations for plants, utilities and structural buildings for the plants is progressing well and most of the equipments have also been installed. The facility is expected to be operational from Q3 of financial year 2013-14.
In the year under consideration the R&D activities have resulted in the launch of three new products, each of them being high value derivatives of fatty alcohols, having specialty applications in personal care products and textile auxiliaries. Improvement of existing processes and the endeavor to develop new processes and technologies will be an ongoing activity. Your Company will continue to put its efforts to manufacture premium quality fatty acids from economy grade raw materials. Your Company will also continue to focus attention on high value fractionated fatty acids for the polymer, oilfield and lubricant industries. Parallel to all the above oleochemicals projects, R&D continues its efforts in developing customized specialty surfactants, focusing on the oral care and personal care markets.
Your Company has always emphasized on quality and its employees are encouraged to get involved in the continuous process of improving quality through TQM and Quality Circles. Navnirman Quality Circle from the Vikhroli Factory won the 1st prize at the CII 25th QC competition, Maharashtra State level. The Quality Circle was also recognized as "Par Excellent Quality Circle" by the Quality Circle Forum of India in the National Convention of Quality Circles held in Kanpur.
Industrial relations at all plant locations remained harmonious. Godrej Industries has always stressed on safety of people working in its premises. Regular structured safety meetings were held with employees and safety programmes were conducted for them throughout the year. These efforts were recognized as an award for 'Longest Accident Free Period' and 'Lowest Average Accident Frequency Rate' won by Vikhroli Factory at the Maharashtra Safety Awards Competition conducted by National Safety Council, Maharashtra Chapter.
SEBI, vide its circular CIR/CFD/DIL/8/2012 dated August 13, 2012 had proposed to mandate inclusion of Business Responsibility Report as part of the Annual Reports for listed entities. According to the proposal, the report should describe measures taken by the listed companies along with key principles enunciated in the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business' framed by the Ministry of Corporate Affairs. This is intended to be adopted by companies in India to report their Corporate Social Responsibility (CSR) activities and initiatives. Your Company had voluntarily published its first Sustainability Report last year. This year too your Company is publishing the Business Responsibility Report.
Your company has during the year upgraded the SAP system which will help business processes. Your Company is using technology for various business activities including HR processes. We will continue to leverage technology and setup "Green Initiatives" through use of technology.
On May 30, 2012 and August 11, 2012, the Compensation Committee approved a total of 2,79,314 stock grants equivalent to 2,79,314 equity shares of the Company to eligible employees in terms of the ESGS 2011 Scheme. The exercise price is Rs. 1 per equity share. As on March 31, 2013 and in terms of the ESGS Scheme, 2011, a total of 3,07,618 grants were vested, exercised and allotted.
Disclosure in compliance with clause 12 of the Securities and Exchange Board of India (Employees Stock Purchase Scheme) Guidelines, 1999 is given in Annexure C and forms a part of this report.
Your Company continues to accept public deposits for 13, 24 and 36 months' tenor. The management of the company is thankful to all the investors for their continued trust in the company. During the year ended March 31, 2013, deposits aggregating to Rs.17 crore have been mobilised and deposits aggregating to Rs. 40 crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
Your Company's equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2013, 99.76% of the equity shares of your Company were held in demat form.
In accordance with Article 127 of the Articles of Association of the Company, Mr. K. K. Dastur, Mr. A. B. Godrej, Mr. A. B. Choudhury and Mr. V. M. Crishna retire by rotation at the ensuing Annual General Meeting and offer themselves for reappointment. Mr. M. Eipe, Executive Director & President (Chemicals) ceased to be Director on April 30, 2013, upon attaining the age of superannuation. Mr. M. Eipe has been a Director of the Company since April 1, 2001. Mr. J. S. Bilimoria an Independent Director of the Company passed away on May 3, 2013. The Directors place on record their appreciation of the valuable contribution made by Mr. M. Eipe and Mr. J. S. Bilimoria, during their tenure. Mr. N. S. Nabar was appointed as an Additional Director and Whole-time Director, designated as Executive Director and President (Chemicals), by the Board w.e.f. May 1, 2013. Mr. K. M. Elavia was appointed as an Additional Director by the Board w.e.f. May 28, 2013, in the category of Independent Director, in compliance with Clause 49 of the Listing Agreement with the Stock Exchanges.
You are requested to appoint Auditors for the current year and to authorise the Board to fix their remuneration. The retiring auditors, Kalyaniwalla and Mistry, Chartered Accountants, are eligible for reappointment. A certificate from the Auditors has been received to the effect that their reappointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.
The Audit Committee, which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2013. The members of the Audit Committee are Mr. K.K. Dastur, Mr. S.A. Ahmadullah, Mr. K.N. Petigara and Mr. A. B. Choudhury, all Independent Directors.
As required by clause 49 of the Listing Agreements with the Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company's compliance of the requirements of Corporate Governance in terms of clause 49 of the Listing Agreement and the same is annexed to the Report on Corporate Governance.
In the context of a globalizing Indian economy, increased number of subsidiaries and the introduction of accounting standards on consolidated financial statements, the Ministry of Corporate Affairs vide its general circular no. 2/2011 dated February 8, 2011 has granted a general exemption from publishing the accounts of subsidiaries provided certain conditions are fulfilled. In line with the above circular and as per the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial statements of the Company forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries. The Audited Annual Accounts and related information of the Company's subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company's registered office in Mumbai, India. The subsidiary companies' documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.
Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors' Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees under section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office of the Company.
Place: Mumbai
Date: May 28, 2013.
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2012.
The Total income increased by Rs. 308.59 crore from Rs. 1,254.54 crore to Rs. 1,563.13 crore, a growth of 25%. The Net Profit for the year was Rs. 201.56 crore as compared to Rs. 133.43 crore in the previous year, a growth of 51%.
The Board of Directors of your Company recommends a final dividend of Rs. 1.75 per equity share of Rs. 1/- each, aggregating Rs. 55.64 crore (previous year Rs. 1.75 per equity share).
Subsidiary, Associate and Joint Venture Companies
Your Company has interests in several industries including animal feeds, poultry and agro-products, oil palm plantation, property development, personal and home care, beverages and confectionery, etc. through its subsidiary / associate / joint venture companies.
GAVL has continued on an aggressive growth path and outperformed targets on all major parameters during the year under review. GAVL's revenue grew by 38% over last year and profits before Taxation has grown by 250%.
Based on the Order of the Hon'ble High Court of Judicature at Bombay, approving The scheme of arrangement between GAVL and Godrej Gokarna Oil Palm Ltd, Godrej Oil Palm Ltd and Cauvery Palm Oil Ltd (Oil Palm Companies), Oil palm Companies merged with Godrej Agrovet Limited with effect from April 1st, 2011.
The Animal Feed business posted an 18% growth in volumes and revenue grew by 35%, largely due to focus on R&D and Quality. The profits also grew by a strong 93% as a result of margin expansion.
The Agricultural Inputs business grew aggressively with sales increasing by 32% over last year and profits by 56%, backed by a superb performance by its products Hitweed and HBR.
The Oil Palm business surpassed all expectations, with processing of Fresh Fruit Bunches (FFBs) crossing 1.97 lac MT during the year under review. Sales during the year showed growth of 94% over last year, buoyed by high Crude Palm Oil (CPO) prices, and profits increased by 114%. GAVL has incorporated Godrej Seeds & Genetics Limited (GSGL) during the second quarter of the year under review.
Godrej Properties Limited (GPL) is the real estate development arm of the Godrej Group. GPL brings the Group's philosophy of innovation and excellence to the real estate industry while aspiring to continue to be the most trusted name in the industry.
GPL ended the year on a positive note by reporting healthy financial performance in what has been a challenging year for Indian real estate. The consolidated total income increased by 47% to Rs. 8,198 million from Rs. 5,589 million in FY 11. Several factors including high interest rate regime, rising costs and slow regulatory approvals impacted sales volumes, profitability and new launches. Given the external environment, the performance is testimony of the Company's robust business model.
GPL successfully concluded its fund raising exercise by raising Rs. 4,707 million through the Institutional Placement Program (IPP). By doing so, GPL became the first Indian Company to take this route after it was introduced by SEBI earlier this year.
An important development for the year has been the appointment of Pirojsha Godrej as Managing Director and Chief Executive Officer with effect from April 1st, 2012. Ever since Pirojsha joined the Company in 2004, he has been closely involved in all the strategic initiatives and operations at GPL. He also anchored very successful the IPO and IPP of Godrej Properties. V Srinivasan has been appointed as Executive Director. His last role was the Chief Financial Officer and Company Secretary at Godrej Industries.
GPL continued to witness healthy demand momentum for all its projects. The total booking value this year was Rs. 15,625 million and the booking area was 2.4 million square feet.
GPL witnessed the highest number of strategic partnerships in a year in the history of the Company with the signing of 10 new projects of which seven are in high growth markets of Mumbai, NCR and Bengaluru. GPL also entered into a landmark alliance with Godrej & Boyce during the year for all future development of Godrej & Boyce owned land in Vikhroli, Mumbai. The year 2011-12 marks GPL's foray into Mumbai's redevelopment space. There is tremendous opportunity for redevelopment in Mumbai where housing demand is high and there are severe constraints on the land availability within the city limits. In line with the asset light model of the company, GPL also executed two private equity deals at favorable valuations.
GPL continues to retain its emphasis towards achieving excellence in responsible and sustainable development by designing and building properties with high impetus on human and environmental health. Two of the new projects at Vikhroli, Mumbai, Godrej Platinum, a residential project and 'Godrej One', the first commercial building of our flagship project 'The Trees' received Platinum Pre-certification, which is the highest available rating for green building.
GINL is our Subsidiary Company, which trades in vegetable oils. In fiscal year 2012, GINL turnover increased by 27% to US$ 205.287 million but profits fell to US$ 1.513 million. Contrary to expectation, palm oil prices remained strong throughout the year inspite of a big increase in production. The company continues to expand volumes each year.
Godrej International Trading & Investments Pte. Limited (GITI)
GITI was established in Singapore as our wholly owned subsidiary. Singapore being strategically located, the intention is to consolidate all our vegetable oil trading activities and oil palm investments in South East Asia in this company which is strategically located in Singapore. During the year GITI commenced trading successfully with turnover of US$ 3.904 million and after-tax profits of US$ 176,488.
Our foray into gourmet food retailing, Natures Basket, has been ramping up very well with a strong expansion in Mumbai and beyond. NBL currently has 20 stores and plans for 8 new stores in the coming year. The business is well positioned as 'the' ultimate retail destination for gourmet and fine food and provides an excellent rub off on the Godrej brand.
The gross turnover of this business for the fiscal year 2012 was Rs. 82 crore with a growth of 50% over the previous year 2010 - 11. We intend to focus on growing this business and its profitability over the next few years.
Through its expansion across India, NBL now has operations in major cities of Mumbai, Pune, Delhi/NCR, Hyderabad and Bengaluru. Its product portfolio contains globally recognized brands.
NBL continues to register robust year on year growth and boasts of world best levels in terms of sales per sq. ft. amongst food retailers. Its strong model, high quality product assortment and in store service levels has helped it carve a distinctive niche in the food industry and paved the way for further expansion into newer cities.
NBL was recognized as the retailer of the year at the Asia Retail Congress in 2012 and also as the Most outstanding Foreign Food retailer of the year at the Food and Grocery Forum for the second successive year.
Godrej Hershey, our food and beverages business is a Joint Venture between The Hershey Company (USA) and the Godrej Group, with your Company holding a 43.4% stake. This JV operates in multiple categories such as confectionery, beverages, and grocery items.
The Beverages portfolio consists of Jumpin (fruit drinks), Xs (juices and nectars) and Sofit (soya milk). Sofit is the market leader in the niche but fast growing soya milk market.
During fiscal year 2012, beverages grew 7% over the previous year and chocolate syrup grew by 23%. Both beverage brands, Jumpin and Sofit were made stronger with a consumer relevant re-stage exercise.
Nutrine Confectionery Company Limited (NCCL)
Nutrine Confectionery Company Limited, a wholly owned subsidiary of GHL is a major player in the sugar confectionery business in India. Its product portfolio includes strong brands like Maha Lacto, Maha Coffee Eclair, Gold Eclair, Nutrine Eclair, Nutrine Lollipop, Aamras and Honeyfab, and newly launched Choco Roco at price point of Rs. 2 & Rs. 5. NCCL has maintained its position as a leading player in confectionery market in core states and the new product launches this year have reinvigorated its portfolio. Eclair category continues to do well across all variants and will be a big driver for the confectionery growth. The big thrust has been investment in brand building and the core brands and innovations have been aggressively supported in mass media.
The steep increase in inputs costs, primarily sugar, has put severe pressure on margins and NCCL has undertaken some major cost savings projects during the year, which have yielded benefits. NCCL continues to focus and innovate products at higher price points with improved profitability.
FY 2012 had been an eventful and action packed year for GCPL. This year GCPL enjoyed healthy sales growth and market share gain in most of its categories.
GCPL continues to focus on growing ahead of the market, driving consumption & penetration and strengthening its portfolio. GCPL continues to be the Largest Indian Household and Personal Care Company. During the year Household Insecticide category delivered robust performance far ahead of the category growth. GCPL continues to enjoy market leadership position in the home insecticides and liquid detergents categories and we are very optimistic of the future growth opportunities in this category.
GCPL's domestic businesses performed impressively, led in particular by strong growth in soaps and household insecticides. Overseas too it has performed creditably with Indonesia and Africa doing particularly well. Consolidated Net Sales stood at Rs. 4,866 crore, as against last year's Sales of Rs. 3,693 Crore and Consolidated Profit After Tax increased by 41% from Rs. 515 Crore last year to Rs. 727 Crore (after minority interest) in the current year.
The just concluded fiscal has been a year of both consolidation and growth. Internationally, GCPL has further expanded its footprint by entering new geographies in Africa and Latin America. During the year under review, GCPL acquired rights for 51% stake in a pan-African leading hair care company, Darling Group Holdings. This acquisition enables GCPL to become a leading player in hair care across sub-Saharan Africa region with presence in 14 countries across the region. 38% of revenues in fiscal year 2012 came from international operations.
GCPL also expanded its presence in Latin America with the acquisition of a 60% stake in Cosmetica Nacional, a leading hair colorant and cosmetics company in Chile. This transaction apart from giving GCPL a foothold in the continent's fastest growing economy has also enabled GCPL to own some highly regarded heritage brands like "Pamela Grant" and "Illicit".
The financial position of your company continues to be sound. The loan funds at the end of the year stand at Rs. 506.72 crore as compared to Rs. 554.23 crore in the previous year. The debt equity ratio is 0.40 as compared to 0.49 last year. Your Company continues to hold the topmost rating of A1+ from ICRA for its commercial paper program (Rs. 260 Crore) (enhanced from Rs. 160 Crore). ICRA has reaffirmed an A1+ rating for its short term debt instruments/other banking facilities (Rs. 750 Crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed LAA rating for long-term debt, working capital and other banking facilities (Rs. 540 Crore). This rating represents high-credit quality carrying low-credit risk.
ICRA Online has assigned a rating of the Fundamental Grade '4+' and the valuation Grade 'B' to the Equity Research rating program of your company. The Fundamental Grade '4' assigned to your company implies that the company has 'strong fundamentals' relative to other listed securities in India, while '+' indicates relatively stronger position within the grading category. The Valuation grade 'B' assigned by ICRA Online implies that the company is "moderately undervalued on a relative basis".
Vikhroli: Vikhroli factory continues to be recertified Integrated Management System (ISO 9001:2008, Environment Management System ISO 14001:2004, Occupational Health & Safety Assessment System OHSAS 18001:2007) conducted by Bureaus Veritas.
Valia: Valia factory, which has been already certified for ISO-9001:2008 and ISO 14001:2004 standards, has also been certified for OHSAS18001:2007 by Bureau Veritas and recertified for and ISO 27001:2005 by BSI.
New products C20-90%, C22-98% Fatty Alcohols were successfully Produced on commercial scale, new spray dryer plant was successfully commissioned for the production of SLS powder and needles. This Factory has achieved its full capacity. Strategy to convert sulphonation facility to produce only SLS and SLES was implemented successfully. Sulphonation plant has also achieved its rated capacity for SLS/SLES.
The factory has implemented and is maintaining the Current Good Manufacturing Practice systems for the Surfuctant plant. This facility is also approved by multinationals for usage of SLS and SLES for oral and personal care applications.
Vegoils Division (Wadala): This division continues as a contract processor of edible oils and vanaspati. The division recorded a turnover of Rs. 2.44 crore as against Rs. 2.86 crore in the previous year.
New manufacturing facilities at Ambernath: Work on new site at Additional Ambernath has commenced and phase one (Land leveling, compound wall and underground water tank and fire water tank has been completed.)Phase two comprising of plant foundations and structures has begun and is in progress.
Research and Development
Your Company is proud to announce that Godrej Industries Limited Research Centre has been accorded the designation of a "Recognized In-House R&D Unit" by the Department of Scientific and Industrial Research (DSIR) Wing of the Department of Science and Technology.
Coinciding with the government recognition, our R&D activities have resulted in the launch of four new products, each of them being high value derivatives of fatty alcohols, having specialty applications in personal care products and textile auxiliaries. As this year comes to a close, we will be on the cusp of developing our first premium grade derivative of glycerine. Improvement of existing processes and the endeavor to develop new processes and technologies will be an ongoing activity. So too, will be our efforts to manufacture premium quality fatty acids from economy grade raw materials. We will also continue to focus our attention on high value fractionated fatty acids for the polymer, oilfield and lubricant industries. Parallel to all the above projects, R&D has taken up initiatives to develop and customize specialty surfactants, focussing on the oral care and personal care markets, thus delivering customer delight.
Your Company has always emphasized on quality and its employees are encouraged to get involved in the continuous process of improving quality through TQM and quality circles. Two quality circles from the Vikhroli Factory viz, Shilpakar Quality Circle and Navanirman Quality Circle were recognized as "Par Excellent Quality Circle" and "Excellent Quality Circle" respectively by the Quality Circle Forum of India in the 25th National Convention of Quality Circles held in Hyderabad.
Industrial relations at all plant locations remained harmonious. Your company entered into a 3 year wage agreement for Valia Factory. Regular structured safety meetings were held with employees and safety programmes were conducted for them throughout the year.
Sustainability Update
There is a separate report on sustainability update as Annexure B to this Report.
Your Company has strategic alliance with Hewlett Packard (HP) for a comprehensive IT outsourcing and transformation project. As a result Application and Infrastructure maintenance services have improved. SAP system has been upgraded in order to make substantial improvement in technology as well as business processes. Adequate support is being provided for ensuring technology availability at the new Ambernath location.
Your Company continues to accept public deposits for 13, 24 and 36 months' tenor. The Fixed Deposits scheme has received an overwhelming response and the management of the company is thankful to all the investors for participating in the scheme and for the trust reposed in the company. During the year ended March 31, 2012, deposits aggregating to Rs. 10.10 crore have been mobilised and deposits aggregating to Rs. 15.08 crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
Your Company's equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2012, 99.73% of the equity shares of your Company were held in demat form.
In accordance with Article 127 of the Articles of Association of the Company, Mr. M. Eipe, Mr. J.S. Bilimoria, Dr. N.D. Forbes and Mr. S.A. Ahmadullah retire by rotation at the ensuing Annual General Meeting and offer themselves for reappointment. Mr. F. P. Sarkari ceases to be Director with effect from June 1, 2012. Mr. F. P. Sarkari has been a Director of the Company since January 30, 2002, and was also the Chairman of the Audit Committee of Directors. The Directors place on record their appreciation of the valuable contribution made by Mr. F. P. Sarkari during his tenure.
The Audit Committee, which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2012. The members of the Audit Committee are Mr. F.P. Sarkari, Mr. S.A. Ahmadullah, Mr. K.N. Petigara and Mr. K.K. Dastur, all Independent Directors.
In the context of a globalizing Indian economy, increased number of subsidiaries and the introduction of accounting standards on consolidated financial statements, the Ministry of Corporate Affairs vide its general circular no.2/2011 dated February 8, 2011 has granted a general exemption from publishing the accounts of subsidiaries provided certain conditions are fulfilled.
In line with the above circular and as per the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial statements of the Company forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries.
The Audited Annual Accounts and related information of the Company's subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company's registered office in Mumbai, India. All these reports / documents are available on the Company's website, www.godrejinds.com . The subsidiary companies' documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.
Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors' Report. As per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees u/s 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office of the Company.
Details of related party transactions are presented in Note No. 46 to Annual Accounts of the Annual Report. The Notes to the Accounts referred to in the Auditors' Report is self-explanatory. In respect of the qualifications in the Audit Reports, we state as follows:
Loans and Advances include Rs. 10.33 crore (Previous year Rs. 10.33 crore) advanced by the Company to certain individuals against pledge by way of deposit of equity shares of Gharda Chemicals Ltd. The Company has enforced its security and lodged the shares for transfer in its name, however, the transfer application has been rejected by Gharda Chemicals Ltd. and the Company filed an appeal before the Company Law Board against the rejection. The investee company had in the meanwhile, moved the Bombay High Court and the Court remanded the matter back to CLB. The CLB has advised that the parties may approach the Bench after final disposal of the suit filed by the investee company and the application made by minority shareholders under section 397/398 before the Hon'ble High Court. The Company has filed an appeal with the Hon'ble High Court against the order of the Company Law Board under Section 10 F of the Companies Act 1956, which is pending for final disposal. The recoverability of the advance is contingent upon the transfer and/or disposal of the said shares. It is the opinion of the management that the underlying value of the said shares is substantially greater than the amount of the loan. In the meantime, the minority shareholders have been restrained from transferring shares to a third party.
Non current investments include Rs. 0.12 crore for investment made in Gharda Chemicals Limites (GCL) which is not in the name of the Company. The Company had lodged the transfer deed for effecting transfer of shares in its name with GCL which was refused by them.
A.B. Godrej
Mumbai, May 30, 2012
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2011.
The Board of Directors of your Company recommends a final dividend of Rs. 1.75 per equity share of Rs. 1/- each, aggregating Rs. 55.58 crore (previous year Rs. 1.50 per equity share).
Management Discussion And Analysis
• Segmentwise performance
Subsidiary, Associate And Joint Venture Companies
Your Company has interests in several industries including animal feeds, agri-inputs, oil palm plantation and poultry, property development, personal and home care, beverages and confectionery, etc. through its subsidiary / associate / joint venture companies.
Fiscal year 2011 has been an excellent year for GAVL. Consolidated Turnover increased to Rs. 1,897.47 crore, a 20% jump over the previous year and the Consolidated Profit after tax but before extra ordinary income increased from Rs. 32.58 crore to Rs. 59.57 crore, an increase of 83%.
The core businesses of Animal Feeds and Agri Inputs have had a very good year. The Animal Feeds business broke out of flat tonnages and registered a volume growth of over 10%. Several initiatives undertaken over the last few years -separating the poultry and cattle feed sales forces, building a strong marketing team, implementing SAP and investing in R&D - have begun to deliver substantial results and contributed to improving business performance. In fact, GAVL won an award for Customer Excellence from SAP for the excellent SAP implementation at GAVL.
GAVL also completed acquisition of the 51% stake in their Aqua Feed joint-venture, Godrej Gold Coin Aquafeed Limited, this year, and has since been merged with GAVL.
The Animal Feed business recorded a strong growth of 12% in volumes and 13% in revenue. Profitability too grew significantly by 63%, due to measures undertaken for margin expansion. GAVL also launched 'Summer Kool', a heat stress preventive cattle feed additive and 'Super Star,' a high performance broiler feed. Both these products were well accepted and received overwhelming response from the market.
The Agricultural Inputs business had a very good year and grew by 20% in revenue and 40% in profit. Hitweed, our herbicide for broad leaf crops was a great success, with volumes growing from 21 KL in 2009-10 to 71 KL this year.
The Oil Palm business has attained a major milestone by crossing one lac MT of Fresh Fruit Bunches crushed during the year. During the year about 4,000 ha. were covered under Oil Palm Plantation taking the total to about 38,000 ha. Improvement in operational efficiencies and additional arrivals from newly emerging areas helped the business to post improved results during the year. Turnover increased to Rs. 115 crore, a jump of 80% over the previous year. Operating profit increased from Rs. 8 crore to Rs. 21 crore. During the year, the business successfully completed a capital expenditure programme including acquiring of Land at Chintampalli, Andhra Pradesh, for a new Palm Oil Mill and augmentation of capacity of existing Mill from 30 TPH to 40 TPH. The Union budget has allocated Rs. 300 crore towards the development of Oil Palm sector which is expected to boost performance of the business going forward.
Revenues from Poultry increased by 40% in FY 2010-11 as compared to the previous year.
GPL continues to take substantial strides towards its ambition of becoming a leading national real estate developer. GPL reported excellent financial and operational performance for fiscal year 2011. Consolidated total income increased by 43% over the previous year to Rs. 558.9 crore and net profit increased by 7% to Rs.130.9 crore.
This business has unprecedented growth opportunities ahead with the scale rapidly increasing. The organization is also becoming more complex as it develops a pan India footprint.
GPL registered notable volumes this year, with successful launches in high growth cities and reported healthy construction progress across all existing projects, including Ahmedabad, Gurgaon, Kolkata, Bangalore and Mumbai.
Bookings grew by 132% over the previous year to 3.2 million square feet. Godrej Garden City, our township project in Ahmedabad, continued to receive a strong response with bookings of 1.6 million square feet. Godrej Frontier, our foray into the National Capital Region, registered bookings of 0.68 million square feet and Godrej Prakriti, our residential project in Kolkata, saw bookings of 0.63 million square feet in the year.
In January 2011, the 35 acre, 2.8 million square feet mixed-use development, at Vikhroli, 'The Trees', was launched. GPL also entered into a joint development agreement with Bombay Footwear to develop 0.15 million square feet of residential space in Chembur, Mumbai and formed a separate subsidiary to focus on redevelopment opportunities in Mumbai.
Planet Godrej, Mumbai, was awarded the first Seven Star rating to any project by CRISIL and Godrej Eternia, Chandigarh received a Leadership in Energy and Environmental Design (LEED)-Platinum pre-certification. GPL also won the Construction World Award 2010 and was recognised as being among India's top ten builders for the fifth consecutive year. GPL continues to focus on being an employer of choice and was ranked in the Top 100 in 'India's Best Companies to Work For', a study conducted by the Economic Times.
Godrej International Limited (GINL)
Godrej International Limited is our subsidiary company, which trades worldwide in vegetable oils. In fiscal year 2011, GINL turnover increased by about 34% over the previous year to US$ 161.70 million and profits increased by about 46% to US$ 2.23 million. This performance has been noteworthy, given that it comes at a time of difficult and volatile markets. The lagging impact of the economic crisis seems to be reversing and we expect GINL to continue to do well in the year ahead.
Our foray into gourmet food retailing, Natures Basket, has been ramping up very well with a strong expansion in Mumbai and beyond. We currently have 14 stores and plan for 8 new stores in the coming year. The business is well positioned as 'the' retail destination for gourmet and fine food and is an excellent rub off on the Godrej brand.
The gross turnover of this business for the fiscal year 2011 was Rs. 56 crore, a growth of 63% over the previous year. We intend to focus on growing this business and its profitability over the next few years.
Godrej Hershey Limited (GHL)
During fiscal year 2011, beverages grew 10% over the previous year and chocolate syrup grew by 47%. Both beverage brands, Jumpin and Sofit were made stronger with a consumer relevant re-stage exercise.
Nutrine Confectionery Company Limited, a wholly owned subsidiary of GHL, is a major player in the sugar confectionery business in India. Its product portfolio includes strong brands like Maha Lacto, Maha Coffee Eclairs, Maha Choco, Nutrine Eclairs, Nutrine Lollipop, Aamras and Honeyfab.
NCCL has maintained its position as a leading player in confectionary market and the new product launches this year have reinvigorated its portfolio. During the last year, NCCL re-staged its flagship brand, Maha Lacto and launched Maha Coffee Eclairs and Maha Lacto Hattrick. Maha Coffee Eclairs is a highly differentiated innovation, which gives the consumer a unique coffee and chocolate experience in an eclairs format. The big thrust has been investment in brand building and the core brands and innovations have been aggressively supported in mass media.
The steep increase in input costs, primarily sugar, has put severe pressure on margins and NCCL has undertaken some major cost savings projects during the year, which have yielded benefits. NCCL is also aiming at addressing the issue of margins by launching differentiated product innovations that offer the consumer a marked jump in experience at higher price points.
GCPL had a good fiscal year 2011. Consolidated Net Sales stood at Rs. 3,643 crore, as against last year's Sales of Rs. 2,041 crore and Profit After Tax increased by 51% from Rs. 340 crore last year to Rs. 515 crore in the current year.
This has also been a transformative year on many fronts. In June 2010, GCPL acquired the remaining 52% share in Godrej Sara Lee Limited and with the merger of the two businesses; GCPL is now the largest Indian Household and Personal Care company. We believe that this merger provides us a unique opportunity to significantly change the trajectory of our FMCG business as we leverage the complementary strengths of the two companies to create one GCPL.
GCPL continued the evolution from an Indian FMCG company to a leading emerging markets FMCG company and has followed a very disciplined and focused globalization approach in line with its 3 by 3 strategy - presence in 3 continents - Asia, Africa and Latin America through 3 core categories - home care, hair care and personal wash. Through its numerous acquisitions, GCPL now has operations in Indonesia, South Africa, Nigeria, Argentina, Uruguay, UK and the Middle East. Its products are now available in 55 countries around the globe and about one third of revenues in fiscal year 2011 came from international operations.
GCPL is the leader in hair colour, home insecticides and liquid detergents and the number two player in soaps in the Indian market. GCPL is also the market leader in air fresheners and wet tissues in Indonesia, in hair colours in many countries in Africa and Latin America. GCPL is the number two player in home insecticides in Indonesia and hair extensions in South Africa.
The financial position of your Company continues to be sound. The loan funds at the end of the year stand at Rs. 554.22 crore as compared to Rs. 547.61 crore in the previous year. The debt equity ratio is 0.49 as compared to 0.52 last year. Your Company continues to hold the topmost rating of A1+ from ICRA for its commercial paper program (Rs.160 crore, enhanced from Rs.140 crore). ICRA has reaffirmed an A1+ rating for the short term debt instruments/other banking facilities (Rs. 595 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed LAA rating for long-term debt, working capital and other banking facilities (Rs. 470 crore). This rating represents high-credit quality carrying low-credit risk.
ICRA Online has assigned a rating of the Fundamental Grade '4+' and the valuation Grade 'B' to the Equity Research rating program of your Company. The Fundamental Grade '4' assigned to your Company implies that the Company has 'strong fundamentals' relative to other listed securities in India, while ' + ' indicates relatively stronger position within the grading category. The Valuation grade 'B' assigned implies that your Company is "moderately undervalued on a relative basis".
Vikhroli:
Vikhroli factory has successfully completed two surveillance audits of the Integrated Management System (ISO 9001 : 2008, Environment Management Systems - ISO 14001 : 2004, Occupational Health & Safety Assessment Series - OHSAS 18001 : 2007) conducted by Bureau Veritas.
Valia:
Valia factory, which is already certified for ISO-9001:2008 and ISO 14001:2004 standards, has also implemented OHSAS 18001:2007 and after Certification Audit by Bureau Veritas, it is now recommended for the certificate.
New products C20-90%, C22-98% Fatty Alcohols and Emulsifying Wax were successfully produced on commercial scale, new spray dryer plant commissioned for the production of SLS powder and needles.
The factory has implemented and is monitoring the GMP systems for the surfactant plant.
Vegoils Division (Wadala):
This division continues as a contract processor of edible oils and vanaspati. The division recorded a turnover of Rs. 2.86 crore as against Rs. 2.44 crore in the previous year.
New manufacturing facilities at Ambernath
Your Company has acquired 17 acres of Industrial land at Additional Ambernath MIDC. The project involves expansion (and relocation of some of the existing facilities from Vikhroli) at Additional Ambernath Industrial Area, Thane district with a modern plant with state of the art technology.
The proposed manufacturing facilities at Ambernath will have suitable energy efficient technologies to reduce specific energy consumption.
In continuation of the environment friendly initiatives, your Company has additionally acquired 4 acres of land for GREEN BELT development.
Research And Development
In the current year, we have incorporated a separate R&D Centre, catering exclusively to the Chemicals business. The GIL Research Centre will soon be a recognized In-House R&D Unit, post its approval from the DSIR.
Activities have been initiated to develop new processes and modify existing processes for the manufacturing of premium quality fatty acids from economy grade raw materials. We will continue to focus our attention on high value fractionated fatty acids for the polymer, oilfield and lubricant industries. This year we have launched value added, upstream products, based on fatty alcohols, and continue to develop processes for high value derivatives of glycerine and fatty acids. Parallel to these activities, R&D has also taken up initiatives to develop and customize specialty surfactants specifically for the oral care and personal care markets, thus meeting customers' specific needs.
Your Company was recognised among India's Best 50 Companies to Work in a survey conducted by Great Place to Work Institute, India for inspiring trust among people, instilling pride in them and creating an environment within the workplace that promotes camaraderie.
Your Company has always emphasized on quality and its employees are encouraged to get involved in the continuous process of improving quality through TQM and quality circles. Two quality circles from the Vikhroli Factory viz, Shilpakar Quality Circle and Navanirman Quality Circle were recognized as "Excellent Quality Circle" and "Distinguished Quality Circle" respectively by the Quality Circle Forum of India in the 24th National Convention on Quality Circles held in Visakhapatnam.
Industrial relations at all plant locations remained harmonious. Your company entered into a 3-year wage agreement for Vikhroli Factory. Regular structured safety meetings were held with employees and safety programmes were conducted for them throughout the year.
Your Company had entered into a strategic alliance with Hewlett Packard (HP) for a comprehensive IT outsourcing and transformation project. The transition to HP services has been smooth and without any disruption to business operations. Application and Infrastructure maintenance services are improving on an ongoing basis. Several initiatives were taken on improvement of business processes for increasing business efficiency on the SAP and the CRM systems. These systems are now widely used across the organization as well as by customers.
Employee Stock Grant Scheme 2011
The Shareholders had vide resolution passed through postal ballot on January 17, 2011 approved Employee Stock Grant Scheme 2011. Under the said scheme, the Company, based on performance criteria, will offer and allot shares of the Company for the benefit of employees and directors of the Company and its Subsidiary Companies (except those who are promoters or belong to the promoter group), not exceeding 25, 00,000 (Twenty five lac only) shares on such terms and conditions as may be fixed or determined by the Board. The main objectives of the scheme are:
• To recognize and reward the efforts of employees and their continued association with the Company;
• To introduce an objective component of employee compensation, which would provide a direct linkage to the efforts of the employees with a measurable and widely accepted criterion i.e. the equity share price of the Company. This could act as a motivational tool for the employees of the Company;
• To keep long association with the Company;
• To have employee participation in equity shareholding of the Company;
• To provide the employees an incentive to continue and strengthen their association with the Company so as to result in long term benefits to the Company as well as the employee - share owner;
• Bring long-term value to the equity shareholders;
• Motivate employees to better the Company's performance continuously.
On May 30, 2011, the Compensation Committee approved 3, 61,797 stock grants equivalent to 3, 61,797 equity shares of the Company to eligible employees in terms of the said Scheme. The grants would vest in three equal parts every year over the next three years. The exercise price is Rs. 1/- per equity share as provided in the Scheme.
Group for interse transfer of shares
As required under Clause 3(1) (e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of the aforesaid SEBI Regulations are given in Annexure D attached herewith and forms a part of this Report.
Your Company continues to accept public deposits for 13, 24 and 36 months' tenor. The Fixed Deposits scheme has received an overwhelming response and the management of the company is thankful to all the investors for participating in the scheme and for the trust reposed in the company. During the year ended March 31, 2011, deposits aggregating to Rs. 57.38 crore have been mobilised and deposits aggregating to Rs. 7.87 crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
Your Company's equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2011, 99.70 % of the equity shares of your Company were held in demat form.
During the year, Mr. V. F. Banaji and Mr. M. P. Pusalkar, Executive Directors, retired from the Company with effect from April 30, 2010 and ceased to be directors of the Company. Mr. V. N. Gogate, Independent Director, ceased to be a director with effect from July 27, 2010.
In accordance with Article 127 of the Articles of Association of the Company, Mr. V. M. Crishna, Mr. K. N. Petigara, Mr. J. N. Godrej and Ms. T. A. Dubash retire by rotation at the ensuing Annual General Meeting and offer themselves for reappointment.
Audit committee
The Audit Committee, which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2011. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr. S.A. Ahmadullah, Mr. K.N. Petigara and Mr. K.K. Dastur, all Independent Directors.
Directors' responsibility statement
Corporate governance
Additional information
Annexure E to this Report gives information in respect of Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forms a part of the Directors' Report.
In the context of a globalizing Indian economy, increased number of subsidiaries and the introduction of accounting standards on consolidated financial statements, the Ministry of Corporate Affairs vide its circular no.2/2011 dated February 8, 2011 has granted a general exemption from publishing the accounts of subsidiaries provided certain conditions are fulfilled.
In line with the above Circular and as per the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial statements of the Company along with its subsidiaries forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries.
The Audited Annual Accounts and related information of the Company's subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company's registered office in Mumbai, India. All these reports / documents are available on the Company's website, www.godrejinds.com. The subsidiary companies' documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.
The Notes to the Accounts referred to in the Auditors' Report is self-explanatory. Details of related party transactions are presented in Schedule 20, Note No. 19 to Annual Accounts of the Annual Report. In respect of the qualifications in the Audit Report, we state as follows:
Loans and Advances include Rs. 10.33 crore (Previous year Rs.10.33 crore) advanced by the Company to certain individuals against pledge by way of deposit of equity shares of Gharda Chemicals Ltd. The Company has enforced its security and lodged the shares for transfer in its name, however, the transfer application has been rejected by Gharda Chemicals Ltd. and the Company filed an appeal before the Company Law Board against the rejection. The investee company had in the meanwhile, moved the Bombay High Court and the Court remanded the matter back to CLB. The CLB has advised that the parties may approach the Bench after final disposal of the suit filed by the investee company and the application made by minority shareholders under section 397/398 before the Hon'ble High Court. The Company has filed an appeal with the Hon'ble High Court against the order of the Company Law Board under Section 10 F of the Companies Act 1956, which is pending for final disposal. The recoverability of the advance is contingent upon the transfer and/or disposal of the said shares. It is the opinion of the management that the underlying value of the said shares is substantially greater than the amount of the loan.
Adi Godrej
Mumbai, May 30, 2011
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2010.
DIVIDEND
The Board of Directors of your Company recommends a final dividend of Rs. 1.50 per equity share of Re. 1/- each, aggregating Rs. 47.65 crore (previous year Rs. 1.25 per equity share).
MANAGEMENT DISCUSSION AND ANALYSIS
SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES
Godrej Agrovet Limited (GAVL):
The turnover of GAVL increased from Rs. 1,283.46 crore to Rs. 1,391.60 crore, an 8% increase over the previous year. The Profit after tax but before extra ordinary income increased from Rs. 13.32 crore to Rs. 21.71 crore.
The year under review saw the core businesses of Animal Feeds and Agri Inputs returning an extremely good performance, both in revenue and profit.
The Animal Feed business recorded a growth of 16% in revenue and 31% in profit. The profitability grew due to expansion of contribution margins and control over fixed overheads. The expansion of contribution margins was possible due to efficient sourcing, improved formulation and successful R & D efforts.
The Agricultural Inputs business grew by 19% in revenue and 22% in profitability. This success is even more impressive in the light of a failed monsoon and drought conditions that followed. The sales growth was fuelled by innovative products from in-house R & D in addition to growth in the more commoditised pesticides and Organic Manure Mixture.
GAVL enjoyed significantly lower borrowing costs on account of efficient treasury management. GAVL also successfully implemented SAP in its Animal Feed business and the implementation has started yielding significant business benefits.
During the year, GAVL transferred its entire shareholding in Natures Basket Limited (NBL) to your Company. GAVL continues to be the holding Company of Godrej Oil Palm Limited (GOPL), Cauvery Palm Oil Limited (CPOL) and Golden Feed Products Limited (GFPL).
Godrej Properties Limited (GPL):
During the year 2009-10, GPL entered the capital market with an Initial Public Offer (IPO) of 9,429,750 equity shares of Rs. 10/- each, through 100% Book Building Process wherein 7,732,405 equity shares were allotted to the subscribers, at a premium of Rs. 480/- per share and 1,697,345 equity shares were allotted to certain Anchor Investors at a premium of Rs. 520/- per share. The issue was subscribed about 3.6 times. GPL shares were listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited on January 5, 2010.
GPL posted a total revenue of Rs. 313.43 crore for the year ended March 31, 2010 from Rs. 255.52 crore for the year ended March 31, 2009, thereby a growth of 23% over last year. The net profit grew by 62% at Rs. 124.19 crore for the year ended March 31, 2010 from Rs. 76.62 crore for the year ended March 31, 2009. During the year, GPL successfully completed several projects, most notably the 1st Phase of Godrej Waterside - commercial project in Kolkata, Godrej Woodsman Estate - a residential project in Bangalore and Godrej Coliseum in Mumbai. At the end of 2009-10, the completed developed area of GPL stood at 7.55 mn sq. ft. compared to 3.63 mn sq. ft. in 2008-09. During the year GPL successfully launched mid-income residential projects in Ahmedabad and Kolkata and it commenced operations in Chandigarh, Chennai and Mangalore.
GPL launched a state-of-the art township project, Godrej Garden City in Ahmedabad in March 2010. It is one amongst 16 founding projects of the Climate Positive Development Program, a Clinton Climate Initiative (CCI) program that will support the development of large-scale urban projects that demonstrate cities can grow in ways that are "Climate Positive." Climate Positive real estate developments will strive to reduce the amount of on-site CO2 emissions to below zero. The project received an overwhelming response, the first phase has been entirely booked within 10 days of its launch.
Godrej International Limited (GINL):
GINL trades worldwide in vegetable oils. GINL's turnover increased by about 4% to US$ 120.27 million from US$ 115.50 million whilst profits increased by about 11% to US$ 1.53 million from US$ 1.38 million. The company improved its turnover and profits despite difficult markets and lower unit value of vegetable oils. As the world economy recovers, the company should continue to do well.
Godrej Hershey Limited (GHL):
Your Company holds a 43.4% stake in GHL. During the year under review, beverages grew 8% over the previous year and chocolate syrup grew 82% over the previous year. The gross margin was under pressure due to unprecedented rise in commodity prices particularly, sugar, glucose and dairy products. There were some major cost saving projects undertaken that yielded benefits during this year.
Nutrine Confectionery Company Limited (NCCL):
NCCL, a 100% subsidiary of GHL, is a major player in confectionery business in India. Its product portfolio includes strong brands such as MahaLacto, Nutrine Eclairs, Koko Naka, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand. Nutrine Lollipop was re-launched with an innovative packaging that provided the much needed momentum to the brand thereby doubling its sales. Nutrine Froot Shoot was re-launched with a modern and contemporary packaging to appeal more to the kids and upgrade the brand to justify Rs. 2/- price point. Nutrine Chatkeeli Imli was launched in Q4 which marked the move of GHL into spicy / tangy segment of fruit candies. This market contributes to about 30% of fruit confectionary and is growing at a very healthy rate.
For the first time, a customer relationship program was held for Maha Lacto in which over 2,000 channel partners were invited in a 'Meet & Greet' Dhoni event. This was held in Chennai and turned out to be a huge hit with the wholesalers and distributors who participated in the same.
Apart from this, a consumer promotion was launched in which kids were invited to meet their idol - M.S. Dhoni. This promotion saw an overwhelming response in key states leading to a jump in sales post the event.
Godrej Consumer Products Limited (GCPL):
GCPL is one of the leading companies in the FMCG sector with a presence in the Personal and Household Care business. During the year under review the company has endeavored to build on its strong foundation and to create an even stronger future. The year has seen the introduction of many new products combined with several other growth initiatives which included a focused expansion into the rural and interior regions. GCPL's new product introductions span all the company's categories comprising soaps, hair colourants, toiletries and a new range of hand hygiene products. All these launches have been after a rigorous amount of research and interaction with the target consumer.
In the soaps business GCPL introduced two new variants of Godrej No. 1 namely 'Lime and Aloe Vera' and 'Moisturising soap' with nourishment of Milk Cream & Almonds. With this the Godrej No. 1 portfolio now comprises nine variants. Godrej No. 1 is one of the three chosen power brands of GCPL and is today valued at over Rs. 500 crore. During the year, Godrej No. 1 maintained its leadership position in the States of Uttaranchal, Punjab, Himachal, and Gujarat and has emerged as the leader in Uttar Pradesh as well.
In the hair colourants business, GCPL re-launched its 'Godrej Expert Hair colour' brand during the year. This is GCPL's power brand. Godrej Expert Colour is now available in liquid form as well as powder form. In Renew brand, GCPL launched Godrej Renew's Ravishing Reds Collection with two new shades, Wine Red and Plum Crazy. Both these new launches have been very well liked.
GCPL's international operations too performed encouragingly especially on the back of the 'One Africa' program which enabled it to derive numerous synergies across the continent and thereby strengthen GCPL's presence. Keyline brands' key offerings, namely the 'Cuticura' Hand Hygiene range, 'Bio-oil', P20 performed strongly. In South Africa 'Inecto' Powder Hair Colours have been relaunched. 'Cuticura' Hand Hygiene range, Godrej Expert Hair Colour and Godrej Nupur Mehendi were launched in the GCC and the Middle East in the current year.
GCPL acquired 49% stake in Godrej Sara Lee Limited (GSLL), an unlisted joint venture between the Godrej Group and Sara Lee Corporation USA earlier during the year. Subsequently in, May 2010 it entered into an agreement to acquire the remaining 51% stake. GSLL has a range of products that are complementary to GCPL's existing offerings and there is significant potential to derive synergies from the combined operations. GCPL has also been able to acquire strong, local, personal and household care brand in key emerging markets. It has acquired Megasari, a leading FMCG player in household care sector in Indonesia and has agreed to acquire Tura, a leading personal care player in Nigeria.
Financial Performance of GCPL
On a consolidated basis, GCPL registered a net income of Rs. 2,088.50 crore as compared to Rs. 1,433.13 crore in the previous year and GCPL's profit after tax increased by 96% from Rs. 173.26 crore in the previous year to Rs. 339.59 crore in the current year. GCPL has paid a total dividend at the rate of Rs. 4.25 per equity share of face value Re. 1.
Godrej Hygiene Care Limited (GHCL)
The Board of Directors of your Company, at its meeting held in May 2009, approved a scheme for the merger of GHCL a 100% subsidiary of your Company, into Godrej Consumer Products Limited (GCPL).
The scheme has been approved by the Hon'able High Court, Bombay in October 2009. The Appointed date of the merger is June 1, 2009 and the assets and liabilities of GHCL stands transferred to and vested in GCPL from that date. Pursuant to the said scheme of arrangement, 51,07,125 equity shares held by GHCL in Godrej Sara Lee Limited, stood transferred to and vested in GCPL and your Company received 209,39,409 equity shares of GCPL in lieu thereof as per the terms of the Scheme of Arrangement. 25% of these shares are locked in till November 2012.
FINANCIAL POSITION
The financial position of your company continues to be sound.
The loan funds at the end of the year stand at Rs. 547.61 crore as compared to Rs. 600.96 crore at the end of the previous year. The debt equity ratio is 0.52 as compared to 0.57 last year.
Your Company continues to hold the topmost rating of A1 + from ICRA for its commercial paper program (Rs. 140 crore) (enhanced from Rs. 100 crore). ICRA has also assigned an A1 + rating for its short term debt instruments/other banking facilities (Rs. 595 crore) (enhanced from Rs. 570 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also assigned LAA rating for long-term debt, working capital and other banking facilities (Rs. 370 crore) (enhanced from Rs. 330 crore). This rating represents high-credit quality carrying low-credit risk.
MANUFACTURING FACILITIES
The Chemicals Division of your Company has manufacturing facilities at Vikhroli and Valia. Effective January 1, 2010, leadership across both the factories has been integrated with one head for manufacturing and engineering services.
Vikhroli factory has successfully implemented OHSAS 18001: 2007 standards last year.
Post implementation of OHSAS 18001: 2007, surveillance audit of the Integrated Management System (Quality Management Systems-ISO 9001:2000, Environment Management Systems-ISO 14001:2004 and Occupational Health & Safety Assessment Series-OHSAS 18001:2007), was conducted by Bureau Veritas.
The factory has been re-certified for the Integrated Management System in which ISO 9001:2000 has been upgraded to ISO 9001:2008 standards during last year.
Valia factory has successfully recertified for ISO-14001:2004 & ISO-9001:2008 upgradation after surveillance audit conducted by Bureau Veritas to check the effectiveness and improvements under the system and on environment and quality front. The factory is recommended for continuation of both certificates. This factory has successfully implemented cost effective separation of C8, C10, C12 and C14 alcohols.
Vegoils Division:
This Division continues as a contract processor of edible oils and vanaspati. The division recorded a turnover of Rs. 2.44 crore as against Rs. 2.45 crore in the previous year.
RESEARCH AND DEVELOPMENT
Activities have been initiated to develop new process/modify existing processes for the manufacturing of premium quality fatty acids from economy grade raw materials for high value fractionated fatty acids for the polymer, oilfield and lubricant industries. Parallel to these activities, the R&D department has taken up initiatives to develop customers for specialty surfactants and glycerin for oral care and personal care products to meet their specific needs.
INFORMATION SYSTEMS
Your Company had entered into a strategic alliance with Hewlett Packard (Hp) for a comprehensive IT outsourcing and transformation project. The transition to HP services has been smooth and without any disruption to business operations.
The customer relationship management package (eCRM) has been re-launched on the robust SAP platform. The domestic portal, named Rishta has been rolled out to 150 plus customers. The international eCRM was launched in February 2010 and already has 50 plus key customers.
GROUP FOR INTERSE TRANSFER OF SHARES
As required under Clause 3(1) (e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of the aforesaid SEBI Regulations are given in Annexure C attached herewith and forms a part of this Report.
HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS
Your Company encourages a culture that develops and empowers people, promotes team building, nurtures new ideas and uses information technology to support HR processes and initiatives. These efforts were recently recognized when the Company received an award for "Excellence in HR through Technology" at the World HRD Congress held in Mumbai on February 13, 2010.
Your Company has always emphasized on quality and its employees are encouraged to get involved in the never-ending process of improving quality through Total Quality Management and quality circles. Two quality circles from the Vikhroli Factory of the Company were recognized as "Excellent Quality Circles" by the Quality Circle Forum of India in the 23rd National Convention on Quality Circles held in Bangalore from 19-21 December 2009.
Industrial relations at all plant locations remained harmonious. Regular structured safety meetings were held with employees and safety programmes were conducted for them throughout the year.
Inclusiveness
It has been the endeavour of your Company to provide opportunities to socially and economically underprivileged persons, particularly those belonging to Scheduled Castes / Scheduled Tribes and physically challenged individuals. Your Company supports underprivileged children for education through scholarships and mid-day meal programs at the school level.
Your Company gave permanent employment to five physically challenged persons.
CORPORATE SOCIAL RESPONSIBILITY
Your Company as part of the Godrej group aims to build a brighter, more sustainable India.
During the year your Company undertook various activities as a part of its Corporate Social Responsibility. Your Company instituted the Indian chapter of 'Table For Two' initiative at the World Economic Forum's India Summit in December last year. This initiative was targeted at addressing hunger and malnutrition in the developing world by combining our organization's tradition of serving society and your individual involvement.
Your Company continues to support Heroes AIDS Project (HAP). HAP is a national HIV/AIDS initiative launched in July 2004 to work with media organizations and societal leaders in India. It seeks to develop coordinated campaigns to address the spread of HIV/AIDS and reduce stigma and discrimination by influencing public perception and policy through two platforms, advocacy and communications.
Under the Teach for India initiative, your Company has sponsored one Company employee for a period of 2 years under Teach for India Fellowship program which is run by Teach for India, an organization established in 2008 to bridge the educational divide and increase the participation of highly skilled leaders in the education sector of India. Under this program, the sponsored employee is committed to teach for two years in low-income urban and rural public schools. During the year, your Company donated fly catcher machines through Lions Club to various hospitals, orphanages, old age homes, home for blind, BMC run schools etc. Your Company distributed scholarships to Scheduled Caste (SC) / Scheduled Tribes (ST) primary school children covering three schools and also distributed note books to SC/ST primary school children in village Kanerao.
ENVIRONMENT AND SOCIAL CONCERN
Your Company continues its efforts for the betterment of the environment and conservation of scarce natural resources.
Your Company planted 4,500 trees in the Company's premises at Valia and environmental training sessions were conducted by Company's personnel at ITI Valia and Anchor Institute, DDIT, Ahmedabad and Ankleshwar.
Your Company continued "Rain water harvesting" initiatives undertaken at its factory and in the staff quarters at Vikhroli. So far 18,500 m3 of water has been collected at Vikhroli factory and staff quarters for the Year 2009-10. This process has resulted in saving water and consequently, the costs, thereof.
To prevent pollution to environment, efforts are made to convert waste from the factories into an environment friendly product and then dispose off the same safely. Your Company continued its arrangement with Trans Thane Creek Waste Management Association for the treatment of solid waste being generated at the Company's factory at Vikhroli. More areas of wasteland have been converted into garden using water from ETP.
As part of your Company's continued commitment to conserve natural resources, and also to ward off the ever increasing water shortage, the Company has successfully commissioned a Reverse Osmosis plant to upgrade ETP treated water to boiler feed water resulting into effective recycling of ETP treated water.
Vikhroli factory continues to convert the bio degradable waste into bio compost with the help of an NGO. The Vikhroli factory focused on waste elimination and also continued energy conservation measures.
The Valia factory has improved / modified in Generation / Transfer/ Treatment / Monitoring and disposal pattern of waste water and treated water. Achieved significant reduction of main waste water pollutant parameter i.e. COD Value at inlet of ETP compared to last year and streamlined/optimized the operation and treatment capability of ETP.
FIXED DEPOSITS
Your Company continues to accept public deposits for 13, 24 and 36 months' tenure. The Fixed Deposits scheme has received an overwhelming response and the management of the company is thankful to all the investors for participating in the scheme and for the trust reposed in the company. During the year ended March 31, 2010, deposits aggregating to Rs. 76.38 crore have been mobilised and deposits aggregating to Rs. 0.60 crore have been repaid on maturity. The Company has no overdue deposits other than unclaimed deposits.
DEPOSITORY SYSTEM
Your Company's equity shares are available for dematerialisation through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2010, 99.68 % of the equity shares of your Company were held in demat form.
DEVELOPMENT OF PROPERTY AT VIKHROLI
During the year your Company has entered into a Memorandum of Understanding (MoU) with Godrej & Boyce Mfg. Co. Ltd. and Godrej Properties Ltd. for development of the property at Vikhroli.
The binding MoU provides for setting up of suitable Special Purpose Vehicle(s) to execute joint development of the property as also the commercial terms for such development including the sharing of costs and revenues/profit between your Company and GPL, who would be developing the said property. The MoU is subject to all the parties obtaining appropriate corporate and statutory permissions/ consents to execute the definitive agreements inter-se and the Company obtaining appropriate shareholders' approval.
DIRECTORS
In accordance with Article 127 of the Articles of Association of the Company, Mr. F.P. Sarkari, Mr. S.A. Ahmadullah, Mr. A.B. Godrej, Mr. K.K. Dastur retire by rotation at the ensuing Annual General Meeting and offer themselves for reappointment. Mr. V.N. Gogate, also retires by rotation at this Annual General Meeting. However in view of his advanced age, Mr. V.N. Gogate has not offered himself for reappointment. Mr. V.N. Gogate has been on the Board of the Company since 1995 and the Board records its appreciation for the contribution made by him during his tenure with the Company.
AUDITORS
AUDIT COMMITTEE
The Audit Committee, which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2010. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr. V.N. Gogate, Mr. S.A. Ahmadullah and Mr. K.N. Petigara, all Independent Directors. The Board of Directors of the Company at its meeting held on May 26, 2010 has appointed Mr. K.K. Dastur as an Audit Committee member with immediate effect.
DIRECTORS' RESPONSIBILITY STATEMENT
CORPORATE GOVERNANCE
ADDITIONAL INFORMATION
The Notes to the Accounts referred to in the Auditors' Report is self-explanatory. However in respect of the qualifications in the Audit Report, we state as follows:
Loans and Advances include Rs. 10.33 crore (Previous year Rs. 10.33 crore) advanced by the Company to certain individuals against pledge by way of deposit of equity shares of Gharda Chemicals Ltd. The Company has enforced its security and lodged the shares for transfer in its name, however, the transfer application has been rejected by Gharda Chemicals Ltd. and the Company filed an appeal before the Company Law Board against the rejection. The investee company had in the meanwhile, moved the Bombay High Court and the Court remanded the matter back to CLB. The CLB has advised that the parties may approach the Bench after final disposal of the suit filed by the investee company and the application made by minority shareholders under section 397/398 before the Hon'ble High Court. The Company has filed an appeal with the Hon'ble High Court against the order of the Company Law Board under Section 10 F of the Companies Act 1956, which has been admitted.
The recoverability of the advance is contingent upon the transfer and/or disposal of the said shares. It is the opinion of the management that the underlying value of the said shares is substantially greater than the amount of the loan.
ACKNOWLEDGEMENT
Mumbai, June 4, 2010
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2009.
The Board of Directors of your Company recommends a final dividend of Rs.1.25 per equity share of Re.1 /- each, aggregating Rs. 3997 lac, the same amount which was paid in the previous year.
There is a separate section on Management Discussion and Analysis appended as Annexure A to this Annual Report, which includes the following:
Your Company has interests in several industries including animal feeds, poultry and agro-products, oil palm plantation, property development, household insecticides, beverages and confectionery, personal care, etc. through its subsidiary/associate/joint venture companies.
Godrej Agrovet Limited (GAVL): GAVL recorded a revenue growth of 11% over the previous year, with the turnover increasing from Rs.1,15,435 lac to Rs.1,28,346 lac. The profit after tax and extraordinary items increased from Rs.3,883 lac to Rs.5,838 lac.
The year under review, saw a good turnaround of the animal feed business of GAVL. This was possible due to strategic linkages for sourcing, focus on quality, cost control and timely price increases. The agricultural inputs division of GAVL continued to return a good performance. "Hitweed", the herbicide product launched by GAVL saw a good market acceptance.
Based on the court order, approving the scheme of arrangement between Godrej Agrovet Limited (GAVL) and Goldmohur Foods and Feeds Limited (GFFL), GFFL was merged with GAVL with retrospective effect from April 1, 2007.
The year under review also witnessed some restructuring, with the processed chicken business, being transferred to Godrej Tyson Foods Limited (formerly Godrej Foods Limited)(GTFL). GAVL divested 51% shareholding in GTFL to Tyson Foods Inc., a global Foods major.
GAVL also transferred the gourmet food retailing business, carried under the banner of Nature's Basket, to its 100% subsidiary Natures Basket Limited. This change is expected to bring in a greater focus on this exclusive food retailing business.
GAVL continues to be the holding company of Godrej Oil Palm Limited (formerly Godrej Oil Plantations Limited), Cauvery Palm Oil Limited and Golden Feed Products Limited apart from Natures Basket Limited which was incorporated in the current year. GAVL ceases to be the holding company of Godrej Tyson Foods Limited (formerly Godrej Foods Limited) consequent to divesture of 51% to Tyson Foods Inc.
Godrej Properties Limited (GPL): GPL has posted a total income of Rs. 18,813 lac and the profit after tax was Rs.7,474 lac for the year ended March 31, 2009.
During the Financial Year 2008-09 GPL has signed a MOU with the Ahmedabad Municipal Corporation for the development of a special township project at village Jagatpur, Gujarat.
GPL has a well diversified portfolio spread across established Tier-1 and emerging Tier-II and III locations. The Company's business model of partnering with landowners for sourcing of land coupled with outsourcing strategy for developing each project has helped during this slowdown in the industry.
GPL has filed the Draft Red Herring Prospectus with SEBI on May 28, 2008 in relation to the proposed Initial Public Offer of 9,429,750 equity shares of Rs. 10/- each (including a pre-IPO placement of upto 2,444,750 equity shares).
Godrej International Limited (GINL): GINL trades worldwide in vegetable oils. GINL's turnover increased by 15% to US$ 11,55,04,010 from US$ 10,01,39,390 whilst profits increased by 1.5% to US$ 13,79,611 from US$ 13,60,464. The company successfully weathered a massive downturn in vegetable oil prices during the year and emerged stronger.
Godrej Hershey Limited (GHL): Your Company holds 43% stake in GHL. During the year under review, GHL recorded an impressive 38% growth in sales over last year.
The topline growth was led by Beverages which grew 45%. GHL also added 2 new categories viz., confectionery and syrup, in its portfolio. In June 2008, the manufacturing unit at Nalagarh in Himachal Pradesh commenced operations bringing confectionery into GHL's business. "Hershey Chocolate Syrup" manufactured at Mandideep was launched in November 2008. During the year the sales and marketing functions were restructured to improve focus. The gross margin was under pressure due to rising commodity costs in 2008-09. GHL went live on all business processes in SAP in September, 2008 with connectivity being established across 3 plants, 36 CFAs & 4 regions.
With HR initiatives, GHL employee commitment scores improved significantly in the "Great places to work" annual survey.
Nutrine Confectionery Company Limited (NCCL): NCCL, a 100% subsidiary of GHL, is a major player in confectionery business in India. Its product portfolio includes strong brands such as MahaLacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand.
NCCL recorded growth in sales of 15%. The topline growth was led by distribution expansion, marketing focus and innovations.
The brand architecture was defined for the confectionery portfolio with all rich, creamy and indulgent toffees coming under "Maha" brand & all fruity and spicy variants coming under "Nutrine". New product "Maha Choco" was launched under the "Maha" brand & became the third largest confectionery brand in NCCL. "Santra Goli" was launched under "Nutrine" brand in addition to the revamping of Aamras & Gulkand. M.S. Dhoni, was signed up as the brand ambassador for confectionery portfolio. The gross margin was under pressure due to rising commodity cost of sugar and milk in 2008-09. NCCL went live on all business processes in SAP in September, 2008.
Godrej Sara Lee Limited (GSLL): The consolidated business recorded a sales of Rs. 75465 lac, a 14% growth during the year 2008-09 over the previous year. The business maintained a high profitability focus and achieved a net profit of Rs. 10447 lac, a growth of 19% during the year under review.
GSLL has built its business with consumer at the core of all key activities undertaken by the business. All the operations and initiatives - innovations, brand building, continue to be driven around the philosophy of Consumer Centricity.
Household Insecticides achieved new records in leadership with market share gains and improving profitability. Good Knight saw two new product launches on the advanced platform - Good Knight Advanced Low Smoke Coil and Good Knight Advanced Aerosol. New Television communications for Good Knight Aerosol won international accolades. Hit drove the growth of aerosol segment while maintaining the leadership in this segment.
Global brands, Ambipur and Brylcreem saw launch of new products in the range with Aromatherapy (Lavendar Spa and White Lilies) and Hybridz respectively. The global brand portfolio was fully integrated in the business and saw a growth of 56% for the year over last year.
All the innovations and brand building initiatives were strongly supported by strong on ground activations.
GSLL continued to align sales infrastructure to the growth opportunities in the market. It significantly improved its service to the traditional general trade outlets by adopting a segmentation approach and providing exclusive distributor salesmen for the premium and mass general trade outlets. This effort has resulted in good growth from the general trade. Focussed initiatives in small towns and rural markets helped GSLL to drive growth in these markets. GSLL also continued to strengthen its relationships with the emerging organised retail. Special emphasis was given to build the capability of sales team to deliver superior market execution.
Godrej Consumer Products Limited (GCPL): GCPL continues to be amongst the fastest growing companies in the FMCG sector and has maintained strong growth momentum across its business segments.
During the year GCPL introduced several new products and revamped some of its current offerings to better suit consumer tastes. During the year under review, GCPL commenced production at the new Chemical and Soap Noodle Plant at Malanpur. GCPL launched yet another variant of Godrej No. 1, namely 'Strawberry & Walnut'. The Cinthol range was relaunched with new variants and graphics led by its new brand ambassador Hrithik Roshan.
The year also saw GCPL launch new range of colours in ammonia free powder and liquids under the 'Godrej Expert Hair colour' brand. GCPL also launched new liquid detergent, namely 'Ezee Bright and Soft' which protects colours on everyday clothes.
On a consolidated basis, GCPL registered a net income of Rs.1,39,296 lac as compared to Rs.1,10,256 lac in the previous year and GCPL's profit after tax increased by 9% from Rs.15,924 lac in the previous year to Rs.17,326 lac in the current year. Like the previous year, GCPL maintained a total dividend rate of Rs. 4 per equity share (400%) on shares of face value Re.1.
In May 2008, GCPL allotted 3,22,32,316 equity shares of the face value Re.1 each by way of rights issue at a premium of Rs.122 per share aggregating Rs. 39,645 lac.
During the year GCPL announced and completed a buyback of its equity shares from the open market at a maximum price not exceeding Rs.150 per equity share at an aggregate consideration not exceeding Rs.1490 lac. Under the buyback, GCPL bought back 11,22,484 equity shares at a total consideration of Rs.1,490 lac.
With effect from April 1, 2008, GCP L acquired a 100% stake in Kinky Group Proprietary Ltd., South Africa. "Kinky", one of the leaders in the South African Hair Category, is a 36 year old business set up by a family of entrepreneurs in South Africa and has trademarks registered in South Africa. Kinky offers a variety of products which include hair, hair braids, hair pieces, wigs, wefted pieces. Kinky also offers hair accessories like styling gels, hair sprays, oil free shampoo. This acquisition gives GCPL an opportunity to enter into a new line of business and diversify its hair product portfolio.
On April 29, 2009, GCPL executed a share purchase agreement with SCA Hygiene Products AB (SCA) for the acquisition of the balance 50% stake in Godrej SCA Hygiene Ltd., the joint venture company between SCA and GCPL. Post this transaction, Godrej SCA Hygiene Ltd, will become a 100% subsidiary of GCPL.
GCPL was rated 6th in the "Best Companies to work for" survey conducted by Mercer. GCPL was ranked 11th in the "Best Employers in India" survey conducted by Hewitt Associates.
In November 2007, your Company successfully placed 2,79,06,950 equity shares of Re.1/- each at a premium of Rs.214/- per share with Qualified Institutional Buyers, raising Rs. 600 crore. The issue was priced at a premium of 9% over the floor price calculated in accordance with the SEBI guidelines. The money raised has since been utilised inter alia to retire debt as also for investments in subsidiary/associate companies.
The loan funds at the end of the year stand at Rs. 60,096 lac as compared to Rs. 43,567 lac at the end of the previous year. The debt equity ratio is 0.56 as compared to 0.41 last year.
Your Company continues to hold the topmost rating of A1 + from ICRA for its commercial paper program (Rs. 100 crore). ICRA has also assigned an A1+ rating for its short term debt instruments (Rs. 570 crore). ICRA also assigned LAA rating for long-term debt (Rs. 330 crore). This rating represents high-credit quality carrying low-credit risk.
The Chemicals Division of your Company has manufacturing facilities at Vikhroli and Valia.
The factory developed the capability to produce one more variant of Fatty Alcohol which is approved by leading overseas customers.
On the environment front, the factory has developed new irrigation network and also planted 3000 saplings in the first phase.
The water supply scheme which was operated by G.I.D.C. is taken over by Valia Industries Association where the factory is also one of the members and this step has resulted into better reliability for supply of processed water and approx savings of Rs.15 lac p.a. would be achieved.
The Vikhroli factory, after implementation of the Integrated Management System (ISO 9001 -2000, ISO 14001 and OHSAS 18001), has successfully completed two surveillance audits by "BUREAU VERITAS" in last year.
Now Vikhroli factory is in the process of getting upgraded for OHSAS 18001 : 2007 standards.
This Division continues as a contract processor of Edible oils and Vanaspati. The division recorded a Turnover of Rs. 245 lac as against Rs.184 lac in the previous year. The focus of the division is to increase third party processing to improve its profitability.
During the year under review, the R & D department developed processes for the manufacturing of premium quality fatty acids from economy grade raw materials, high value fractionated fatty acids for the polymer, oil field and lubricant industries, specialty surfactants for oral care and personal care products and value added derivatives of glycerin so as to enter certain niche markets.
Your Company has entered into a strategic alliance with Hewlett Packard (HP) for a comprehensive IT outsourcing and transformation project that will include infrastructure solutions, SAP Application services and other consulting services. HP will help facilitate various business transformation initiatives and implement tailor made solutions for GIL. This exercise will involve the implementation of a scalable and reliable service delivery structure based on ITIL standards. This includes Application support and management for SAP, Peoplesoft and other critical business applications.
Your Company has successfully implemented SAP in the Chemicals Business. Knowledge Management, Business intelligence, Collaboration with customers and Centralised Architecture are the key components of SAP implementation. Initiatives like GodrejConnect works as an effective Knowledge Management tool and ensures speedy and effective information flow within the organization. SAP's centralised architecture allows business to achieve operational efficiency with help of consistent data, better controls and visibility.
Your Company has received recognition for innovation in Business Week's list of top 25 'unsung innovators' for a customer portal (e-CRM) on SAP which would enable customers to access key information on a real time basis.
EMPLOYEE STOCK OPTION PLAN (ESOP):
During the financial year 2008-09, 139 employees of the Company and/or its subsidiaries were granted ESOPs based on their leadership responsibility and potential.
Disclosure in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Purchase Scheme) Guidelines, 1999 is given in Annexure B attached and forms a part of this Report.
Your Company encourages a culture that develops and empowers people, promotes team building and nurtures new ideas. A recent recognition of the effort to make it a model employer was its inclusion in the list of fifteen "Best Companies to Work for in India" based on a survey conducted by Mercer Consulting and Business Today.
Your Company put great emphasis on optimizing people performance through various people oriented processes starting from recruitment, training, performance management and talent building.
Industrial relations at all plant locations remained harmonious. Regular structured safety meetings were held with employees and safety training programmes were conducted for them throughout the year. Training has also been an important means of raising productivity. At the Valia factory Skill Matrix system has been implemented for assessing the skills of every employee related to their jobs and filling the skill gap through focused training.
It has been the endeavour of your Company to provide opportunities to socially and economically underprivileged persons particularly those belonging to Scheduled Castes/Scheduled Tribes and physically challenged individuals. The Valia factory of Godrej Industries has partnered with the Kanerao Primary School, where all children belong to underprivileged sections of the society. Children in this school are assisted through the provision of free note books, school bags, water-bottle etc. and by conducting extra curricular activities like general knowledge, drawing, dancing and singing competitions every month.
Your Company continued "Rain water harvesting" initiatives undertaken during the previous year at its factory and in the staff quarters at Vikhroli. "Rain water harvesting" is a process by which rain water is collected and channelised into tanks for domestic consumption. So far 8500 Sq. Meter of roof area has been covered under the rain water harvesting initiative and 22500 M3 of water has been collected at Vikhroli factory and staff quarters. This process has resulted in saving water and consequently, the costs, thereof.
Recharging of two bore wells with rain water has also been undertaken, which resulted in improvement of yield and quality.
Effluent Drainage System carrying effluent from chemical plants was upgraded. To prevent pollution to environment, efforts are made to convert waste from the factories into an environment-friendly product and then dispose off the same safely. Your Company continued its arrangement with Trans Thane Creek Waste Management Association for the treatment of solid waste being generated at the Company's factory at Vikhroli. More Areas of wasteland have been converted into garden using water from ETP. The process of bio composting has been enhanced with use of enzyme to reduce frequency of decomposition.
Your Company has started accepting public deposits for 13, 24 and 36 months' tenure. During the year ended March 31, 2009, deposits aggregating to Rs. 2,164 lac have been mobilised.
Your Company's equity shares are available for dematerialisation through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2009, 99.66 % of the equity shares of your Company were held in demat form.
BUYBACK
Your Company had announced Buy-back of fully paid-up equity shares of the face value Re.1/- each not exceeding 57,00,000 Equity Shares ("Maximum Offer Shares"), from the existing owners of Equity Shares other than Persons in Control, at a price not exceeding Rs.275/- (Rupees Two Hundred and Seventy Five Only) per Equity Share (the "Maximum Offer Price") payable in cash, for an aggregate amount not exceeding Rs.99 crore ("Maximum Offer Size"). The Maximum Offer Size represents 9.90% of the aggregate of the Company's total paid-up equity capital and free reserves as on March 31, 2008 (the date of the latest standalone audited accounts).
Your Company had published a Public Notice dated July 30, 2008, pursuant to a decision of the Board approving the Buy-back, in compliance with Regulation 5A of the Buy-back Regulations ("Notice"). Subsequent to the Notice, the Company had filed an application with the Securities and Exchange Board of India ("SEBI") under Regulation 4(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ("SEBI Takeover Regulations") seeking an exemption on behalf of the promoters, whose shareholding may increase consequent to the Buy-back, from applicability of Chapter III of the SEBI Takeover Regulations. SEBI vide its order dated March 23, 2009 (the "SEBI Order") had granted the exemption to the Persons in Control from the applicability of the said regulations.
SEBI has since approved the public announcement with minimum offer shares of 20,00,000 equity shares and the buyback is expected to commence shortly.
In accordance with Article 127 of the Articles of Association of the Company, Mr. J.N. Godrej, Ms. T.A. Dubash, Mr. M. Eipe and Mr. V.F. Banaji retire by rotation at the ensuing Annual General Meeting. They are eligible and offer themselves for re-appointment.
To comply with the terms of the amended Clause 49 of the listing agreement with the Stock Exchanges, the Company was required to appoint three directors who are independent as defined under the said clause, which would take the strength of the Board to 16 directors. Since the Company had permission for a maximum of 15 directors, the Board of Directors had on May 2, 2008, approved increase in the size of the Board to a maximum of 18 Directors, subject to approval of Shareholders and the Central Government. The Shareholders' and Central Government's approvals were received on June 25, 2008 and December 1, 2008 respectively. The Company has appointed three eminent persons for the position of independent directors, viz. Mr. J.S. Bilimoria, Mr. A. Maira, and Dr. N.D. Forbes with effect from January 27, 2009. They are being appointed as Directors, liable to retire by rotation at the forthcoming Annual General Meeting (AGM). Their brief profiles are given along with the Notice of the AGM.
The terms of appointment and remuneration payable to the Wholetime Directors, Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar will be expiring on March 31, 2010 and it is proposed to re-appoint them with revised terms at the forthcoming Annual General Meeting. Their profiles are given along with the Notice of the AGM.
You are requested to appoint Auditors for the current year and to authorize the Board to fix their remuneration. The retiring auditors, Kalyaniwalla and Mistry, Chartered Accountants, are eligible for re-appointment. A certificate from the Auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.
The Audit Committee which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement has reviewed the Accounts for the year ended March 31, 2009. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr.V.N.Gogate, Mr.S.A.Ahmadullah and Mr. K.N. Petigara, all Independent Directors.
b) that such accounting policies have been selected and applied consistently, and such judgments and estimates have been made 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 or loss of the Company for that period.
As required by the existing clause 49 of the Listing Agreements with the Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company's compliance of the requirements of Corporate Governance in terms of Clause 49 of the Listing Agreement and the same is annexed to the Report on Corporate Governance.
The shares referred to were pledged with us as security for loans given and since the loans were not being repaid, your Company enforced the securities by lodging the shares for transfer. On the refusal of the Company to transfer the shares, your Company has moved the Company Law Board, Western Bench and we expect a favourable decision.
Mumbai, May 27, 2009
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2008.
The Board of Directors of your Company recommends a final dividend of Rs.1.25 per equity share of Re.1/- each, aggregating to Rs.3,996.98 lac, on enlarged base of 31,97,58,602 equity shares (last year. 29,18,51,652 equity shares) as against a final dividend of Re.1 /- per equity share of Re.1 /- each aggregating to Rs.2,919 lac in the previous year.
There is a separate section on Management Discussion and Analysis appended as Annexure A in this Annual Report, which, includes the following:
Industry Structure and Developments
Discussion on financial performance with respect to operational performance
Segment-wise performance
Human Resources and Industrial Relations
Opportunities and Threats
Internal Control Systems and their adequacy
Risks and Concerns Outlook
Your Company has interests in several industries including animal feeds, poultry and agro-products, oil plantation, property development, household insecticides, pesticides, beverages and confectionery, personal care, etc. through its subsidiary/associate/ joint venture companies.
Godrej Agrovet Limited (GAVL): GAVL recorded a revenue growth of 30% over the previous year, with the turnover increasing from Rs.71,285 lac to Rs.92,617 lac. The profit aftertax increased from Rs.275 lac to Rs.3,821 lac.
During the year the Company restructured its business into four verticals viz. Animal Feeds, Oil Plantation, Poultry and Retail.
The Oil Palm Plantation business was demerged and two separate companies were incorporated under the names of Godrej Oil Plantations Ltd. (GOPL), which will operate in the states of Andhra Pradesh, Gujarat, Orissa and Mizoram, and Godrej Gokarna Oil Palm Ltd. (GGOPL), which will operate in the states of Goa and Karnataka. In GOPL, Blessed Resources Pte. Ltd. is the JV partner with a 20% stake while in GGOPL the JV partner is IJM Plantations, Berhad with a 51% stake.
The rural retailing business, which operated under the name of Aadhaar, was transferred to Aadhaar Retailing Ltd. which is now operating as a JV in which Future Group has taken a 70% stake.
The Company is in the process of merging its 100% Subsidiary-Goldmohur Foods and Feeds Ltd. into itself. This step is expected to benefit the company in streamlining its animal feeds business.
Goldmohur Foods and Feeds Limited (GFFL):
The Poultry Industry was once again adversely impacted by the Avian Influenza which this time was detected in Eastern India in January 2008. This resulted in de-growth of the Industry during the year under review. Significant increases in commodity prices further impacted the profitability of GFFL's business. By focusing on R&D initiatives and cost cutting these vertical measures, the Company tried to minimize the impact of the above factors on the profitability of the business. Despite recording an increase of 21.50% in turnover, profitability could only be maintained at similar levels as in the previous year.
Godrej Properties Limited (GPL): GPL had a good financial year with the total income rising from Rs.7,046 lac for the year ended 31.3.07 to Rs.22,750 lac for the year ended 31.3.08. The profit after tax recorded an impressive growth of 83% from Rs.4,145 lac in the financial year ended 31.3.07 to Rs.7,589 lac for the financial year ended 31.3.08.
During the year GPL started operations in cities like Chandigarh, Mangalore, Chennai and Kochi. GPL also signed a large township development project in Ahmedabad. It also agreed to sell a part of Phase II in the Godrej Woodsman Estate Project in Bangalore on a "Built to Suit" basis.
GPL is actively pursuing its IPO plans during the current financial year.
Your Company has entered into a Moll with GPL to develop and commercially exploit the lands leased to it by Godrej and Boyce Mfg. Co. Ltd.
Godrej International Limited (GINL): As a worldwide trader of vegetable oils, GINL posted turnover of US$ 10,12,07,622 as compared to US$ 6,15,73,658 in the previous year - rise of 64%. The net profit increased by 136% from US$ 6,07,280 in the previous year to US$ 14,35,899 in the current year. During the year, GINL undertook a buyback of 2,50,000 ordinary shares of °1 at a price of US$10 per share. The shares bought back were cancelled.
Godrej Hicare Limited (GHL): GHL operates in the household insecticide sector. Total income of GHL has gone up from Rs.2,996 lac in the previous year to Rs.3,008 lac in the current year. During the year, GHL closed its bulk chemicals business to concentrate on its services business. The revenue from services business, during the year has gone up from Rs.2,377 lac to Rs.2,792 lac, an increase of 17%. GHL's PAT during the same period went up from Rs.182 lac to Rs.265 lac, an increase of 46%.
With a view to improve its services, GHL started its own service centres and expects to service about 50 % of its business through its own centres in 2008-09. This has resulted in substantial investment in manpower, which is a critical factor for success in this industry.
Godrej Global Solutions Ltd. (GGSL): GGSL provides back-office transaction processing services to overseas customers in the U.S.A. and U.K. During the year the Company earned a total income of Rs.1,369.19 lac as against Rs.1,405.26 lac in the previous year. The BPO/ITES industry faced challenges last year due to the dollar depreciation and GGSL was no exception. As a response, GGSL had to rationalize its operations at Mumbai and Navi Mumbai to meet the challenges and strove to achieve higher operational efficiencies. GGSL continued to focus on business segments like Healthcare claim form processing, medical transcription, medical billing and document conversion services.
As this is not a focus area for your Company, in May 2008, your Company entered into a Share Purchase Agreement with Tricom India Limited for sale of the entire shareholding of GGSL for a purchase consideration of Rs. 1,963 lac. The transaction is expected to be completed by the end of June, 2008.
Godrej Hershey Ltd. (formerly Godrej Beverages and Foods Ltd.) (GHL): GHL is a JV between the Hershey Netherlands BV and your Company. During the year under review, GHL earned a total income of Rs. 19,785 lac as compared to Rs. 17,795 lac, an increase of 11%. However, during the same period GHL recorded a loss of Rs.2,988 lac as compared to a loss of Rs.1,879 lac in the previous year. This loss has been mainly on account of major restructuring initiatives undertaken during the year, the results of which are expected in the future.
During the year, GHL revamped its distribution network. It has also set up a manufacturing unit at Nalagarh in Himachal Pradesh, which is likely to commence operations by end of June, 2008. In addition to its existing range of products, Hersheys Milk Mix was launched in select markets in the south of the country.
Nutrine Confectionery Company Ltd. (NCCL): NCCL, a 100% subsidiary of GHL, is a major player in confectionery business in India which includes in its product portfolio strong brands such as MahaLacto, Maha MahaLacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand. NCCL recorded a turnover of Rs. 15,768 lac during the year under review as compared to Rs. 16,921 lac during the previous year - a decrease of 7%. The net profit however increased from Rs.825 lac in the previous year to Rs.864 lac. NCCL has also revamped its distribution network during the year for broader reach, more effective execution and improved administrative control.
Godrej Sara Lee Limited (GSLL): The consolidated business recorded sales growth of 25% during the year 2007-08 over the previous year. The consolidated business continued to maintain its profitability focus and achieved profit growth of 32% during the year under review.
GSLL continued driving business with the consumer at the centre of all its initiatives. All new innovations and product launches were built on a deeper understanding of consumer needs and aspirations.
The new identity of the Good Knight brand was executed on the entire range to build a superior connect with consumers. Good Knight sequentially gained market share from 19% in Quarter 1 to 24% in Quarter 4 of 2007-08.
The HIT brand maintained its leadership in the fastest growing segment (viz.: aerosols) of household insecticides which was further aided by new launches at accessible price points.
Sara Lee's Household and Body Care business in India and Sri Lanka was acquired effective July 2, 2007. This added new categories to the business viz., hair styling (Brylcreem), shoe care (Kiwi), surface care (Kiwi Kleen). Brylcreem is a pioneer in the men's hair grooming in the country and continues to lead the category. Kiwi is a global leader in shoe care. An innovation in air care, the Odour eliminator range was launched under Ambipur.
Growth of organized retail is leading to change in channel dynamics. GSLL strengthened its relationships with the emerging organized retail partners. This helped GSLL in driving growth in the new emerging retail formats. The Company continued to provide better servicing and develop stronger relationships in the traditional trade as well. Building a strong distribution infrastructure for Kiwi and Brylcreem brands became a priority for GSLL and several initiatives were taken in this direction.
Godrej Consumer Products Limited (GCPL): On a consolidated basis, GCPL registered a net income of Rs.1,10,257 lac as compared to Rs.95,152 lac in the previous year. GCPL's profit after tax increased by 19% from Rs. 13,416 lac in the previous year to Rs. 15,924 lac in the current year. GCPL declared dividends aggregating to 400% in the current year as compared to 375% in the previous year.
In March 2008, GCPL launched the new improved and expanded Cinthol range of soap, talc and deodorant. GCPL also re-launched its Powder Hair Dye as "Godrej Expert Powder Hair Dye".
During October 2007, the Company acquired Godrej Global Mideast FZE, a 100% subsidiary of Godrej International, which will enable GCPL to consolidate its presence in the GCC countries and in the Middle East. On April 1, 2008, GCPL completed the acquisition of 100% stake in the Kinky Group (Proprietary) Ltd. in South Africa.
GCPL's joint venture company, Godrej SCA Hygiene Limited launched "Libresse" brand of sanitary napkins, "Libera" brand of baby diapers, "Tena" adult incontinent diapers and re-launch of Snuggy brand as "Snuggy Dry".
GCPL was ranked 6th in the "Best Employers Study" conducted by Hewitt Associates and the Economic Times. In the Business Week -Asia's Hot Growth Companies: 2007, GCPL was ranked 23rd making it the highest ranked FMCG company. The Malanpur factory won the Platinum Award in the India Manufacturing Excellence Awards (IMEA) by Frost & Suillivan, in the Chemicals category.
The financial position of your Company continues to be sound.
In November, 2007, your Company successfully placed its equity issue of 2,79,06,950 equity shares of Re.1 /- each at a premium of Rs.214/- with Qualified Institutional Buyers, raising Rs.600 crore. The issue was priced at a premium of 9% over the floor price calculated in accordance with the SEBI guidelines. The money raised has been utilised to retire debt as also for investments in subsidiary companies and in some short-term liquid assets.
The loan funds at the end of the year stand at Rs.43,567 lac as compared to Rs.46,770 lac at the end of the previous year. The debt equity ratio is 0.41 as compared to 1.08 last year.
Your Company continues to hold the topmost rating of A1+ from ICRA for its commercial paper program (Rs.60 crore). ICRA has also assigned an A1+ rating for its short term debt instruments (Rs.630 crore). ICRA also assigned LAA rating for long-term debt (Rs.270 crore). This rating represents high credit quality carrying low credit risk.
RECOGNITION FOR CREATING SHAREHOLDER VALUE
During the year, your Company was ranked the 9th Fastest Wealth Creator with a CAGR of 127% and the 65th Biggest Wealth Creator for having added over Rs.4600 crore to its market capitalization for the period 2002-2007 in the 12th Annual Wealth Creation Study Report by Motilal Oswal Securities. Your Company was.also ranked 4th in delivering the greatest Total Shareholder Returns (TSR) of 146% p.a. for the period 2002-2007 in the large cap segment in a survey published by Businessworld in June 2007.
In the EOU plant, fractionation capacity has been enhanced by replacing one fractionation column with a new, high efficiency column which has resulted in improvement in its ability to produce high purity finished products. This change enables better price negotiation. The Cooler in the fractionation plant has been replaced with a waste heat recovery boiler which, has resulted in cost reduction and energy conservation. Commercial production of fatty alcohol derivatives has also been streamlined.
The Vikhroli factory, after implementation of the Integrated Management System (ISO 9001-2000, ISO 14001 and OHSAS 18001), has successfully completed two surveillance audits by BUREAU VERITAS.
The Vegoils Division continued as a contract processor of edible oils and vanaspati.
During the year under review, the R&D department developed processes for the manufacturing of premium quality fatty acids from economy grade raw materials, high value fractionated fatty acids for the polymer, oilfield and lubricant industries, specialty surfactants for oral care and personal care products and value added derivatives of glycerin so as to enter certain niche markets.
Your Company continued to leverage Information Technology (IT) across the Chemical business in the year 2007-08. SAP implementation has stabilized across all business areas and the Company has started enjoying the benefits of a centralized ERR A Business Intelligence (Bl) initiative built on SAP is under implementation and expected to provide faster and more accurate information to key decision makers.
The shareholders at their Extraordinary General Meeting held on December 1, 2005 had approved the Godrej Industries Limited Employee Stock Option Plan (GIL ESOP) for grant of 15,00,000 (Fifteen Lac) Options convertible into 15,00,000 (Fifteen Lac) equity shares of the nominal value of Rs.6/- each to the employees/ directors of the Company and/or its subsidiaries. Consequent to the subdivision of each equity share of Rs.6/- into 6 equity shares of Re.1 / - each, the number of options that can be granted stands increased from 15,00,000 to 90,00,000 convertible into 90,00,000 equity shares of Re.1/- each. During the financial year 2007-08, 220 employees of the Company and/or its subsidiaries were granted ESOP's based on their leadership responsibility and potential.
As required under Clause 3(1) (e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of the aforesaid SEBI Regulations are given in Annexure C attached and forms a part of this Report.
Your Company continues to take various initiatives for the development of its human resources and has maintained healthy and harmonious industrial relations at all locations.
Your Company lays great emphasis on optimizing people performance through various people processes. It begins with best practices in recruiting people and moves through learning and development, engagement, employee feedback and rewards and recognition.
The ACE (Accelerated Career for Employees) program recruits professionals from premium institutes like Indian Institute of Technology, National Institute of Technology, Birla Institute of Technology and Science and Sri Ram College of Commerce, Delhi and also through advertisements. Your Company provides the new recruits with necessary managerial skills which in turn develops them into successful managers. Your Company also provides summer training program to B-School graduates; 'Gurukool', provides a live project with a structured goal, workshop by senior leaders and an informal interaction with seniors and the Chairman.
For the above recruits and existing employees your Company offers on the job learning initiatives like e-MBA in collaboration with renowned management institutions like NT School of Management (Mumbai), Symbiosis Institute of Business Management (Pune) and DM (Indore).
Fostering people development and harnessing their creative potential to the maximum, identifying and grooming management talent and leadership development at all levels remains a priority. The "Total Talent Management" program has been successful in identifying and grooming Leadership Talent.
Employee feedback is obtained through a Voice of the Employee (VOTE) process, informal sessions with the Executive Directors and Employee Commitment Survey.
In order to manage your Company's human resources more effectively a globally acclaimed state-of-the-art Human Resource Management System has been implemented. It helps in collating workforce data and using it for driving performance, developing talent and managing competitiveness.
Your Company believes in inclusiveness and hence is nurturing employment of SC/ST categories. As on March 31, 2008 your Company employed 372 employees from the SC/ST categories.
Industrial Relations
The industrial relations at all our Plant locations remained harmonious.
Your Company continued "Rain water harvesting" initiatives undertaken during the previous year at its Vikhroli Factory and in the staff quarters at Vikhroli. So far 8,500 Sq. Meter of roof area has been covered under the rain water harvesting initiative and 22,500 M:' of water has been collected at the factory and staff quarters in Vikhroli. This process has resulted in saving water and consequently, the costs thereof. Recharging of two bore wells with rain water has also been undertaken, which resulted in improvement of yield and quality.
The Effluent Drainage System for carrying effluents from the chemical plants was upgraded. To prevent pollution to environment, waste from the factories is converted into an environment-friendly product and then disposed off safely.
More Areas of wasteland have been converted into gardens using water from the Effluent Treatment Plant. The Vikhroli factory continues to convert the bio degradable waste into bio compost with the help of an NGO. The process of bio composting has been enhanced with the use of enzymes to reduce the frequency of decomposition.
The Confederation of Indian Industry (CM) - Sohrabji Godrej Green Business Centre has evolved a Code for Ecologically Sustainable Business Growth. The Code comprises of "Ten Natural Capital Commandments", which include, commitments to reduce specific consumption of Energy and Water, reduce Green House Gas (GHG) emissions and all kinds of waste. Your Company has been an early and enthusiastic adopter of this Code.
Electricity produced by your Company's wind mills have resulted in reduction in emission of C02 for which your Company was granted CERs (Certified Emission Reduction). Unfortunately in the current year, the windmills have produced less electricity than expected.
Your Company has started a concept of "Table For Two" under which the Company will sponsor mid-day meals to students coming from the underprivileged section of the society. Your Company is also in the process of signing an agreement with a logistics service provider for distribution of mid-day meals to a number of schools in Mumbai.
Your Company has stopped accepting Fixed Deposits from the public. Deposits of an aggregate amount of Rs.2.38 lac unclaimed earlier have been paid during the year on receipt of valid claims.
Your Company's equity shares are available for dematerialisation through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2008, 99.63% of the equity shares of your Company were held in demat form.
In accordance with Article 127 of the Articles of Association of the Company, Mr. K. K. Dastur, Mr. V. M. Crishna, Mr. K. N. Petigara
and Mr. M. P. Pusalkar retire by rotation at the ensuing Annual General Meeting. They are eligible and offer themselves for re-appointment.
The Shareholders vide Postal Ballot the results of which were declared on November 7, 2007, had appointed Mr. C. K. Vaidya as Executive Director and President (Business Excellence) for a tenure of three years from September 18, 2007 to September 17, 2010. Mr. C. K. Vaidya however has expressed his desire to step down from the Board with effect from May 28, 2008 due to personal reasons and has ceased to be a Director effective that date. The Directors place on record their appreciation for the contribution made by Mr. C. K. Vaidya during his tenure as Director of the Company.
Under the amended Clause 49 of the listing agreement with the Stock Exchanges, where the Non-Executive Chairman is a promoter of the Company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the Company shall consist of independent Directors. Mr. A. B. Godrej is a promoter and a Non-Executive Chairman of the Company. The current strength of the Board is 13 members out of which 5 are Independent. Based on the amended Clause 49 of the listing agreement, at least one-half of the Board should comprise of Independent Directors. The current Articles of Association of the Company provide for a maximum of 15 directors. Hence approval of the shareholders of the Company is being sought through postal ballot (results of which shall be declared on June 25, 2008) to increase the size of the Board to 18 Directors to enable the Company to appoint such number of Independent Directors as would meet the requirements of continued listing. Based on the shareholders approval, the Company will have to apply to the Central Government for increase in the number of directors from the existing maximum of 15 Directors to a maximum of 18 Directors.
You are requested to appoint Auditors for the current year and to authorize the Board to fix their remuneration. The retiring auditors, Kalyaniwalla and Mistry, Chartered Accountants, are eligible for re-appointment. A certificate from the Auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.
The Audit Committee which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement has reviewed the Accounts for the year ended March 31, 2008. The members of the Audit Committee are Mr.- F. P. Sarkari (Chairman), Mr. V. N. Gogate and Mr. S. A. Ahmadullah, all Independent Directors.
b) that such accounting policies have been selected and applied consistently, and such judgements and estimates have been made 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 or loss of the Company for that period.
Annexure D to this Report gives information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forms a part of the Directors' Report.
Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors' Report. As per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office of the Company.
The shares referred to were pledged with us as security for loans given and since the loans were not being repaid, your Company enforced the securities by lodging the shares for transfer. On the refusal of the Company to transfer the shares, your Company has moved the Company Law Board, Western Bench and we expect a favourable decision shortly.
Your Directors thank the Union Government, the Governments of Maharashtra and Gujarat as also all the Government agencies, banks, financial institutions, shareholders, customers, employees, vendors and other related organizations, who, through their continued support and co-operation, have helped as partners in your Company's progress.
DIRECTOR'S REPORT
Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2007.
The Board of Directors of your Company recommends a final dividend of Re. 1/- per equity share of Re. 1/- each, aggregating to Rs. 2919 lac, as against final dividend of Rs. 5/- per equity share of Rs. 6/- each aggregating to Rs. 2432 lac in the previous year.
MANAGEMENT DISCUSSION & ANALYSIS
There is a separate section on Management Discussion and Analysis in this Annual Report, which, inter alia, covers the following:
• Segment - wise performance
The same is appended as Annexure A to the Directors' Report.
SUBSIDIARY AND ASSOCIATE COMPANIES
Your Company has interests in several industries including animal feeds, poultry and agro-products, property development, household insecticides, pesticides, tea, fruit and soya drinks and infotech, etc. through its subsidiary/associate companies.
The Company is in the business of animal feeds, agri inputs, poultry, oil palm and rural retailing. The Company recorded a revenue growth of 18% in FY 2006-07, the total income rising from Rs. 60556 lac to Rs. 71285 lac. The Profit after tax however declined from Rs. 683 lac to Rs. 275 lac.
The Company launched 8 new rural retail stores under the Aadhaar initiative in the last quarter of the year taking the total store count to 39 outlets and launched 3 new Nature's Basket stores in Mumbai (total 8 such stores), which retail a large range of domestic as well as exotic fruits, vegetables and herbs. The Company also launched the Yummiez range of ready to eat veg and non-veg snacks and extended this range to Delhi, Baroda, Nagpur and Chandigarh in the last quarter.
Avian Influenza and high prices of certain key raw materials impacted the performance of the Animal Feed and Poultry businesses.
The Company entered into a MoU with IJM Plantations, Berhad a listed Malaysian Company to promote oil palm plantation in India and also entered into a JV (49:51) named Godrej Gold Coin Aqua Feed Limited with Cold Coin Group, Singapore for developing and marketing special feed for shrimp.
Goldmohur Foods and Feeds Limited (GFFL) :
Operations of this wholly owned subsidiary of GAVL were also impacted during the initial months of the Financial Year under review by the outbreak of Avian Influenza. High prices of certain key raw materials like maize also impacted the performance. The Profit after Tax came down from Rs. 538 lac in the previous year to Rs. 320 lac in the year under review, in spite of the total income rising from Rs. 29588 lac to Rs. 32635 lac.
Golden Feed Products Limited (GFPL) :
This wholly owned subsidiary of GAVL transferred its Higashimaru brand shrimp feed marketing business to Godrej Gold Coin Aquafeed Limited during the year. The Company reported a loss of Rs. 15.57 lac against a loss of Rs.140 lac for 2005-06.
Godrej Properties Limited (GPL) :
Recorded an increase in Total Income of 95%/from Rs. 7046 lac in the previous year to Rs.13726 lac in the current year. The Profit after Tax increased by 210% from Rs. 1339 lac in the previous year to Rs. 4145 lac. GPL has declared an interim dividend of 419% as compared to 96% in the previous year.
"Planet Godrej", the five 50-storeyed towers project located in close proximity to Mahalaxmi race course and Willingdon Club in Mumbai has won the prestigious Pinnacle Award 2006 awarded by Zee Business in the category of 'Best Upcoming Real Estate Project' in India.
In addition to the two IT parks over 35 lac sq. ft. in Salt Lake area, Kolkata, the Company has started developing an IT park at Hyderabad covering an area of approximately 60 lac sq. ft. It has also signed an agreement to develop a residential project on approx. 13 acres of land at Bangalore and 12 acres of land at Pune. The total area under development is over 2 crore sq. ft. at present.
The Company has formed three new Private Limited Companies viz., Godrej Real Estate Private Limited, Godrej Developers Private Limited and Godrej Sea View Properties Private Limited to develop the projects at Hyderabad, Kolkata and Goa respectively.
Godrej International Limited (GINL) :
A worldwide trader of vegetable oils has posted turnover of US$ 61573658 as compared to US$ 50724030 in the previous year a rise of 21 %. The net profit increased by 78% from US$ 382566 in the previous year to US$ 658135 in the current year.
Godrej Global MidEast FZE (GGME) :
A 100% subsidiary of GINL earned Net Profit of AED 356453 as compared to AED 191167 in the previous year registered a rise of 86%.
Godrej Hicare Limited (GHL):
The Pest Management Services Company has recorded an excellent growth of 42% in its revenue. Total Income grew from Rs. 2112 lac in the previous year to Rs 2996 lac in the current year. The Company's Profit after Tax of Rs. 182 lac for the year as compared to Rs.104 lac in the previous year shows an impressive growth of 75%.
The Company identified training as critical to its success and hence invested substantial resources behind this activity. In its never ending . effort to achieve excellence in service delivery it invited eminent foreign consultants to train employees at all levels.
The Company launched one of world's leading brands of Flying Insect Killing machines. This was in the last quarter of the current year and the Company expects good revenue in coming years from new customer acquisitions and deepening relationship with current ones.
Godrej Global Solutions Ltd. (GGSL) :
A back-office transaction Processing Services Company earned a total income of Rs.1405.26 lac as against Rs. 966.30 lac in the previous year, an increase of 45%. GGSL grew its operations at both Chennai and Navi Mumbai facility. During the year under review, GGSL added a number of new clients, ramped up operations for existing clients, achieved higher operational efficiencies there by achieving' the revenue growth. During the year, GGSL facilities were awarded the most coveted Information Security Certification ISO 27001 and ISO 9001 certification. GGSL continued to focus on business segments like Healthcare claims processing, medical transcription, medical billing and document management services.
Godrej Beverages & Foods Ltd. (GBFL) :
GBFL markets juices and fruit drinks under brands Xs and Jumpin; soyamilk based drink under the Sofit brand; edible oil brands like Cooklite, packaged tea under the brand name Godrej Tea and confectionery under the Nutrine portfolio. The Nutrine's portfolio includes strong subrbrands like MahaLacto, Maha MahaLacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand.
W.e.f. May 08, 2006, GBFL ceased to be the subsidiary of the Company. GBFL acquired 100% stake in Nutrine Confectionery Company Ltd. (NCCL) on 01/07/06, a major player in the confectionery business in India. During the year, GBFL earned a Total Income of Rs. 17795 lac as compared to Rs. 779 lac in the previous year recording a loss of Rs. 1879 lac compared to loss of Rs. 1717 lac in the previous year whereas NCCL earned a total income of Rs.10681 lac and profit of Rs. 321 lac for the period July 1, 2006 to March 31, 2007. Further, towards the end of the financial year, Hershey's, the largest North American chocolate manufacturing company signed an agreement to acquire 51% stake in GBFL. The agreement was signed on April 2, 2007, giving GBFL a strategic long term partner with global brands and international technology.
Godrej Sara Lee Limited (GSLL) :
The company recorded a topline growth of 17% with strong profit growth of 23% during the year 06-07. The Company paid a total interim dividend of 313%. This year, Good Knight, the lead brand of the company underwent a major transformation in line with changing Indian consumers. Good Knight presented a new vibrant identity to consumers showcased in the form of packaging and advertising. Further, in an' endeavour to provide superior solutions for consumers to protect their cherished happy moments everyday from mosquitoes, Good Knight launched a breakthrough innovation: Good Knight Advanced Active + System. Good Knight continued to be voted the most trusted Household care brand by Brand Equity - ET.
HIT brand continues to be the fast growing Household Insecticide brand. This was enabled by the launch of a new innovation: HIT Seek n Kill for cockroaches backed by outstanding brand communication.
The Company's foray into air care, Ambipur also fortified its pioneering status by expanding franchise into the Home Perfume arena through the launch of Ambipur Aerosols.
Godrej Consumer Products Limited (GCPL) :
GCPL continued to be a focused FMCG company. On a standalone basis, GCPL earned a Total Income of Rs. 76382 lac as compared to Rs. 66425 lac in the previous year. GCPL's Net Profit increased to Rs.13216 lac as compared to Rs.12120 lac in the previous year. GCPL declared dividends aggregating to 375% in the current year as compared to 350% in the previous year. During this year, the Company commenced commercial production at its new facilities at Katha (HP) and Sikkim.
GCPL's 100% subsidiary Keyline Brands Limited (KBL) reported total earnings of Rs.16748 lac and a PBT of Rs.1987 lac for 2006-07.
On September 01, 2006, GCPL completed the acquisition of the South African business of Rapidol, U.K. as well as its subsidiary Rapidol International. The Rapidol acquisition gives GCPL ownership of strong ethnic hair colour brands like 'INECTO' and 'SOFLENE' in ten countries. It also gives GCPL an opportunity to enhance its global presence through the Modern Trade Network and the ownership of customer listings of the INECTO and SOFLENE brands.
During March 2007, GCPL entered into an agreement with SCA Hygiene Products AB, Sweden to form a 50:50 joint venture company known as Godrej SCA Hygiene Limited. Godrej SCA Hygiene Limited will manufacture and market paper based absorbent hygiene products, especially sanitary napkins and baby diapers in India, Nepal and Bhutan.
On a consolidated basis, GCPL earned a total income of Rs. 95588 lac and Net Profit of Rs.14403 lac for the year ended March 31, 2007.
GCPL has been ranked 6th in the Best Employers Study conducted by Hewitt Associates along with Economic Times. GCPL is the highest ranked FMCG Company in the survey.
GCPL's Malanpur factory was presented by JIPM solutions, Japan with the Award for TPM Excellence, 1st Category for improvement in operational efficiencies with TPM initiatives. The factory also won the Platinum Award in India Manufacturing Excellence Awards (IMEA) by Frost & Sullivan in the Chemicals Category.
The financial position of your Company continues to be sound. The loan funds as at the end of the year is at Rs. 46770 lac as compared to Rs. 32714 lac as at the end of the previous year. Your Company continues to hold the topmost rating of A1+ from ICRA for its commercial paper programme. The rating indicates that the prospect of timely repayment of debt/obligation is the best.
Valia :
Existing Alpha Olefin Synthesis plant has been revamped to produce Alpha Olefin of higher chain lengths.
Additional fractionation column has been installed in existing Fatty Acid Fractionation plant for the production of Laurie Acid as a feed stock for the Fatty Alcohol Synthesis plant making production of Lauryl Alcohol more commercial and economical.
Balancing equipment has been installed to help in the manufacture of Fatty Alcohol derivatives.
The EOU unit commissioned in March, 2006 has achieved its full operating capacity and contributed to the revenue growth from this division this year.
The factory was awarded the "Energy Efficient Unit" award from CII.
Vikhroli :
Fatty Acid fractionation plant capacity was enhanced by establishing a new fractional distillation plant at Vikhroli factory and the plant was commissioned. Successful trials were conducted for the manufacture of 90% pure Erucic Acid . This plant has been built with heat recovery system to reduce the cost of conversion.
The Vikhroli factory has successfully implemented the SAP ERP system for all manufacturing operations.
The Vikhroli factory also embarked on Integration of ISO 9001-2000, ISO 14001 and OHSAS 18001 and was audited and certified by "BUREAU VERITAS" for Integrated Management System.
Post sale of Foods Division to Godrej Beverages & Foods Ltd. under the Slump Sale Agreement w.e.f. close of working hours on March 31, 2006, the Vegoils Division continued as contract processor of edible oils and vanspati.
During the year under review, amongst the achievements of R&D of your Company, the notable ones include the development of premium quality fatty acids from economy grade raw materials, a cost and energy saving process for high pressure hydrolysis of specific oils, manufacture of high value fractionated fatty acids for the polymer, oilfield and lubricant industries, manufacture of specialty surfactants for oral care and personal care products and value added derivatives of glycerine so as to enter certain niche markets. R&D efforts of your Company also focused on increasing our intellectual property by filing new patent applications.
GIL continues to leverage IT and implemented SAP across the Chemical business in the year 2006-07. The implementation was done in an aggressive time frame of 5 months across all functions and locations. The SAP implementation is expected to provide the much needed robust architecture required to sustain our e-CRM initiative and ensure faster and accurate information is made available to key decision makers.
EMPLOYEE STOCK OPTION PLAN (ESOP)
.The shareholders at their Extraordinary General Meeting held on December 1, 2005 had approved Godrej Industries Limited Employee Stock Option Plan (GIL ESOP) for grant of 15,00,000 (Fifteen Lac) Options convertible into 15,00,000 (Fifteen Lac) equity shares of the nominal value of Rs. 6/- each to the employees/directors of the Company and/or its subsidiaries. Consequent to the subdivision of each equity share of Rs. 6/- into 6 equity shares of Re.1/- each, the number of options that can be granted stands increased from 15,00,000 to 90,00,000 convertible into 90,00,000 equity shares of Re.1/- each. During the financial year 2006-07 no employee was granted ESOP. However, on April 5, 2007 and April 11, 2007, 26,25,000 ESOPs have been granted to 46 employees of the Company and/or its subsidiaries based on their leadership responsibility and potentials. Disclosure in compliance with clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Schee) Guidelines, 1999 are setout in Annexure B to this report.
As required under Clause 3(1 )(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of the aforesaid SEBI Regulations are given in Annexure C attached herewith and the said Annexure C forms part of this Annual Report.
HUMAN RESOURCE DEVELOPMENT AND INDUSTRTIAL RELATIONS
Your Company continues to take various initiatives for the development of its human resources. The Company maintained healthy and harmonious industrial relations at all levels.
Your Company continued "Rain water harvesting" initiatives undertaken during the previous year at its factory at Vikhroli and in the staff quarters at Vikhroli. "Rain water harvesting" is a process by which rain water is collected and channelised into tanks for domestic consumption. During the year 845 Sq. Metre of roof area has been covered and total roof area covered so far is 8500 Sq. Metre under the rain water harvesting initiative and 22000 M3 of water has been collected at Vikhroli factory and staff quarters. This process has resulted in saving water and consequently, the costs, thereof.
To prevent pollution to environment, efforts are made to convert waste from the factories into an environment-friendly product and then dispose of the same safely. Your Company continued its arrangement with Trans Thane Creek Waste Management Association for the treatment of solid waste being generated at the Company's factory at Vikhroli. More areas of wasteland have been converted into garden using water from ETP. The process of bio composting has been enhanced to reduce frequency of decomposition with use of enzyme.
The Vikhroli factory focused on waste elimination and also continued energy conservation measures.
Your Company has put up 5 windmills of 1.25 MW each at Dhule in Maharashtra. Windmills generate electricity from wind energy and are encouraged for augmenting the power generation in the country on account of their non-polluting' nature. Wind power producing clean energy is a potential candidate for Clean Development Mechanism (CDM) benefits under the Kyoto Protocol of United Nations Framework Convention on Climate Change (UNFCCC).
Your Company's windmill project has been successfully registered for Clean Development Mechanism (CDM) benefits under the Kyoto Protocol of United Nations Framework on Climate Change Convention (UNFCCC). Your Company is thereby entitled to Certified Emission Reductions (CERs), popularly known as carbon credits, on the basis of units of power generated through windmills. CERs are tradable with countries and companies that have not met their Greenhouse gases reduction targets and thus have a ready market. CERs will continue to accrue on the power generated from the windmill project for a period of 10 years from the date of registration.
Your Company has stopped accepting Fixed Deposits from the public. Public Deposits of an aggregate amount of Rs. 17.31 lac which matured, have been repaid during the year.
Your Company's equity shares are available for dematerialisation through National Securities Depository Limited & Central Depository Services (India) Limited. As of March 31, 2007, 99.50 % of the equity shares of your Company were held in demat form.
SUB-DIVISION OF EQUITY SHARES
In terms of the shareholders' approval in the previous Annual General Meeting the equity share of the Company each equity share of Rs. 6/-has been subdivided into 6 Equity Shares of Re.1/- each w.e.f. September 1, 2006.
In accordance with Article 127 of the Articles of Association of the Company, Mr. A. 8. Godre), Mr. S. A. Ahmadullah, Mr. V. N. Gogate and Mr. F. P. Sarkari retire by rotation at the ensuing Annual General Meeting. They are eligible and offer themselves for re-appointment.
You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, Kalyaniwalla & Mistry, Chartered Accountants, are eligible for re-appointment. A certificate from the Auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.
Pursuant to directions from the Department of Company Affairs, P.M. Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditors for the year 2006-07. They are required to submit their report to the Central Government within 180 days from the end of the accounting year.
The Audit Committee which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2007. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr.V. N. Gogate and Mr. S. A. Ahmadullah.
Pursuant to the provisions contained in Section 217(2AA) of the' Companies Act, 1956, the Directors of your Company confirm:
a. that in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;
b. that such accounting policies have been selected and applied consistently, and such judgments and estimates have been made 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 or loss of the Company for that period.
c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company, for preventing and detecting fraud and other irregularities;
d. that the annual accounts have been prepared on a going concern basis.
Annexure D to this Report gives information in respect of Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forms a part of the Directors' Report.
Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors' Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees u/s 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the Registered office of the Company.
The Notes to the Accounts referred to in the Auditors' Report is self-explanatory and therefore does not call for any further explanation.
Your Directors thank the Union Government, the Governments of Maharashtra, Madhya Pradesh, Gujarat as also all the Government agencies, banks, financial institutions, shareholders, customers, employees, fixed deposit holders, vendors and other related organisations, who, through their continued support and co-operation, have helped as partners in your Company's progress.
Mumbai, May 25, 2007