The Members, Welspun Corp Limited
Your directors have pleasure in presenting the 20th Annual Report of your Company along with the Audited Financial Statement for the financial year ended March 31, 2015
2. Reserves and Dividend
In view of the losses, the Board does not propose any amount for transfer to general reserves.
The Board is pleased to recommend a dividend for the 10th consecutive year @ 10% for the year ended March 31, 2015 i.e. Re. 0.50/- per equity share of Rs.5/- each fully paid-up out of accumulated profits. In respect of the dividend declared for the previous financial years, Rs. 4.49 million remained unclaimed as on March 31, 2015.
4. Internal Controls
Your Company has adequate internal control system, which is commensurate with the size, scale and complexity of its operations. Your Company has designed and implemented a process driven framework for Internal Financial Control ("IFC") within the meaning of the explanation of Section 134(5)(e) of the Companies Act, 2013. For the year ended March 31, 2015, the Board is of the opinion that your Company has sound IFC commensurate with the nature of its business operations; wherein controls are in place and operating effectively and no material weakness exists. Your Company has a process in place to continuously monitor existing controls and identify gaps and implement new and / or improved controls wherever the effect of such gaps would have a material effect on your Company's operation.
5. Subsidiary/Joint Ventures/Associate Companies and their performance
The Company has 9 subsidiaries. A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented in Form AOC-1 annexed to this Report as Annexure 1.
The Company has not accepted any deposit within the meaning of the Chapter V to Companies Act, 2013. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the year under report.
A) Statutory Auditors
Your Company's Auditors, M/s. Price Waterhouse Chartered Accountants LLP, who have been appointed up to the conclusion of the 24th Annual General Meeting, subject to ratification by the members of the Company at every Annual General Meeting, have given their consent to continue to act as the Auditors of the Company for the remaining tenure. Members are requested to consider their re-appointment as the Auditors of the Company and to fix their remuneration by passing an ordinary resolution under Section 139 of the Companies Act, 2013.
B) Cost Auditors
M/s. Kiran J. Mehta & Co, Cost Accountants, are proposed to be appointed as the Cost Auditors under Section 148 of the Companies Act, 2013. The members are requested to approve their remuneration by passing an ordinary resolution pursuant to Rule 14 of the Companies (Audit and Auditors) Rules, 2015.
C) Secretarial Auditors
The Board of Directors has re-appointed M/s. M Siroya and Company, Company Secretaries, as the Secretarial Auditor of the Company for the year 2015-16.
8. Auditors' Report
A) Statutory Auditors' Report
The Auditors' observations read with Notes to Accounts are self-explanatory and therefore do not call for any comment.
B) Cost Audit Report
The Company had appointed M/s. Kiran J. Mehta & Co., Cost Accountants (Firm Registration No. 000025) as the Cost Auditors of the Company for the financial year 2014-15. The Cost Audit Report for the year 2013-14 was e-filed on August 20, 2014. The Cost Audit for the financial year 2014-15 is in progress and the report will be e-filed to Ministry of Corporate Affairs, Government of India, in due course.
C) Secretarial Audit Report
Secretarial Audit Report given by M/s. M Siroya and Company, Company Secretaries is annexed with the report as Annexure 2.
9. Share Capital & Listing
A) Issue of equity shares with differential rights
The Company does not have any equity shares with differential rights and hence disclosures as required in Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014 are not required.
B) Issue of sweat equity shares
During the year under report, the Company allotted 227,781 equity shares of Rs. 5/- each fully paid-up as sweat equity shares to the Managing Director pursuant to the special resolution passed by the shareholders at the Extra Ordinary General Meeting held on August 6, 2012. The disclosures as required in Rule 8 (13) of Companies (Share Capital and Debentures) Rules, 2014 are as under:
(a)The class of director or employee to whom sweat equity shares were issued - Managing Director
(b)The class of shares issued as Sweat Equity Shares -
(c)The number of sweat equity shares issued to the directors, key managerial personnel or other employees showing separately the number of such shares issued to them, if any, for consideration other than cash and the individual names of allottees holding one percent or more of the issued share capital - 227,781 Sweat Equity Shares in consideration of know-how brought in by him in the Company.
(d)The reasons or justification for the issue - The shares were issued in consideration of the know-how brought in by the Managing Director in the Company.
(e)The principal terms and conditions for issue of sweat equity shares, including pricing formula - Ranking pari-passu in all respect with the existing equity shares and locked-in for a period of three years from the date of allotment i.e. upto March 30, 2018. Issue price is Rs. 127.13 per share as determined under applicable SEBI regulations.
(f)The total number of shares arising as a result of issue of sweat equity shares - 227,781 equity shares
g)The percentage of the sweat equity shares of the total post issued and paid up share capital - 0.09% post issue and paid-up capital
(h)The consideration (including consideration other than cash) received or benefit accrued to the Company from the issue of sweat equity shares -Know-how brought in by him in the Company
(i)The diluted Earnings Per Share (EPS) pursuant to issuance of sweat equity shares - Rs. (0.60)
C) Issue of employee stock options
During the year under review, the Company has granted stock options to the Managing Director of the Company in terms of the Employment Agreement and the resolution passed by the members of the Company at the Extra Ordinary General Meeting held on August 6, 2012.
The particulars required to be disclosed pursuant to the SEBI (Share Based Employee Benefits) Regulations, 2014 and Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014 are given below:
Difference in employee compensation cost based on intrinsic value and fair value:
The Company has adopted intrinsic value method for valuation and accounting of the aforesaid stock options as per SEBI (Share Based Employee Benefits) Regulations, 2014.
Had the Company valued and accounted the aforesaid stock options as per the Black Scholes Model, the net loss for the year would have been lower by Rs. 1.26 million and the diluted earnings per share would have been Rs. (0.59) per share instead of Rs. (0.60) per share
E) Listing with the stock exchanges
The Company's equity shares are listed on the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE). The Secured Non-Convertible Debentures are listed on the Bombay Stock Exchange Limited. The Global Depository Receipts are listed at Singapore Securities Trading Limited (SGX-ST). Annual listing fees for the year 2014-15 have been paid to BSE, NSE and SGX-ST.
10.Conservation of energy, technology absorption and foreign exchange earnings and outgo.
Conservation of energy
Initiatives taken for conservation of energy, its impact are as under:
• Installation of Variable Frequency Drive at hydro inlet, outlet and OD-3 outlet conveyors at Dahej unit.
° Energy saving - 19,800 Kwh/year o Savings in cost - Rs. 108,900
• Modification In Fo Day Tank Heating Control System at Dahej unit
o Energy saving - 26,062 Kwh/Year o Savings in cost - Rs. 143,342
• Modified Brushing Unit Power Pack PLC Control Logic at Dahej unit.
o Energy saving - 2820 Kwh/year and o Savings in cost - Rs. 15,510
1. Efforts, in brief, made towards technology absorption, adaptation and innovation - Not Applicable
2.The benefits derived like product improvement, cost reduction, product development or import substitution -Not Applicable
3 In case of imported technology (imported during the last three years reckoned from the beginning of the financial year)- Not Applicable
Research and development
1. Specific areas in which R&D is carried out by the Company
Pipe Mill at Anjar:
• Development of high strain based pipes in API 5L X70M PSL2 grade
• Development of high wall thick plates of API 5L X70M PSL2 grade pipes
• FBE/DFBE Coating of bends
• 3LPE-3LPP Coating of bends
• Liquid PU Coating of bends
• 5 LPP-7LPP Coating of Pipes for Insulation
Low Application temperature FBE and 3LPECoating for-strain Based design Pipes
High Operating Temperature pipeline - FBE and 3LPP Coating Special designed Conveyor Rollers for High Temperature Coating Stripping System
2. Benefits derived as a result of the above R&D.
Pipe Mill at Anjar: LSAW Pipe Mill qualified for supply of high strain based pipes in API 5L X70M PSL2 grade
3. Future plan of action
Anjar Pipe Mill: Development of API 5L X70M PSL2 plates at Plate Mill for high strain based design pipes.
4. Expenditure on R&D
(a) Capital - Nil
(b) Recurring - Rs. 16.17 million
(c) Total - Rs. 16.17 million
(d) Total R&D expenditure as a% of total turnover - 0.03%
Foreign exchange earnings and outgo:
5. Total foreign exchange used and earned.
Used : Rs. 38,679.43 million Earned : Rs. 35,943.71 million
Including foreign exchange earned and used by the wholly owned subsidiary of the Company in India viz Welspun Tradings Limited.
11. Corporate Social Responsibility
Disclosures as required under Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 are annexed to this report as Annexure 3.
12. Directors and Key Managerial Personnel
A) Changes in Directors and Key Managerial Personnel
Since the last report, no change took place in the Board of Directors and Key Managerial Personnel except the appointment of Mr. Atul Desai as an additional independent director whose term is expiring at the forthcoming annual general meeting. Pursuant to Section 160 of the Companies Act, 2013, the Company has received a notice from a member proposing Mr. Desai for appointment as a director of the Company. Accordingly, a resolution proposing his appointment has been included in the notice convening the annual general meeting. Mr.Desai meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013. In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Balkrishan Goenka and Mr. Utsav Baijal are retiring by rotation at the forthcoming Annual General Meeting and being eligible, they have been recommended for re-appointment by the Board.
Details about the directors being appointed / re-appointed are given in the Notice of the forthcoming Annual General Meeting being sent to the members along with the Annual Report.
B) Declaration by an Independent Director(s)
The independent directors have individually declared to the Board that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 at the time of their respective appointment and there is no change in the circumstances as on the date of this report which may affect their status as an independent director.
C) Formal Annual Evaluation
The evaluation process was led by the Chairman of the Nomination and Remuneration Committee with specific focus on the performance vis-a-vis the plans, meeting challenging situations, performing leadership role within, and effective functioning of the Board. The evaluation process invited, through IT enabled platform, graded responses to a structured questionnaire for each aspect of evaluation viz. time spent by each of the directors; accomplishment of specific responsibilities and expertise; conflict of interest; integrity of the Director; active participation and contribution during discussions. For the financial year 2014-15, the annual performance evaluation was carried out which included evaluation of the Board, independent directors, non-independent directors, executive directors, Chairman, Committees of the Board, quantity, quality and timeliness of information to the Board. The independent directors evaluated all non-independent directors, the Board, the Committees, the Chairman and the information to the Board. The Nomination and Remuneration Committee and Board evaluated performance of the independent directors, the Board itself, the Chairman, the Executive Directors, the Committees of the Board, the information provided to the Board. All results were satisfactory.
D) Committees of the Board of Directors
Information on the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders' Relationship, Share Transfer and Investors' Grievance Committee and meetings of those committees held during the year is given in the Corporate Governance Report.
The corporate guarantees were given to secure credit capital facilities availed by subsidiaries of the Company and other companies in the group.
14. Particulars of contracts or arrangements with related parties
All related party transactions that were entered into during the year under report were on an arm's length basis and were in the ordinary course of business. There were 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 at large.
The Company's policy on Related Party Transactions as approved by the Board is uploaded on the Company's website.
None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.
Disclosures as required under the Companies Act, 2013 are given in Form AOC-2 annexed as Annexure 4 to this Report.
15. Familiarization program for Independent Director
The details of familiarization program (for independent directors) are disclosed on the Company's website and a web link thereto is: <http://www.welspuncorp.com/> content.aspRs.Submenu = Y&MenuID=1&Sub-menuID=64
16. Code of Conduct
The Company has Code of Conduct for Board members and senior management personnel. A copy of the Code has been put on the Company's website for information of all the members of the Board and management personnel.
All Board members and senior management personnel have affirmed compliance of the same.
A declaration signed by the Managing Director of the Company is given below:
"I hereby confirm that the Company has obtained from all the members of the Board and Management Personnel, affirmation that they have complied with the Code of Conduct for the financial year 2014-15."
19. Corporate Governance Certificate
The Compliance certificate obtained from M/s. JMJA & Associates LLP, Company Secretaries regarding compliance of conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement is annexed with the report.
20. Risk Management Policy
With its fast and continuous expansion in different areas of businesses across the globe, the Company is exposed to plethora of risks which may adversely impact growth and profitability. The Company recognizes that risk management is of concern to all levels of the businesses and requires a structured risk management policy and process involving all personnel. With this objective the Company had formulated structured Risk
Management Policy thereby to effectively address such risks namely, strategic, business, regulatory and operational risks. The Policy envisages identification of risks by each product segment and location, together with the impact that these may have on the business objectives. It also provides a mechanism for categorization of risks into Low, Medium and High according to the severity of risks.
For the key business risks identified by the Company please refer to the Management Discussion and Analysis annexed to this Report.
21.Extract of the annual return
An extract of the annual return in Form MGT-9 of the Companies (Management and Administration) Rules, 2014 is attached to this report as
22. Miscellaneous Disclosures:
During the year under report, there was no change in the general nature of business of the Company.
No material change or commitment has occurred which would have affected the financial position of the Company between the end of the financial year of the Company to which the financial statements relate and the date of the report.
No significant and material order was passed by the regulators or courts or tribunals which would have impacted the going concern status and the Company's operations in future.
The Company has not made any provision of money for the purchase of, or subscription for, shares in the Company or its holding company, to be held by or for the benefit of the employees of the Company and hence, the disclosure as required under Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 is not required.
Further, the Board of the Company approved the Policy on Prevention, Prohibition and Redressal of Sexual Harassment of women at workplace at its meeting held on January 27, 2014 and formed the Internal Complaints Committee for each location of the Company. No case of sexual harassment was reported to the Internal Complaints Committee during the year under review.
23. Directors' Responsibility Statement
Pursuant to Section 134(3)(c) & 134(5) of the Companies Act, 2013, your directors hereby confirm that:
a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
b. the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period;
c. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. the directors had prepared the annual accounts on a going concern basis;
e. being a listed company, the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Your directors thank the Government Authorities, Financial Institutions, Banks, Customers, Suppliers, Shareholders, Employees and other business associates of the Company, who through their continued support and co-operation, have helped as the partner in your company's progress and achievement of its objectives.
For and on behalf of the Board of Directors
(DIN : 00270175)
Date: April 28, 2015