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Asian Paints Ltd (ASIANPAINT) -BSE
2421.3 38.00 (1.59%) 09-Mar-2021 |09:45
PREV.CLOSE OPEN PRICE HIGH(Rs) LOW(Rs) VOLUME(Rs) 52AVG.RANGE MARKET CAP(Rs.Cr) P/E Div Yield (%) Eps (Rs)
2383.3 2400 2424 2400 17968 2871.4 - 1431.85 228605.61 84.39 0.5 28.24
Directors Report

Dear Members,

The Board of Directors are pleased to present the Seventy-Fourth Annual Report of Asian Paints Limited along with the audited financial statements (standalone and consolidated) for the financial year ended 31st March, 2020.

FINANCIAL RESULTS

The Company's financial performance for the year ended 31st March, 2020 is summarized below:

Rs. crores

Standalone

Consolidated

Year ended 31.03.2020 Year ended 31.03.2019* Growth (%) Year ended 31.03.2020 Year ended 31.03.2019* Growth (%)
Revenue from Operations* 17,194.09 16,391.78 4.9% 20,211.25 19,248.45 5.0%
Earning Before Interest, Taxes, Depreciation and Amortisation 4,214.58 3,789.62 11.2% 4,466.08 3,998.58 11.7%
Less : Finance Cost 78.38 78.60 102.33 105.27
Less : Depreciation and Amortisation Expense 689.97 540.77 780.50 622.14
Profit For the period before share of profit in associate 3,446.23 3,170.25 8.7% 3,583.25 3,271.17 9.5%
Share of profit of Associate - - 50.74 40.73
Profit before exceptional items & tax 3,446.23 3,170.25 8.7% 3,633.99 3,311.90
Exceptional Items** 33.20 - - -
Profit Before Tax 3,413.03 3,170.25 7.7% 3,633.99 3,311.90 9.7%
Less : Tax Expense 759.08 1,038.08 854.85 1,098.06
Profit for the period from continuing operations 2,653.95 2,132.17 24.5% 2,779.14 2,213.84 25.5%
Profit before tax from discontinued operations - - (5.73) (7.28)
Tax expense of discontinued operations - - (0.78) (1.48)
Profit for the period from discontinued operations - - (4.95) (5.80)
Profit for the period 2,653.95 2,132.17 24.5% 2,774.19 2,208.04 25.6%
Attributable to:
Shareholders of the Company 2,653.95 2,132.17 24.5% 2,705.17 2,155.92 25.5%
Non Controlling Interest - - 69.02 52.12
Other Comprehensive Income (net of tax) 50.40 (18.18) 58.31 (13.76)
Total Comprehensive Income 2,704.35 2,113.99 27.9% 2,832.50 2,194.28 29.1%
Attributable to:
Shareholders of the company 2,704.35 2,113.99 27.9% 2,755.61 2,132.97 29.2%
Non-Controlling Interest - - 76.89 61.31
Opening balance in Retained Earnings 4,424.53 3,345.90 4,604.60 3,502.31
Amount available for Appropriation 7,068.66 5,451.71 7,299.35 5,632.52
Dividend - Interim - FY 2019-20 1,007.16 - 1,007.16 -
Interim - FY 2018-19 - 273.37 - 273.37
Final- FY 2018-19 733.79 - 733.79 -
Final- FY 2017-18 - 580.31 - 580.31
Tax on Dividend 353.07 173.50 353.07 173.50
Transfer to General Reserve - - - -
Transfer to Other Reserve - - 0.69 0.74
Closing balance in Retained Earnings 4,974.64 4,424.53 5,204.64 4,604.60

* Restated figures after adjusting for retrospective application of Ind AS 116 - Leases.

**Comprise of impairment provision towards investment made in Sleek International Private Limited & Maxbhumi Developers Limited of ' 29.7 crores and ' 3.5 crores respectively.

COMPANY PERFORMANCE OVERVIEW During the financial year 2019-20:

• During the financial year 2019-20, revenue from operations on standalone basis increased to Rs. 17,194.09 crores as against Rs. 16,391.78 crores in the previous year - a growth of 4.9%.

• Even with the loss of sales in the last fortnight of March, 2020, the Company managed to end the year with a double digit volume growth of 11.2% for domestic decorative business. Against this double digit volume growth for the year, the value growth was in single digit as we continue to focus on growing the bottom of the pyramid with concentrated push on the upgradation of emulsions as well as large undercoats market.

• Cost of goods sold as a percentage to revenue from operations decreased to 55.3 % as against 57.4% in the previous year.

• Employee cost as a percentage to revenue from operations increased to 5.7% (Rs.5.43 crores) against 5.5% (Rs.900.14 crores) in the previous year.

• Other expense as a percentage to revenue from operations increased to 16.6% (Rs.2,845.44 crores) as against 15.7% (Rs.2,576.21 crores) in the previous year.

• The Company has contributed Rs. 25 Crores towards COVID-19 pandemic related relief activities.

• The Profit After Tax for the current year is Rs. 2,653.95 crores against Rs. 2,132.17 crores in the previous year - a growth of 24.5%. Higher growth was due to reduction in tax rate during the year.

• On a consolidated basis, the group achieved revenue of Rs.,211.25 crores as against Rs. 19,248.45 crores - a growth of 5.0%. Net profit after non-controlling interest for the group for the current year is Rs. 2,705.17 crores as against Rs. 2,155.92 crores in the previous year - a growth of 25.5%.

IMPACT OF COVID-19

The country witnessed lockdown being implemented in India in the second fortnight of March 2020. There were also restrictions of varying extent across larger part of the world, due to the COVID-19 pandemic. This impacted the business operations of the Company significantly. Since May 2020, the Company started resuming operations in its manufacturing plants and warehouses after taking requisite permissions from Government authorities.

By staying true to its purpose and its values, the top-most priority for the Company was to ensure the safety of its employees. The Company has taken several measures to ensure their well-being including leveraging the power of technology to enable them to work from home. For those employees who are working in sales offices and manufacturing locations, their safety is being ensured by stringent use of protective gear, abiding by social distancing norms and taking all safety precautions.

Standing by its core commitment, the Company is navigating through these unprecedented times by building stronger and deeper relationships with consumers and its partners. The Company is supporting various Government Initiatives and helping communities around to fight the pandemic.

Detailed information on the same has been included under the Management Discussion & Analysis report forming part of this Annual Report.

TRANSFER TO RESERVES

The Company has not transferred any amount to the Reserves for the year ended 31st March, 2020.

DIVIDEND

During the year under review, the Company paid to its shareholders:

• First interim dividend of Rs. 3.35 (Rupees three and paise thirty-five only) (335%) per equity share of the face value of Rs. 1 (Rupee one only) each in the month of November, 2019; and

• Second interim dividend of Rs. 7.15 (Rupee seven and paise fifteen only) (715%) per equity share of the face value of Rs. 1 (Rupee one only) each in the month of March, 2020.

The Board of Directors at their meeting held on 23rd June, 2020 has recommended payment of Rs. 1.50 (Rupees one & paise fifty only) per equity share of the face value of Rs. 1 (Rupee one only) each as final dividend for the financial year ended 31st March, 2020. The payout is expected to be Rs. 143.88 crores (Rupees one hundred fourty three crores and eighty eight lakhs). The payment of final dividend is subject to the approval of the shareholders of the Company at the ensuing Annual General Meeting (AGM).

If approved, the total dividend (interim and final dividend) for the financial year 2019 - 20 will be Rs. 12 (Rupees Twelve only) per equity share of the face value of Rs. 1 each (Rupee one only) [Dividend payout for the FY 2019-20 totals to Rs. 1,151.04 crores (Rupees one thousand one hundred fifty one crores and four lakhs)] as against the total dividend of Rs. 10.50 (Rupees ten and paise fifty only) per equity share of the face value of Rs. 1 each (Rupee one only) paid for the previous financial year 2018-19 [Dividend payout for the FY 2018-19 totals to Rs. 1007.16 crores (Rupees One Thousand and Seven Crores and Sixteen Lakhs)].

In view of the changes made under the Income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. The Company shall, accordingly, make the payment of the final dividend after deduction of tax at source.

The dividend recommended is in accordance with the Dividend Distribution Policy of the Company. The Dividend Distribution Policy of the Company is set out as Annexure [A] and is also uploaded on the Company's website: https://www.asianpaints.com/more/investors/policies- programs.html.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In accordance with the applicable provisions of Companies Act, 2013 (hereinafter referred to as "the Act") read with Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 (hereinafter referred to as the "IEPF Rules"), all unclaimed dividends are required to be transferred by the Company to the IEPF, after completion of seven (7) years. Further, according to IEPF Rules, the shares on which dividend has not been claimed by the shareholders for seven (7) consecutive years or more shall be transferred to the demat account of the IEPF Authority. The details relating to amount of dividend transferred to the IEPF during the FY 2019-20 and corresponding shares on which dividends were unclaimed for seven (7) consecutive years, are provided in the General Shareholders Information section of Corporate Governance report forming part of this Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of the Act, Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "Listing Regulations") and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2019-20, together with the Auditors' Report form part of this Annual Report.

SUBSIDIARIES & ASSOCIATE COMPANIES

Financial Performance

The Management Discussion and Analysis report forming part of the Annual Report provides a detail overview of the operations of the subsidiaries of the Company.

A statement containing the salient features of financial statements of subsidiaries/joint venture companies of the Company in the prescribed Form AOC - 1 forms a part of Consolidated Financial Statements (hereinafter referred to as "CFS") in compliance with Section 129 (3) and other applicable provisions, if any, of the Act read with Rules.

In accordance with Section 136 of the Act, the audited financial statements, including the CFS and related information of the Company and the financial statements of each of the subsidiary and associate companies, are available on our website, www.asianpaints.com

The Company's Policy for determining material subsidiaries may be accessed on the website of the Company at https://www.asianDaints.com/more/ investors/Dolicies-Droarams.html .

The Company does not have a material subsidiary.

During the year under review:

a. The Board of Directors of the Company at their meeing held on 22nd January, 2020, approved the Scheme of Amalgamation of Reno Chemicals Pharmaceuticals & Cosmetics Private Limited (Reno), wholly owned subsidiary of the Company with the Company, subject to necessary statutory and regulatory approvals, including approval of the National Company Law Tribunal, Mumbai.

The proposed Amalgamation is, inter alia, to maintain a simple corporate structure, eliminate duplicate corporate procedures and reduce multiplicity of legal and regulatory compliances between both the companies.

There is no consideration involved as the entire share capital of Reno is held by the Company along with its nominees. The appointed date for the Scheme of Amalgamation is 1st April, 2019 or such other date as may be approved by the National Company Law Tribunal (NCLT) and the Scheme shall be effective from the last date of receipt of all approvals, permissions as may be required or filing of necessary certified copies of Orders under the applicable section(s) of the Act with the Registrar of Companies, Maharashtra at Mumbai.

The NCLT vide its Orders dated 22nd April, 2020 and 27th April, 2020, inter alia admitted the Scheme of Amalgamation.

b. Asian Paints International Private Limited, Singapore (APIPL), wholly owned subsidiary of the Company divested its entire stake in Berger Paints Singapore Pte Limited, Singapore (BPS), wholly owned subsidiary of APIPL to Omega Property Investments Pty Ltd, Australia, for a consideration of approx Rs. 20.81 crores (Rupees twenty crores and eighty one lakhs) on 17th September, 2019. BPS had a limited presence in the Singapore coatings market and was not material in overall Company's international operations.

c. The Company has made an assessment of the recoverable value of investment in its subsidiaries taking into account the past business performance, prevailing business conditions and revised expectations of the future performance. Accordingly, an impairment loss of approximately Rs. 29.70 crores (Rupees twenty nine crores and seventy lakhs) and Rs. 3.50 crores (Rupees three crores and fifty lakhs) have been recognised towards investment in Sleek International Private Limited and Maxbhumi Developers Limited (an asset holding Company having land held for sale), respectively.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Board of Directors

Retirement of Mr. KBS Anand as the Managing Director & CEO of the Company

The term of Mr. KBS Anand as the Managing Director and CEO came to an end on 31st March, 2020 and consequently he ceased to be a Director of the Company.

Mr. KBS Anand had joined the Company in the year 1979 and has held various positions in Decorative, Industrial and Chemical business functions of the Company. He was appointed as the Managing Director & CEO of the Company, w.e.f. 1st April, 2012. During his tenure as the Managing Director & CEO, he has transformed the Company from being a Paints' major towards a complete decor solutions provider to help customers create their dream homes.

The Board of Directors place on record their deep sense of gratitude and appreciation for the invaluable contribution rendered by Mr. KBS Anand during his four decades long illustrious career with the Company in many roles and recently as the Managing Director & CEO of the Company for the past eight years.

Appointment of Mr. Amit Syngle as an Additional Director/Managing Director & CEO of the Company

The Board of Directors of the Company at their Meeting held on 28th March, 2020, based on the recommendations of the Nomination and Remuneration Committee of the Board of Directors of the Company, approved the appointment and remuneration of Mr. Amit Syngle as an Additional Director/Managing Director & CEO (Key Managerial Person) of the Company for a period of three years effective from 1st April, 2020 up to 31st March, 2023, subject to the approval of the shareholders at ensuing AGM of the Company.

The Board of Directors recommend the appointment of Mr. Amit Syngle as the Managing Dirctor and CEO of the Company. Mr. Amit Syngle has spent 30 years with the Company and has headed Supply Chain, Sales & Marketing and Research & Technology funtions. In addition, he also spearheaded the newly acquired businesses of the Kitchens and Bath spaces in the Home Improvement venture of the Company.

Before being appointed as an Additional Director/ Managing Director & CEO, Mr. Amit Syngle held the position of Chief Operating Officer of the Company.

He has been appointed as the Key Managerial Personnel of the Company in accordance with Section 203 of the Act, w.e.f. 1st April, 2020.

Appointment of Mr. Manish Choksi as NonExecutive Director of the Company

The Board of Directors of the Company at their meeting held on 22nd October, 2018, based on the recommendations of the Nomination & Remuneration Committee approved the appointment of Mr. Manish Choksi as a Non - Executive Promoter Director, to fill the casual vacancy created on the Board on account of the sad demise of Mr. Ashwin Choksi, erstwhile Chairman. The shareholders had thereafter approved the same.

In terms of sub-section (4) of Section 161 of the Act, Mr. Manish Choksi holds office upto to the date of this AGM.

The Board of Directors of the Company, based on the recommendation of Nomination and Remuneration Committee, have recommended the appointment of Mr. Manish Choksi as a Non - Executive Director of the Company from the date of ensuing AGM, subject to approval of the shareholders, in terms of Section 152 read with Section 160 of the Act, liable to retire by rotation.

Retirement by rotation and subsequent reappointment

In accordance with the provisions of Section 152 and other applicable provisions, if any, of the Act (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and the Articles of Association of the Company, Mr. Ashwin Dani and Ms. Amrita Vakil, Non-Executive Directors, are liable to retire by rotation at the ensuing AGM and being eligible have offered themselves for re-appointment.

The Managing Director & CEO and Independent Directors of the Company are not liable to retire by rotation.

Mr. Ashwin Dani, Chairman and Non - Executive Director of the Company, having attained the prescribed age limit of 75 years, Special Resolution is proposed in accordance with Regulation 17(1A) of Listing Regulations for approval by the Shareholders of the Company.

The Shareholders had earlier approved the continuation of directorship of Mr. Ashwin Dani beyond 75 years of age by passing a Special Resolution.

In the opinion of the Nomination & Remuneration Committee and Board of Directors of the Company, considering his seniority, role played by Mr. Ashwin Dani towards the growth of this Company and to reap the benefits of his rich and varied experience, approval of shareholders is sought for continuation of Mr. Ashwin Dani as a Non-Executive Director, liable to retire by rotation.

Declaration of independence from Independent Directors

The Company has received the following declarations from all the Independent Directors confirming that:

• They meet the criteria of independence as prescribed under the provisions of the Act, read with the Schedules and Rules issued thereunder, as well as of Regulation 16 of the Listing Regulations.

• In terms of Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014, they have registered themselves with the Independent Director's database maintained by the Indian Institute of Corporate Affairs, Manesar.

• In terms of Regulation 25(8) of the Listing Regulations, they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

In terms of Regulation 25(9) of the Listing Regulations, the Board of Directors has ensured the veracity of the disclosures made under Regulation 25(8) of the Listing Regulations by the Independent Directors of the Company.

CHANGE IN KEY MANAGERIAL PERSON Retirement of Mr. Jayesh Merchant as CFO & Company Secretary, President - Industrial JVs from the Company

Mr. Jayesh Merchant retired from the services of the Company, w.e.f. 26th November, 2019.

Mr. Jayesh Merchant had joined the Company in the year 2002 as Vice President- Finance & Company Secretary. The Board of Directors designated him as the Chief Financial Officer of the Company in 2006. Since, November, 2012, he also headed the Industrial businesses of the Company operated in India, through two joint ventures companies with PPG Inc., USA.

The Board places on record its appreciation of the contribution of Mr. Jayesh Merchant during his association with the Company.

Appointment of Mr. R J Jeyamurugan as the CFO

6 Company Secretary of the Company

Mr. R J Jeyamurugan was appointed as the CFO & Company Secretary of the Company, w.e.f. 27th November, 2019.

Mr. R J Jeyamurugan is an associate member of the Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI). He joined the Company in the year 1991. He has considerable experience in the areas of finance, accounts, secretarial and taxation matters. He has held important positions in the organization including Assistant Company Secretary during August, 1997 to May, 1999. He heads the Finance, Accounts, Shared Service Centre, Tax, Legal, Secretarial & Investor relations functions of the Company.

Before his appointment as the CFO & Company Secretary, he held the position of Vice President - Finance of the Company. He has also been the Compliance Officer of the Company since May, 2018.

NUMBER OF MEETINGS OF THE BOARD

7 (seven) meetings of the Board of Directors were held during the financial year 2019 - 20. The details of the meetings of the Board of Directors of the Company convened and attended by the Directors during the financial year 2019-20 are given in the Corporate Governance Report which forms part of this Annual Report.

NOMINATION AND REMUNERATION POLICY

The salient features of the Nomination and Remuneration Policy of the Company are set out in the Corporate Governance Report which forms part of this Annual Report.

The said Policy of the Company, inter alia, provides that the Nomination and Remuneration Committee shall formulate the criteria for appointment & re-appointment of Directors on the Board of the Company and persons holding Senior Management positions in the Company, including their remuneration and other matters as provided under Section 178 of the Act and Listing Regulations.

The Policy is also available on the website of the Company https://www.asianpaints.com/more/investors/ policies-programs.html .

REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT

The remuneration paid to the Directors, Key Managerial Personnel and Senior Management is in accordance with the Nomination and Remuneration Policy formulated in accordance with Section 178 of the Act and Regulation 19 of the Listing Regulations.

The information required under Section 197 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors/employees of the Company is set out in the Annexure [B] to this report and is also available on the website of the Company (www.asianpaints.com ).

PERFORMANCE EVALUATION

The Nomination and Remuneration Policy of the Company empowers the Nomination and Remuneration Committee to formulate a process for effective evaluation of the performance of Individual Directors, Committees of the Board and the Board as a whole.

The Board formally assesses its own performance based on parameters which, inter alia, include performance of the Board on deciding long term strategy, rating the composition and mix of Board members, discharging of governance and fiduciary duties, handling critical and dissenting suggestions, etc.

The parameters for the performance evaluation of the Directors include contribution made at the Board meeting, attendance, instances of sharing best and next practices, domain knowledge, vision, strategy, engagement with senior management, etc.

The Chairperson(s) of the respective Committees based on feedback received from the Committee members on the outcome of performance evaluation exercise of the Committee, shares a report to the Board.

The Independent Directors at their separate meeting review the performance of: non-independent directors and the Board as a whole, Chairperson of the Company after taking into account the views of Executive Director and non-executive directors, the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

Based on the outcome of the performance evaluation exercise, areas have been identified for the Board to engage itself with and the same would be acted upon.

The details of the evaluation process are set out in the Corporate Governance Report which forms a part of this Annual Report.

FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTORS

All new independent directors inducted into the Board are familiarized with the operations and functioning of the Company. The details of the training and familiarization program are provided in the Corporate Governance report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134 of the Act (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the Directors of the Company state that:

a. in the preparation of the annual accounts for the financial year ended 31st March, 2020, the applicable Accounting Standards and Schedule III of the Act, have been followed and there are no material departures from the same;

b. the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2020 and of the profits of the Company for the financial year ended 31st March, 2020;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a Rs.going concern' basis;

e. proper internal financial controls laid down by the Directors were followed by the Company and that such internal financial controls are adequate and operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems are adequate and operating effectively.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis as stipulated under the Listing Regulations is presented in a separate section forming part of this Annual Report.

AUDITORS AND AUDITORS' REPORT Statutory Auditor

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018), were appointed as Statutory Auditors of the Company at the 70th AGM held on 28th June, 2016, to hold office till the conclusion of the 75th AGM.

M/s. Deloitte Haskins & Sells LLP has confirmed that they are not disqualified from continuing as Auditors of the Company.

The Auditors have issued an unmodified opinion on the Financial Statements for the financial year ended 31st March, 2020. The Auditors' Report for the financial year ended 31st March, 2020 on the financial statements of the Company is a part of this Annual Report.

Cost Auditor

The Company has maintained cost records for certain products as specified by the Central Government under sub-section (1) of Section 148 of the Act. M/s. R A & Co., Cost Accountants, (Firm Registration No. 000242) carried out the cost audit for applicable businesses during the financial year 2019 - 20.

The Board of Directors of the Company, on the recommendations made by the Audit Committee, have appointed M/s. RA & Co., Cost Accountants, (Firm Registration No. 000242) as the Cost Auditor of the Company to conduct the audit of cost records of certain products for the financial year 2020 - 21. M/s. RA & Co., being eligible, have consented to act as the Cost Auditors of the Company for the FY 2020 - 21.

The remuneration proposed to be paid to the Cost Auditor, subject to ratification by the members of the Company at the ensuing 74th AGM, would not exceed Rs. 8 lakhs (Rupees Eight Lakhs only) excluding taxes and out of pocket expenses, if any.

Secretarial Auditor

The Board of Directors of the Company has appointed Dr. K R Chandratre, Practicing Company Secretary (Certificate of Practice No. 5144), as the Secretarial Auditor to conduct an audit of the secretarial records for the financial year 2020 - 21. The Company has received consent from Dr. K. R. Chandratre to act as the auditor for conducting audit of the secretarial records for the financial year ending 31st March, 2021.

The Secretarial Audit Report for the financial year ended 31st March, 2020 under Act, read with Rules made thereunder and Regulation 24A of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) is set out in the Annexure [C-1] to this report.

The Secretarial Compliance Report for the financial year ended 31st March, 2020, in relation to compliance of all applicable SEBI Regulations/circulars/ guidelines issued thereunder, pursuant to requirement of Regulation 24A of Listing Regulations, is set out in Annexure [C-2] to this report. The Secretarial Compliance Report has been voluntarily disclosed as part of Annual Report as good disclosure practice.

The Secretarial Audit Report and/or Secretarial Compliance Report does not contain any qualification, reservation or adverse remark.

COMMITTEES

As on 31st March, 2020, the Board has six committees: Audit Committee, Corporate Social Responsibility Committee, Nomination and Remuneration Committee, Risk Management Committee, Stakeholders Relationship Committee and Shareholders Committee.

During the year, all recommendations made by the committees were approved by the Board.

A detailed note on the composition of the Board and its committees is provided in the Corporate governance report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

During the financial year ended 31st March, 2020, the Company incurred CSR Expenditure of Rs. 74.64 crores (Rupees seventy four crores and sixty four lakhs). The CSR initiatives of the Company were under the thrust area of health & hygiene, education, water management and vocational training. The CSR Policy of the Company is available on the website of the Company at https://www. asianDaints.com/about-us.html .

The Company's CSR Policy statement and annual report on the CSR activities undertaken during the financial year ended 31st March, 2020, in accordance with Section 135 of the Act and Companies (Corporate Social Responsibility Policy) Rules, 2014 (including any statutory modification(s) or re- enactment(s) thereof for the time being in force) is set out in Annexure [D] to this report.

The Company has committed Rs. 35 crores towards COVID-19 pandemic related relief activities, out of which Rs. 15 crores was spent as CSR in the FY 2019-20. The contribution was made to the Central as well as other Disaster Relief State funds to combat COVID-19 pandemic.

CORPORATE GOVERNANCE REPORTAND BUSINESS RESPONSIBILITY REPORT

In compliance with Regulation 34 of the Listing Regulations, a separate report on Corporate Governance along with a certificate from the Auditors on its compliance and a Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front forms part of this Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return of the Company as on 31st March, 2020 in Form MGT - 9 in accordance with Section 92 (3) of the Act read with Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.asianpaints.com/more/ investors/financial-results.html and is set out in Annexure [E] to this Rport.

RELATED PARTY TRANSACTIONS

AH contracts/arrangements/transactions entered into by the Company during the year under review with Related Parties were in ordinary course of business and on arm's length basis in terms of provisions of the Act.

The Company's Policy on dealing with and Materiality of Related Party Transactions is available on the website of the Company at https://www.asianpaints.com/more/ investors/policies-programs.html .

All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on dealing with and materiality of Related Party Transactions and the Related Party Framework, formulated and adopted by the Company. During the year under review, the Related Policy Framework was suitably amended to give effect to the changes in the relevant provisions of law.

There are no materially significant related party transactions that may have potential conflict with interest of the Company at large. There are no person(s) or entities forming part of the Promoter(s)/Promoter(s) Group which individually hold 20% or more shareholding in the Company.

The details of the related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note 43 to the Standalone Financial Statements of the Company.

The Company in terms of Regulation 23 of the Listing Regulations submits within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges. The said disclosures can be accessed on the website of the Company at https://www.asianpaints.com/more/investors.html .

Form AOC - 2 pursuant to Section 134 (3) (h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure [F] to this report.

LOANS AND INVESTMENTS

Details of loans, guarantees and investments under the provisions of Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, as on 31st March, 2020, are set out in Note 37(B) to the Standalone Financial Statements of the Company.

RISK MANAGEMENT

The Company operates in a volatile, uncertain, complex and ambiguous (VUCA) world with rapid changes. These changes bring a mix of opportunities and uncertainties impacting the Company's objectives. Risk Management, which aims at managing the impact of these uncertainties, is an integral part of the Company's strategy setting process. The Company regularly identifies these uncertainties and after assessing them, devises short-term and long-term actions to mitigate any risk which could materially impact the Company's long-term goals.

The Risk Management Committee of the Company has been entrusted by the Board with the responsibility of reviewing the risk management process in the Company and ensuring that the risks are brought within acceptable limits.

Mitigation plans to significant risks are well integrated with functional and business plans and are reviewed on a regular basis by the senior leadership.

The Company endeavors to continually sharpen its Risk Management systems and processes in line with a rapidly changing business environment. The Company, through its risk management process, aims to contain the risks within its risk appetite. There are no risks which in the opinion of the Board threaten the existence of the Company. However, some of the risks which may pose challenges are set out in the Management Discussion and Analysis which forms part of this Annual Report.

The Board of Directors of the Company on the recommendation of the Risk Management Committee has developed risk management policy for the Company which articulates the Company's approach to address the uncertainities in its endeavour to achieve its stated and implicit objectives.

VIGIL MECHANISM

The Company has a robust vigil mechanism through its Whistle Blower Policy approved and adopted by Board of Directors of the Company in compliance with the provisions of Section 177 (10) of the Act and Regulation 22 of the Listing Regulations.

The Company has engaged an agency for managing an Rs.Ethics Hotline' which can be used to, inter alia, report any instances of financial irregularities, breach of code of conduct, abuse of authority, disclosure of financial/unpublished price sensitive information other than for legitimate purposes, unethical/unfair actions concerning Company vendors/suppliers, mala-fide manipulation of Company records, discrimination to the Code of Conduct in an anonymous manner.

The Policy also provides protection to the directors, employees and business associates who report unethical practices and irregularities.

Any incidents that are reported are investigated and suitable action is taken in line with the Whistle Blower Policy.

The Whistle Blower Policy of the Company can be accessed at website of the Company at https://www.asianpaints. com/more/investors/Dolicies-Droorams.html .

POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

As per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (hereinafter referred to as "Prevention of Sexual Harassment Act"), the Company has formulated a Policy on Prevention of Sexual Harassment at Workplace for prevention, prohibition and redressal of sexual harassment at workplace and an Internal Complaints Committees has also been set up to redress any such complaints received.

The Company is committed to providing a safe and conducive work environment to all of its employees and associates.

The Company periodically conducts sessions for employees across the organization to build awareness about the Policy and the provisions of Prevention of Sexual Harassment Act.

Complaints of sexual harassment received during the financial year 2019-20 by the Company were investigated in accordance with the procedures prescribed and adequate steps were taken to resolve them.

INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

Internal financial control over financial reporting have been designed to provide reasonable assurance with regards to recording and providing reliable financial information and complying with applicable accounting standards. These controls are reviewed periodically, and the Company continuously tries to automate these controls to increase its reliability.

The Company uses an established ERP system of SAP S/4 HANA to record day to day transactions for accounting and financial reporting. The ERP system is configured to ensure all transactions are integrated seamlessly with the underlying books of account.

During the year, the Company upgraded its core Navision based ERP system to the latest SAP S/4 HANA version for its International business units except subsidiaries in South

Pacific. All key internal controls over financial reporting were thoroughly tested along with the core functionalities before migrating to the new system.

The Shared Services Center (SSC) further increased the coverage of digital invoice processing during the year. This has made the process touchless and seamless. Necessary validations built in ensures compliance to statutes and internal policies are adhered to.

The Company has invested in an RPA (Robotic Process Automation) to help in doing the GST reconciliation with the data uploaded by the vendors. This has brought about significant efficiencies and enabled the Company to follow up with the vendors in a timely manner so that GST credits taken are not lost.

The Company has a well-defined and documented delegation of authority with specified limits for approval of expenditure, both capital and revenue. The Company has workflows to ensure adherence to the delegation of authority.

The Company has a commercial manual which lays down certain principles and procedures that are to be followed in commercial & purchase contracts transactions across the Company. The SSC verifies the compliance to commercial manual before clearing the payments.

The Company periodically tracks all amendments to Accounting Standards and makes changes to the underlying systems, processes and financial controls to ensure adherence to the same. All resultant changes to the policy and impact on financials are disclosed after due validation with the Audit Committee.

Corporate accounts function is actively involved in designing large process changes as well as validating changes to IT systems that have a bearing on the books of account.

The Company gets its Standalone financial statements audited every quarter by its Statutory Auditors. The policies to ensure uniform accounting treatment are prescribed to the subsidiary companies as well. International subsidiaries provide information required for consolidation of accounts in the format prescribed by the Company. The accounts of the subsidiary and joint venture companies are audited and certified by their respective Statutory Auditors for consolidation.

OTHER DISCLOSURES

a. There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2019-20 and the date of this report;

b. During the year under the review, there was no change in the nature of business of the Company.

In the beginning of financial year 2020-21, the Company has expanded its health and hygiene segment by the launch of Viroprotek range of hand sanitisers and Surface disinfectants. This was with a view to address the growing requirement of hand and surface sanitizers for increased protection and assist the Government in fighting against the COVID-19 pandemic;

c. During the year under review, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014;

d. The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings;

e. There are no significant material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future;

f. The Competition Commission of India has passed a prima facie Order dated 14th January, 2020, directing the Director General to cause an investigation against the Company, under the provisions of Section 26(1) of the Competition Act, 2002.

This Order is for initiating an investigation against the Company under the relevant provisions of the Competition Act, but it in no way affects the going concern status of the Company;

g. The Managing Director & CEO of the Company has not received any remuneration or commission from any of the subsidiary companies. Further the Company doesn't have any holding Company;

h. None of the Auditors of the Company have reported any fraud as specified under the second proviso of Section 143 (12) of the Act;

i. The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Act read with the Companies (Accounts) Rules, 2014, is set out in the Annexure [G] to this report;

j. The Company does not have any scheme or provision of money for the purchase of its own shares by employees/ Directors or by trustees for the benefit

of employees/ Directors;

k. The Company has not issued equity shares with differential rights as to dividend, voting or otherwise;

l. The Company has not issued any sweat equity shares to its directors or employees; and

m. There was no revision of financial statements and Boards report of the Company during the year under review.

APPRECIATION

The Board of Directors place on record sincere gratitude and appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year.

The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

For and on behalf of the Board of Directors
Ashwin Dani
Chairman
(DIN: 00009126)
Place : Mumbai
Date : 23rd June, 2020

   

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