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Asian Paints

BSE: 500820|NSE: ASIANPAINT|ISIN: INE021A01026|SECTOR: Paints & Varnishes
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Directors Report Year End : Mar '17    Mar 16

Board’s Report

Dear Members,

The Directors have pleasure in presenting the 71st Annual Report of Asian Paints Limited for the financial year ended 31st March, 2017. FINANCIAL RESULTS

(Rs, in crores)

Standalone

Consolidated

Year ended 31.03.2017

Year ended 31.03.2016

Growth

(%)

Year ended 31.03.2017

Year ended 31.03.2016

Growth

(%)

7.8

Revenue from Operations

14,360.43

13,332.18

7.7

17,084.76

15,841.69

Earnings Before Interest, Taxes, Depreciation and Amortization

2,972.34

2,726.36

9.0

3,284.03

2,982.54

10.1

Less : Finance Costs

18.86

23.40

30.58

40.66

Less : Depreciation and Amortisation expense

295.43

234.51

338.84

275.58

Profit Before Exceptional Item & Tax

2,658.05

2,468.45

7.7

2,914.61

2,666.30

9.3

Exceptional Item

-

65.35

-

52.45

Profit Before Tax

2,658.05

2,403.10

10.6

2,914.61

2,613.85

11.5

Less : Tax Expense

854.95

780.29

947.98

844.49

Profit After Tax

1,803.10

1,622.81

11.1

1,966.63

1,769.36

11.1

Share of profit of Associate

49.61

33.42

Profit After Tax including share of Associate

1,803.10

1,622.81

11.1

2,016.24

1,802.78

11.8

Attributable to:

Shareholders of the Company

1,803.10

1,622.81

11.1

1,939.42

1,745.16

11.1

Non-Controlling Interest

76.82

57.62

Other Comprehensive Income (net of tax)

139.04

(17.26)

7.68

(23.49)

Total Comprehensive Income

1,942.14

1,605.55

21.0

2,023.92

1,779.29

13.7

Attributable to:

Shareholders of the Company

1,942.14

1,605.55

21.0

1,998.40

1,726.97

15.7

Non-Controlling Interest

25.52

52.32

Opening balance in Retained Earnings

2,181.55

1,839.64

2,141.50

1,807.76

AMOUNT AVAILABLE FOR APPROPRIATION

3,990.03

3,464.17

4,090.25

3,552.90

Dividend - Interim - FY 2016-17 Interim - FY 2015-16

254.19

211.03

254.19

211.03

- Final - FY 2015-16 Final - FY 2014-15

508.37

412.45

508.37

412.45

Tax on Dividend

154.33

126.24

154.33

126.24

Transfer to General Reserve

500.00

532.90

500.00

660.82

Transfer to Other Reserve

-

-

0.61

0.86

Closing Balance in Retained Earnings

2,573.14

2,181.55

2,672.75

2,141.50

COMPANY’S PERFORMANCE

The Company has adopted Indian Accounting Standards (Ind AS) with effect from 1st April, 2016, pursuant to the notification of Companies (Indian Accounting Standard) Rules, 2015 issued by the Ministry of Corporate Affairs. Previous years'' figures have been restated and audited by the Joint Statutory Auditors of the Company, namely, M/s. BSR & Co. LLP Chartered Accountants (Firm Registration No. 101248W/W-100022) and M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018).

During the financial year 2016-17, revenue from operations on standalone basis increased to '' 14,360.43 crores as against Rs, 13,332.18 crores in the previous year - a growth of 7.7%.

Cost of goods sold as a percentage to revenue from operations decreased to 59.8% as against 60.7% in the previous year. Employee cost as a percentage to revenue from operations increased to 5.2% (Rs, 742.83 crores) against 5% (Rs, 666.83 crores) in the previous year.

Other expenses as a percentage to revenue from operations increased to 16.5% (Rs, 2,364.44 crores) as against 15.8% (Rs, 2,101.70 crores) in the previous year.

The Profit After Tax for the current year is Rs, 1,803.10 crores as against Rs, 1,622.81 crores in the previous year - a growth of Rs, 11.1%. The growth in profit is mainly driven by increase in revenue from operations and softening of input material prices during the year.

On a consolidated basis, the group achieved revenue of Rs, 17,084.76 crores as against Rs, 15,841.69 crores - a growth of 7.8%. Net profit after non controlling interest for the group for the current year is Rs, 1,939.42 crores as against Rs, 1,745.16 crores in the previous year - a growth of Rs, 11.1%.

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2016-17 and the date of this report.

CONSOLIDATED FINANCIAL STATEMENTS

As per 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 provisions of the Companies Act, 2013 read with the Rules issued there under, the Consolidated Financial Statements of the Company for the financial year 2016-17 have been prepared in compliance with applicable Accounting Standards and on the basis of audited financial statements of the Company, its subsidiaries and associate companies, as approved by the respective Board of Directors.

The Consolidated Financial Statements together with the Auditors'' Report form part of this Annual Report.

SUBSIDIARIES

A separate statement containing the salient features of financial statements of all subsidiaries of the Company forms a part of consolidated financial statements in compliance with Section 129 and other applicable provisions, if any, of the Companies Act, 2013. In accordance with Section 136 of the Companies Act, 2013, the financial statements of the subsidiary and associate companies are available for inspection by the members at the Registered Office of the Company during business hours on all days except Saturdays, Sundays and public holidays upto the date of the Annual General Meeting (‘AGM''). Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at the Registered Office of the Company. The financial statements including the consolidated financial statements, financial statements of subsidiaries and all other documents required to be attached to this report have been uploaded on the website of the Company (www.asianpaints.com). The Company has formulated a policy for determining material subsidiaries. The policy may be accessed on the website of the Company (www.asianpaints.com)

During the year under review,

- In order to consolidate, the Company''s investments in overseas subsidiary companies, Asian Paints (International) Limited, Mauritius (APIL), wholly owned subsidiary of the Company, has transferred holdings in its operational subsidiary companies to Berger International Private Limited, Singapore (BIPL), indirect subsidiary of the Company.

- The Board of Directors of the Company, at their meeting held on 25th October, 2016, approved the Scheme of Amalgamation of APIL into the Company (“Scheme”). The Company has also received approval from SEBI in the form of ‘No adverse Observation letters'' regarding the Scheme, from the BSE Limited and the National Stock Exchange of India Limited, in accordance with the provisions of the Companies Act, 2013 and the Listing Regulations. During the financial year 2016-17, the Ministry of Corporate Affairs notified Section 230 to 234 of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017, pursuant to which any foreign company which is proposed to merge with an Indian company requires prior approval of the Reserve Bank of India (“RBI”). Accordingly, the Company has made an application to the RBI and post receiving approval from RBI would file necessary applications with the National Company Law Tribunal for obtaining sanction to the Scheme.

On 3rd April, 2017, BIPL acquired 100% controlling stake in Causeway Paints Lanka (Private) Limited (“CPLPL”), Sri Lanka, for a consideration of Rs, 386.75 crores (approx.) in cash. The aforesaid transaction was entered into with an objective of enhancing the group''s presence in the Sri Lankan market where the Company through its indirect subsidiary Company, Asian Paints (Lanka) Limited, already has operations. CPLPL is a key player in the Sri Lankan coatings market, operating for more than 2 (two) decades and supplies mainly decorative paints (including wood finishes) and automotive paints.

A statement containing the financial performance of each of the subsidiaries and joint venture companies included in the consolidated financial statements of the Company is set out in the Annexure [A] to this Report. Additional details of the performance and operations of the subsidiaries and joint venture companies along with details of the restructuring and investments made by the Company are set out in the Management Discussion and Analysis which also forms a part of this report.

TRANSFER TO GENERAL RESERVE

The Company proposes to transfer Rs, 500 crores to the General Reserve. An amount of Rs, 2,573.14 crores is proposed to be retained in the Retained Earnings.

DIVIDEND

During the financial year 2016-17, the Company declared and paid to the shareholders, an interim dividend of Rs, 2.65 (Rupees two and paise sixty five only) per equity share of the face value of Rs, 1 (Rupee one) each in the month of October, 2016. For celebrating 75 years of Excellence at Asian Paints, the Board of Directors of the Company have recommended payment of one-time special dividend of Rs, 2 (Rupees two only) per equity share of the face value of Rs, 1 (Rupee one) each in addition to final dividend of Rs, 5.65 (Rupees five and paise sixty five only) per equity share of the face value of Rs, 1 (Rupee one) each, for approval of the shareholders at the ensuing AGM. If approved, the total dividend (interim dividend, one-time special dividend and final dividend) for the financial year 2016-17 will be Rs, 10.30 (Rupees ten and paise thirty only) per equity share of the face value of Rs, 1 (Rupee one) each as against the total dividend of Rs, 7.50 (Rupees seven and paise fifty only) per equity share of the face value of Rs, 1 (Rupee one) paid for the previous financial year 2015-16.

In accordance with Regulation 43A of the Listing Regulations, the Company has formulated a ‘Dividend Distribution Policy'' and details of the same have been uploaded on the Company''s website (www.asianpaints.com).

REGISTRAR AND TRANSFER AGENT OF THE COMPANY

As mentioned in the last year''s Annual Report, the Company had during the financial year 2015-16, discovered certain irregularities with regard to the share related and dividend encashment activities carried out by M/s. Sharepro Services (India) Private Limited (hereinafter referred to as “Sharepro”), Company''s erstwhile Registrar & Transfer Agent. The Board of Directors of the Company, at their meeting held on 14th March, 2016, had approved the appointment of M/s. TSR Darashaw Limited, as the Registrar and Transfer Agent with effect from 1st April, 2016. Further, SEBI, vide its Interim Order dated 22nd March, 2016, has restrained Sharepro from conducting Registrar & Transfer Agent activities.

The Company has taken necessary legal steps and action against Sharepro and some of its employees.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Resignation of Mr. Dipankar Basu:

Mr. Dipankar Basu, Independent Director, stepped down from the Board of Directors of the Company w.e.f. 1st January, 2017, due to his advancing age.

During his long association with the Company, his contribution to the Audit Committee as the Chairman as well as to the Board and the Nomination and Remuneration Committee has been immensely valuable. The Board places on record, its appreciation for his inspiring guidance and his outstanding contribution to improve the overall functioning of the Company.

Appointment of Mr. R. Seshasayee:

During the financial year 2016-17, the Board of Directors at their meeting held on 23rd January, 2017, had appointed Mr. R. Seshasayee as an Additional Director (Independent Director) of the Company. Appropriate resolution for the appointment of Mr. R. Seshasayee as an Independent Director of the Company is being placed for the approval of the shareholders of the Company at the ensuing AGM for a period of 5 (five) years from the date of his appointment. The Board of Directors of the Company recommend his appointment as an Independent Director of the Company.

Retirement by rotation and subsequent re-appointment:

Mr. Abhay Vakil and Ms. Amrita Vakil, Non-Executive Directors, are liable to retire by rotation at the ensuing AGM, pursuant to Section 152 and other applicable provisions, if any, of the Companies Act, 2013, read with the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the Articles of Association of the Company and being eligible have offered themselves for re-appointment. Appropriate resolutions for their re-appointment are being placed for the approval of the shareholders of the Company at the ensuing AGM. The brief resume of the Directors and other related information has been detailed in the Notice convening the 71st AGM of the Company. The Directors recommend their re-appointment as Non-Executive Directors of the Company.

In accordance with the provisions of the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations, the Independent Directors of the Company (other than Mr. R. Seshasayee) shall hold office upto 31st March, 2019 and are not liable to retire by rotation.

Re-appointment of Managing Director & CEO:

The Board of Directors at their meeting held on 11th May, 2017, subject to the approval of the shareholders at the ensuing AGM, considered and approved the re-appointment of Mr. K.B.S. Anand as the Managing Director & CEO of the Company for a further period of 2 (two) years commencing from 1st April, 2018.

Mr. K.B.S. Anand, Managing Director & CEO and Mr. Jayesh Merchant, CFO & Company Secretary, President - Industrial JVs, are Key Managerial Personnel of the Company in accordance with the provisions of Sections 2(51), 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

Disclosure Relating to Remuneration of Directors, Key Managerial Personnel and particulars of Employees:

The remuneration paid to the Directors is in accordance with the Nomination and Remuneration Policy formulated in accordance with Section 178 of the Companies Act, 2013 and Regulation 19 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force). The salient aspects covered in the Nomination and Remuneration Policy have been outlined in the Corporate Governance Report which forms a part of this report.

The Managing Director & CEO of the Company does not receive remuneration from any of the subsidiaries of the Company.

The information required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) 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).

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the Directors of the Company confirm that:

a. in the preparation of the annual accounts for the financial year ended 31st March, 2017, the applicable Accounting Standards and Schedule III of the Companies Act, 2013, 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 judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2017 and of the profit and loss of the Company for the financial year ended 31st March, 2017;

c. proper and sufficient care has been taken 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 annual accounts have been prepared on a ‘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.

DECLARATION OF INDEPENDENCE

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of the

Companies Act, 2013 read with the Schedules and Rules issued there under as well as Regulation 16 of Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act, 2013 read with the Rules issued there under, Regulation 17(10) of the Listing Regulations and the circular issued by SEBI dated 5th January, 2017 with respect to Guidance Note on Board Evaluation, the evaluation of the annual performance of the Directors/Board/Committees was carried out for the financial year 2016-17.

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

NOMINATION AND REMUNERATION POLICY

The Company has formulated and adopted the Nomination and Remuneration Policy in accordance with the provisions of Companies Act, 2013 read with the Rules issued there under and the Listing Regulations. The details of the Nomination and Remuneration Policy are set out in the Corporate Governance Report which forms a part of this report.

The Nomination and Remuneration Policy of the Company provides that the Nomination and Remuneration Committee shall formulate the criteria for appointment of Executive, Non-Executive and Independent Directors on the Board of Directors of the Company and persons in the Senior Management of the Company, their remuneration including determination of qualifications, positive attributes, independence of Directors and other matters as provided under sub-section (3) of Section 178 of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

The Nomination and Remuneration Policy can be accessed on the website of the Company (www.asianpaints.com).

NUMBER OF MEETINGS OF THE BOARD AND ITS COMMITTEES

The details of the meetings of the Board of Directors and its Committees, convened during the financial year 2016-17 are given in the Corporate Governance Report which forms a part of this report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis forms an integral part of this report and gives details of the overall industry structure, economic developments, performance and state of affairs of the Company''s various businesses viz., the decorative business, international operations, industrial and home improvement business, internal controls and their adequacy, risk management systems and other material developments during the financial year 2016-17.

CORPORATE GOVERNANCE 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, forms an integral part of this report.

BUSINESS RESPONSIBILITY REPORT

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 an integral part of this report.

AUDITORS AND AUDITORS’ REPORT

Statutory Auditor(s):

At the 70th AGM of the Company held on 28th June, 2016, the shareholders had approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022) jointly with M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018) as the Joint Statutory Auditors to hold office till the conclusion of the 71st AGM.

M/s. B S R & Co. LLP, Chartered Accountants, have been the Statutory Auditors of the Company since the financial year 2007-08 and their tenure as the Joint Statutory Auditors of the Company will expire with the conclusion of this ensuing AGM, in accordance with Section 139 and other applicable provisions, if any, of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

The Board places on record, its appreciation for the contribution of M/s. B S R & Co. LLP, Chartered Accountants, during their tenure as the Statutory Auditors of the Company.

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company at the 70th AGM held on 28th June, 2016 till the conclusion of the 75th AGM, subject to ratification of their appointment by the shareholders of the Company at every AGM held thereafter.

The Company has received written consent(s) and certificate(s) of eligibility in accordance with Sections 139, 141 and other applicable provisions of the Companies Act, 2013 and Rules issued there under (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) from M/s. Deloitte Haskins & Sells LLP. Further, M/s. Deloitte Haskins

& Sells LLP, Chartered Accountants, have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under the Listing Regulations.

The Auditors'' Report for the financial year ended 31st March, 2017 on the financial statements of the Company is a part of this Annual Report. During the financial year ended 31st March, 2017, there has been no delay in depositing amounts required to be transferred to the Investor Education and Protection Fund (IEPF), other than one instance of delay in transferring the unclaimed final dividend for the financial year 2008-09 to the IEPF which has been explained in detail in Note 46 to the Standalone Financial Statements of the Company.

Cost Auditor:

The Board of Directors of the Company, on the recommendations made by the Audit Committee, at their meeting held on 11th May, 2017, has approved the appointment of M/s. RA & Co., Cost Accountants, (Firm Registration No. 000242) as the Cost Auditor of the Company to conduct the audit of cost records for the financial year 2017-18. The remuneration proposed to be paid to the Cost Auditor, subject to ratification by the shareholders of the Company at the ensuing 71st AGM, would not exceed Rs, 5.50 lakhs (Rupees five lakhs and fifty thousand only) excluding taxes and out of pocket expenses, if any.

The Company has received consent from M/s. RA & Co., Cost Accountants, to act as the Cost Auditor for conducting audit of the cost records for the financial year 2017-18 along with a certificate confirming their independence and arm''s length relationship.

Secretarial Auditor:

In terms of Section 204 of the Companies Act, 2013, the Board of Directors of the Company at their meeting held on 11th May, 2017 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 2017-18.

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, 2018.

The Secretarial Audit Report for the financial year ended 31st March, 2017 is set out in the Annexure [C] to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

None of the Auditors of the Company have reported any fraud as specified under the second proviso of Section 143 (12) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

POLICIES OF THE COMPANY

The Company is committed to good corporate governance and has consistently maintained its organizational culture as a remarkable confluence of high standards of professionalism and building shareholder equity with principles of fairness, integrity and ethics.

The Board of Directors of the Company have from time to time framed and approved various Policies as required by the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations. These Policies and Codes are reviewed by the Board and are updated, if required.

Some of the key policies adopted by the Company are as follows:

Sr. Name of the Policy No.

1. Dividend Distribution Policy

2. Policy on Determination of materiality of events/ information

3. Code of Conduct for Board Members and Senior Management Personnel

4. Policy on Archival of Information

5. Code of Conduct for Employees

6. Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information

7. Code of Conduct to Regulate, Monitor and Report trading by Insiders

8. Policy on Related Party Transactions

9. Policy on Materiality of Subsidiaries

10. Whistle Blower Policy

11. Corporate Social Responsibility Policy

12. Nomination and Remuneration Policy

The above mentioned policies and code are also available on the website of the Company (www.asianpaints.com).

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return as on 31st March, 2017 in Form MGT - 9 in accordance with Section 92 (3) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, are set out in the Annexure [D] to this report.

RELATED PARTY TRANSACTIONS

During the financial year 2016-17, the Company entered into transactions with related parties as defined under Section 2 (76) of the Companies Act, 2013 read with Companies (Specification of Definitions Details) Rules, 2014, all of which were in the ordinary course of business and on arm''s length basis and in accordance with the provisions of the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations. Further, there were no transactions with related parties which qualify as material transactions under the Listing Regulations.

All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on Related Party Transactions formulated in accordance with the provisions of Companies Act, 2013 read with the Rules issued there under and the Listing Regulations.

Prior omnibus approvals are granted by the Audit Committee for related party transactions which are of repetitive nature, entered in the ordinary course of business and are on arm''s length basis in accordance with the provisions of Companies Act, 2013 read with the Rules issued there under and the Listing Regulations.

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 Form AOC - 2 pursuant to Section 134 (3) (h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure [E] to this report.

LOANS AND INVESTMENTS

Details of loans, guarantees and investments under the provisions of Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, as on 31st March, 2017, are set out in Note 38 to the Standalone Financial Statements of the Company.

RISK MANAGEMENT

The Company has a well defined process to ensure risks are identified and steps to treat them are put in place at the right level in the management. The operating managers are responsible for identifying and putting in place mitigation plan for operational and process risks. Key strategic and business risks are identified and managed by the senior leadership team in the organization.

The risks identified are updated along with the mitigation plans as part of the annual planning cycle. The mitigation plans are then woven into the plans/initiatives for each function and are monitored accordingly. The senior leadership team reviews the status of the initiatives as part of business review meetings.

The key strategic and business risks which are significant in terms of their impact to the overall objectives of the Company along with status of the mitigation plans are periodically presented and discussed at the Risk Management Committee meetings. Inputs from the Committee are duly incorporated in the action plans. During these meetings, brief synopsis of risks with low to medium impact on the objectives of the Company are also shared for the perusal of the Committee. The details of the Committee are set out in the Corporate Governance Report. 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 a part of this report.

VIGIL MECHANISM

The Board of Directors has formulated a Whistle Blower Policy which is in compliance with the provisions of Section 177 (10) of the Companies Act, 2013 and Regulation 22 of the Listing Regulations.

As a part of the Policy, the Company has engaged a third party for managing an ''Ethics Hotline'' which can be used by employees and business associates of the Company to, inter alia, report any violations, fraud, unfair trade practices, discrimination to the Code of Conduct in an anonymous manner.

In line with the commitment of the Company to open communications, the Policy provides protection to the employees and business associates reporting unethical practices and irregularities and also encourages employees and business associates to report incidences of fraud.

Any incidents that are reported are investigated and suitable action is taken in line with the whistle blower policy.

POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has in place a Policy on Prevention of Sexual Harassment at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Prevention of Sexual Harassment of Women at Workplace Act”) and Rules framed there under and an Internal Complaints Committee has also been set up to redress complaints received regarding sexual harassment.

The Company has ensured organization wide dissemination of the Policy and the provisions of Prevention of Sexual Harassment of Women at Workplace Act by conducting sessions throughout the Company.

During the financial year 2016-17, 4 (four) complaints were received by the Company and the same were investigated in accordance with the procedure prescribed and adequate steps were taken to resolve them.

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

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR expenditure incurred by the Company during the financial year 2016-17 was '' 47.84 crores, which was higher than the statutory requirement of 2% of the average profit for the last three financial years.

The CSR initiatives of the Company were under the thrust areas of health & hygiene, education, water management and enhancement of vocational training.

To celebrate 75 years of Excellence at Asian Paints, Kaleidoscope was launched to begin a wonderful journey to touch multiple lives and inspire even more. The key objective of Kaleidoscope is to provide infrastructure support, development oriented activities and events across health and education areas, centered around schools and communities along with activate employee contribution and participation.

The Company''s CSR Policy statement and annual report on the CSR activities undertaken during the financial year ended 31st March, 2017, in accordance with Section 135 of the Companies Act, 2013 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 the Annexure [F] to this report.

DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

The Company has put in place adequate internal financial controls over financial reporting. These are reviewed periodically and made part of work instructions or processes in the Company. The Company continuously tries to automate these controls to increase its reliability.

The Company has adopted accounting policies which are in line with the Indian Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with the Companies (Indian Accounting Standards) Rules, 2015. These are in accordance with Generally Accepted Accounting Principles in India. Changes in policies, if any, are approved by the Audit Committee in consultation with the Statutory Auditors.

The Company has identified inherent reporting risks for each major element in the financial statements and put in place controls to mitigate the same. These risks and the mitigation controls are revisited periodically in the light of changes in business, IT systems, regulations and internal policies. Corporate accounts function is involved in designing large process changes as well as validating changes to IT systems that have a bearing on the books of account.

International subsidiaries provide information required for consolidation of accounts in the format prescribed by the Company. These are certified by the respective statutory auditors for being compliant with the group accounting policies for the purpose of annual consolidation of accounts.

The Company periodically conducts physical verification of inventory, fixed assets and cash on hand and matches them with the books of account. Explanations are sought for any variance noticed from the respective functional heads.

The Company has a robust financial closure self-certification mechanism wherein the line managers certify adherence to various accounting policies, accounting hygiene and accuracy of provisions and other estimates.

The Company, in preparing its financial statements makes judgments and estimates based on sound policies and uses external agencies to verify/validate them as and when appropriate. The basis of such judgments and estimates are also approved by the Audit Committee of the Board of Directors of the Company in consultation with the Joint Statutory Auditors of the Company. The management periodically compares the actual spends against the estimates and makes necessary adjustments to the same based on changes noticed.

The Company has a Code of Conduct applicable to all its employees along with a Whistle Blower Policy which requires employees to update accounting information accurately and in a timely manner. Any non-compliance noticed is to be reported and auctioned upon in line with the Whistle Blower Policy.

The Company gets its Standalone accounts audited every quarter by its Joint Statutory Auditors.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS

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.

OTHER DISCLOSURES

a. During the year under review, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force);

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

c. The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is set out in the Annexure [G] to this report;

d. 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; and

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

APPRECIATION

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

Further, the Board sincerely 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

Ashwin Choksi

Chairman

Place: Mumbai

Date:11th May, 2017

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