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Hindalco Industries Ltd.

BSE: 500440 | NSE: HINDALCO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE038A01020 | SECTOR: Aluminium

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Annual Report

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Director’s Report

Dear Shareholder, The Directors have pleasure in presenting the 57th Annual Report and the audited standalone and consolidated financial statements of your company for the year ended 31st March, 2016. FINANCIAL HIGHLIGHTS (Rs. crore) Standalone Consolidated FY16 FY15 FY16 FY15 Revenue from Operations 34,318 34,525 1,00,042 1,04,281 Other Income 1,066 882 1,215 1,105 Profit Before Interest, Tax and Depreciation (PBITDA) 4,384 4,299 10,007 10,049 Depreciation 1,277 837 4,287 3,591 Finance Costs 2,375 1,637 5,049 4,178 Profit before Exceptional Items and Tax 732 1,825 671 2,280 Exceptional Items - 578 577 1,940 Profit before Tax 732 1,247 94 340 Tax Expenses 125 322 515 256 Profit/ (Loss) for the period from Continuing Operations 607 925 (421) 84 Profit/ (Loss) from Discontinuing Operations - - (158) - Share in Profit/ (Loss) of Associates (Net) - - 175 175 Minority Interest in Profit/ (Loss) (Net) - - (449) (596) Net Profit 607 925 45 854 Basic EPS -Rs. 2.94 4.48 0.22 4.14 The amounts proposed to carry to any reserves: Standalone Accounts : (Rs. crore) Surplus in the Statement As at As at of Profit and Loss 31/03/2016 31/03/2015 Balance as at the 1279.35 750.00 beginning of the year Add: Profit for the year 607.25 925.16 Less: Transferred to (150.00) (150.00) Debenture Redemption Reserve Less: Dividend on Equity (206.50) (206.52) Shares - (a) Less: Dividend (21.07) (39.29) Distribution Tax - (a) & (b) Balance as at the end of 1509.03 1279.35 the year a) Dividend on Equity Shares and Tax on Dividend include Rs. Nil (Previous year Rs. 0.02 crore) pertaining to previous year for Equity shares issued before the record date of dividend. b) Dividend Distribution Tax is net of Rs. 20.97 crore (Previous year Rs. 0.30 crore) being dividend distribution tax paid by subsidiaries. Dividend: For the year ended 31st March,2016, the Board of Directors of your Company have recommended dividend of Rs. 1 per share (Previous year Rs. 1 per share) to equity shareholders aggregating to Rs. 249 crore (Previous year Rs. 246 crore) including Dividend Distribution Tax. Equity shares that may be allotted upon exercise of Options granted under the Employee Stock Option Scheme and before the Book Closure for payment of dividend will rank pari passu with the existing shares and shall also be entitled to receive the aforesaid dividend. OVERVIEW AND STATE OF THE COMPANY''S AFFAIRS For the year ended March 31, 2016, the Company''s revenue at Rs. 34,318 crore was broadly stable at FY 15 level notwithstanding the sharp fall in both aluminium and copper realisations. The steep fall in copper revenues was offset by increased revenues from aluminium business. The aluminium higher revenues were achieved primarily on the back of higher volumes and improved product mix despite a sharp decline in realisations. Profit before Interest, Tax, Depreciation and Amortisation (PBITDA) for the year was marginally higher by 2%. This reflects a robust operational performance in a challenging year, when average realisations were much lower. PBIDTA was also augmented by higher other income. As anticipated, depreciation and finance cost increased by Rs. 1,178 crore over FY 15 following progressive capitalisation of the projects. The PBT during FY 16 (before exceptional items) was lower by 60% at Rs. 733 crore. Net Profit for the year at Rs. 607 crore was lower by 34% as compared with that delivered in FY 15. Standalone Segmental Results: (Rs. crore) FY16 FY15 Aluminium Segment Net Sales 17,125 14,105 Earnings Before Interest & Tax (EBIT) 880 1,349 Copper Segment Net Sales 17,209 20,451 Earnings Before Interest & Tax (EBIT) 1,419 1,516 Aluminium business: During FY 16, our primary focus was on ramping up the Greenfield projects to their designed capacities and stabilise these operations. This objective was achieved during the year and all plants are now running at their designed capacities. For the year, Alumina production (including Utkal refinery) was 2.7 Mn tonnes, an increase of 19% over FY 15. Aluminium production for the year reached a record high. It crossed the 1 Mn tonnes mark for the first time reaching 1.13 Mn tonnes an increase of 36% or almost 300 KT over that produced during the previous financial year. In spite of higher volumes, the EBIT of Aluminium segment declined because of higher depreciation following progressive capitalisation of the projects. The standalone financials do not include Utkal''s financial performance. Copper Business: Though copper production for the year was steady at 388 KT, Fertiliser production rose by 8%. Our continued thrust on Value addition led to higher production of Continuous cast (CC) rods. The production of CC rods was higher by 5%. Despite all these initiatives for value maximisation, EBIT was 6% lower as compared with that achieved in FY15. This was primarily on account of the abolition of certain export incentive scheme during the year and challenging market conditions. Consolidated Results: Consolidated revenue decreased by 4% while Profit before interest, depreciation and taxes was at same level compared to the last year''s corresponding fi gures. Net Profit was lower at Rs. 45 crore on back of adverse macroeconomic conditions, higher interest cost, depreciation and loss from discontinuing operations. Novelis Inc. (A wholly owned subsidiary): Revenues decreased 11% to $9.9 billion in FY 2016, as higher shipments were more than offset by a 16% decrease in average base aluminium prices and a 58% decrease in local market premiums. For fiscal year 2016, the company recorded a net loss of $38 million. Excluding tax effected special items, net income was $131 million for the full year. The rapid decline in local market premiums over the early months of FY 2016 resulted in $172 million in negative metal price lag for the full year, and was primarily responsible for the 12% decrease in EBITDA to $791 million in FY 2016. Excluding the impact of metal price lag in both years, EBITDA was $963 million in FY 2016, up 7% compared to $896 million in FY 2015. The company more than doubled its free cash fl ow as compared to the prior year, generating $160 million in FY 2016 after investing $370 million in capital expenditure. As of March 31, 2016, the company reported a strong liquidity of $1.2 billion. Utkal Alumina International Limited (UAIL) (A wholly owned subsidiary): The alumina refinery at UAIL produced 1.4 Mn tonne of alumina in FY 16 compared to 1 Mn tonne in FY 15. Of this, 130 KT of alumina was sold outside and the balance was supplied to smelters at Hindalco. The cost of production of alumina at UAIL is comparable to the world benchmark cost of production. UAIL reported an EBITDA of Rs. 714 crore. Its net loss stood at Rs. 93 crore after accounting for interest charge of Rs. 518 crore and depreciation of Rs. 289 crore. Aditya Birla Minerals Limited: Aditya Birla Minerals Limited (ABML), Australia, a subsidiary of the Company, has sold 100% of the shares in Birla Mt Gordon Pty Ltd to M/s Lighthouse Minerals Holdings Pty Ltd on 27th October, 2015. Further, Metals X Ltd, a listed company in Australia, made a takeover offer for shares of ABML. As per the offer, the Shareholders of ABML will receive A$ 0.08 per share of ABML in cash and 1 share of Metals X Limited for every 4.5 shares of ABML. The Company has accepted the said offer on 19th July, 2016 in respect of its entire shareholding of ABML. There were no other material changes and commitments affecting the financial position of your Company between end of financial year and the date of report. Business Reconstruction Reserve: The Company had formulated a scheme of financial restructuring under Sections 391 to 394 of the Companies Act 1956 (the Scheme) between the Company and its equity shareholders approved by the High Court of judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan. Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve (BRR) was created during the year 2008-09 by transferring balance standing to the credit of Securities Premium Account of the Company for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company had transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and till 31st March, 2015, Rs. 250.33 crore and Rs. 2,165.80 crore have been adjusted against BRR in stand-alone and consolidated accounts respectively. During the year, following expenses has been adjusted with BRR in both accounts: (a) Rs. 279.46 crore towards expenses on exited Projects. (b) Impairment loss of Rs. 367.31 crore (Net of deferred tax Rs. 194.39 crore). (c) Provision of Rs. 35.50 crore towards diminution in value of investments. Had the Scheme not prescribed aforesaid treatment, the impact on results and Earnings per Share (EPS) would have been as under: i) Standalone and Consolidated Net Profit for the year ended 31st March, 2016 lower by Rs. 682.27 crore. (ii) Standalone and Consolidated Basic and Diluted EPS for the year ended 31st March, 2016 lower by Rs. 3.30. HUMAN RESOURCES Several innovative people focused initiatives have been instituted at the Group level, and these are translated into action at all of the Aditya Birla Group Companies. Our basic objective is to ensure that a robust talent pipeline and a high-performance culture, centred around accountability is in place. We feel this is critical to enable us retain our competitive edge. RESEARCH AND DEVELOPMENT Your Company''s Research & Development (R&D) activities are focused on providing innovative, cost-effective and sustainable solutions to support consistent growth of business. The R&D activities of your Company include process, product and application development, to develop short term as well as long term solutions to the issues faced by nonferrous sector, such as raw material quality, cost effective management of waste generated during processing, recovery of value from byproduct as well as any waste products, developing better understanding of the science of processes, reducing the specific energy consumption and carbon footprint etc. Specific programs have also been initiated to foster better understanding of the requirement of existing and prospective customers, and to provide a better service through application development, so as to increase your company''s market share in the chosen market space. Technical competencies developed by your company will go a long way in terms of quick absorption of technologies, enabling pushing boundaries of our processes, so as to increase the economic performance and improve our new product/new application pipeline to address the impending market opportunities. Your Company already operates two Hindalco Innovation Centres (HIC), one HIC-Alumina at Belagavi working on R&D of bauxite, alumina and specialty alumina products, and one HIC-SemiFab located at Taloja, near Mumbai, working in the area of aluminium fabricated products. In addition, your company engages the Aditya Birla Group''s corporate research and development centre, Aditya Birla Science and Technology Company Private Limited (ABSTCPL), for conducting R&D in select areas of work through chartered R&D projects. These are based on the domain expertise and R&D facilities available in ABSTCPL. The engagement has resulted into some patent applications, which have been and will be assigned to your company on the grant of the patent. ABSTCPL''s forte of having multi- disciplinary teams of technical experts, scientists and engineers, enables your company to develop building competencies in select areas, as a long term value to business. AWARDS & RECOGNITIONS Several accolades have been conferred upon your Company, in recognition of its contribution in diverse field. A selective list: Hindalco Marketing: Hindalco awarded the Top Exporter - Gold Trophy in the category of large enterprise for outstanding performance in financial year 201314. This was the second consecutive year that Hindalco has won the top award in this category. This recognition of excellence in exports, is an award administered by EEPC (formerly Engineering Export Promotion Council), an export promotion council under Union Ministry of Commerce and Industry, Government of India. The London Metal Exchange in March, 2016 approved Aluminium Ingots & Sows produced at Aditya and Mahan Smelters as good delivery brands against its high grade primary Aluminium contracts. Aditya Aluminium: Aditya Aluminium wins Safety Award by the National Safety Council of India - Certificate of Appreciation in recognition of appreciable achievement in Occupational Safety and Health. Belagavi Alumina: Belagavi Alumina wins the State Safety Award Unnatha Suraksha Puraskara - by the National Safety Council of Karnataka State for outstanding work in safety performance and management systems in the manufacturing sector category. Belur Rolling Plant: Belur Rolling Plant wins First Prize in Industrial Relations category, for the 16th Long Term Settlement signed at a 78 year old unit, which has contributed towards survival and profitability of the plant, presented by the National HRD Network Eastern Regional Zenith Awards & Recognition Programme held in January 2016. Birla Copper: Birla Copper Dahej wins the Greentech Environment Gold Award for 2015, in the Metal & Mining sector, for continual sustainable development approach, presented by the Greentech Foundation, New Delhi. Birla Copper Dahej awarded the Greentech Gold Safety Award 2015 in the Metal & Mining Sector for outstanding achievement in Safety Management. Birla Copper Dahej wins the FAI Environmental Protection Award 2015 constituted by the Fertilizer Association of India for control of pollution. Gare Palma Coal Mines: Gare Palma Coal Mines wins First Prize in the HR Best Practices category, for cultural change brought about in the newly acquired mines, presented by the National HRD Network Eastern Regional Zenith Awards & Recognition Programme held in January 2016. Hirakud: Hirakud Complex awarded the Greentech Safety Gold Award 2015 in Metal, Mining & CPP Sector category presented by the Greentech Foundation, New Delhi. Hirakud Power wins the CII Odisha State Award 2015, First Prize, for Best Practices in Environment, Health & Safety. Utkal Alumina International Limited: (wholly owned subsidiary) Utkal Alumina awarded the OTV (Odisha Television) CSR Award 2015 in the category of Women''s Empowerment. Individual: Mr. D. Bhattacharya, Managing Director Hindalco and Vice Chairman, Novelis, named Global Leader of the Year by CEO India, for his multiple distinctions achieved on the world stage and leading the Aditya Birla Group''s metals business in a highly volatile environment. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements for the year ended 31st March, 2016 have been prepared by your Company in accordance with the provisions of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, applicable Accounting Standards and the provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 Listing Regulations and forms part of the full Annual Report. Consolidated Financial Statements (CFS) were approved by the Board of Directors on 28th May, 2016 which incorporated accounts of Aditya Birla Minerals Limited (ABML), Australia, a subsidiary of the Company, for six months ended 30th September, 2015, as full year accounts of ABML were not available at that time. ABML has subsequently finalized its accounts for the year ended 31st March, 2016. Accordingly, the Board of Directors in the meeting held on 21st July, 2016 approved updated CFS based on full year accounts of ABML which is a part of full Annual Report. EMPLOYEE STOCK OPTION SCHEMES ESOS 2006: During the year ended 31st March, 2016, the Company has allotted 3,185 fully paid-up equity share of Rs. 1/- each (Previous year 373,666) on exercise of options under ESOS 2006 for which the Company has realised Rs. 0.03 crore (Previous year Rs. 3.83 crore) as exercise money. The weighted average share price at the exercise date was Rs. 134.70 per share (Previous year Rs. 168.73 per share). ESOS 2013: During the year ended 31st March, 2016, the Company has allotted 2,193 fully paid-up equity share of Rs. 1/- each (Previous year 18,848) on exercise of options under ESOS 2013 for which the Company has realised Rs. 0.03 crore (Previous year Rs. 0.22 crore) as exercise money. The weighted average share price at the exercise date was Rs. 114.30 per share (Previous year Rs. 154.54 per share). The details of Stock Options and Restricted Stock Units granted under the above mentioned Schemes are available on your Company''s website viz. www.hindalco.com. A certificate from the statutory auditor on the implementation of your Company''s Employees Stock Option Schemes will be placed at the ensuing Annual General Meeting for inspection by the members. CORPORATE GOVERNANCE Your Directors reaffirm their continued commitment to good corporate governance practices. Your Company fully adheres to the standards set out by the Securities and Exchange Board of India for Corporate Governance practices and has implemented all of its stipulations. The entire report on Corporate Governance forms part of full Annual Report. ABRIDGED ANNUAL REPORT In terms of the provision of Section 136(1) of the Companies Act, 2013, Rule 10 of Companies (Accounts of Companies) Rules, 2014 and Regulation 36 of the Listing Regulations, the Board of Directors has decided to circulate the Abridged Annual Report containing salient features of the balance sheet and statement of profit and loss and other documents to the shareholders for the Financial Year 2015-16, under the relevant laws. The Abridged Annual Report is being circulated to the members excluding the ''Annual Report on CSR Activities'', ''Remuneration Philosophy/ Policy'', ''Secretarial Audit Report'', ''Extract of Annual Return'', ''Full Report on Corporate Governance and Shareholders'' Information''. Members who desire to obtain the full version of the Annual Report may write to the Company Secretary at the registered office. Full version of the Annual Report is also available on the Company''s website www.hindalco.com. DIRECTORS'' RESPONSIBILITY STATEMENT As stipulated in Section 134(3)(c) of the Companies Act, 2013 the Act, your Directors subscribe to the Directors'' Responsibility Statement and confirm that: a) in the preparation of the annual accounts, applicable accounting standards have been followed along with proper explanations relating to material departures; b) the accounting policies selected have been applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2016 and of the Profit of your company for that period; 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 your company and for preventing and detecting fraud and other irregularities; d) the annual accounts of your Company have been prepared on a going concern basis; e) your Company had laid down internal financial controls and that such internal financial controls are adequate and were operating effectively; f) your Company has devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE The information on conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo stipulated under Section 134(3)(m) of the Companies Act, 2013, read with Companies (Accounts) Rules, 2014 is set out in Annexure I to the full and Abridged Annual Report. PARTICULARS OF EMPLOYEES In accordance with the provisions of Section 197(12) of the Companies Act, 2013 the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are to be set out in the Directors'' Report, as an addendum thereto. However, in line with the provisions of Section 136(1) of the Act, the Report and Accounts as set out therein, are being sent to all Members of your Company excluding the aforesaid information about the employees. Any Member, who is interested in obtaining these particulars about employees, may write to the Company Secretary at the Registered Offi ce of your Company. Disclosures pertaining to remuneration and other details as required under section 197(12) read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure II to the full and Abridged Annual Report. DIRECTORS Board constitution and changes: Mr. Y.P. Dandiwala (DIN:01055000), was appointed as an Independent Director of the Company for a term of five years which was also approved by the members in the Annual General Meeting held on 16th September, 2015. At the same Annual General Meeting, Mr. Kumar Mangalam Birla and Mr. Satish Pai were reappointed as the Directors of the Company. Mr. N. J. Jhaveri passed away, hence ceased to be a Director w.e.f. 6th June, 2015. Mr. D. Bhattacharya (DIN:00033553) will demit the office as the Managing Director w.e.f. the close of business hours of 31st July 2016. He is appointed as the Vice Chairman of the Board. Mr. Satish Pai (DIN:06646758) is appointed as the Managing Director for a term of 5 years w.e.f. opening hours of 1st August 2016. Mr. Praveen Kumar Maheshwari (DIN:00174361) is appointed as the Whole-time Director for a term of 5 Years w.e.f. 28th May,2016. He is also the Chief Financial Officer of the Company. Mr. Girish Dave (DIN:00036455) is appointed as an Independent Director for a term of 5 years w.e.f. 28th May, 2016. These changes are based on recommendation of the Nomination and Remuneration Committee. The Board places on record its deep appreciation for the services rendered by Mr. Bhattacharya as the Managing Director of your Company. Notices pursuant to Section 160 of the Companies Act, 2013, have been received from members proposing Mr. Praveen Kumar Maheshwari and Mr. Girish Dave as Directors of the Company. Smt. Rajashree Birla (DIN:00022995) and Mr. D. Bhattacharya (DIN:00033553) will retire from offi ce by rotation at the ensuing Annual General Meeting, and being eligible, offers themselves for reappointment. The Board recommends the appointment of Mr. Satish Pai, Mr. Praveen Kumar Maheshwari and Mr. Girish Dave and reappointment of Smt. Rajashree Birla and Mr. D. Bhattacharya. Items seeking your approval on the above are included in the Notice convening the Annual General Meeting. Brief resume of the directors being appointed/ reappointed forms part of the notice of the ensuing Annual General Meeting. All the directors being appointed/reappointed have given required declaration under Companies Act, 2013 and Listing Regulations. All Independent Directors have given declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and Listing Regulations. Policy on appointment and remuneration of Directors and Key Managerial Personnel: The Nomination and Remuneration Committee has formulated the remuneration policy of your company which is attached as Annexure III to the full Annual Report. Meetings of the Board: The Board of Directors of your Company met 5 times during the year details of which are given in the Corporate Governance Report forming part of the full Annual Report. Annual Evaluation: Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Directors have carried annual performance evaluation of Board, Independent Directors, Non executive Directors, Executive Directors, Committee and Chairman of the Board. The evaluation framework focused on various aspects of the Board and Committees such as review, timely information from management etc. Also, the performance of individual directors was divided into Executive, Non Executive and Independent Directors and based on the parameters such as contribution, attendance, decision making, action oriented, external knowledge etc. Board members have evaluated Independent Directors, Non executive Directors, Executive Directors, Committee and Chairman of the Board. The result of evaluation was satisfactory and meets the requirements of the Company. Board fully agreed and rated 100% on its functioning, skill sets and working atmosphere. Independent Directors scored well on expressing their views and in understanding the Company and its requirements. Non-Executive Directors scored well in understanding the Company and its requirement. Executive Directors are action oriented and ensures timely implementation of the Board decisions. Board is completely satisfied with the functioning of various Committees. Board has full faith in the Chairman in leading the Board effectively and ensuring contribution from all its members. AUDIT COMMITTEE The Audit Committee comprises of Mr. M.M. Bhagat, Mr. K.N. Bhandari, Mr. Y.P. Dandiwala, Independent Directors of your Company. Mr. D. Bhattacharya: Managing Director, Mr. Satish Pai: Deputy Managing Director and Mr. Praveen Kumar Maheshwari: Chief Financial Officer are the permanent invitees. Further details relating to the Audit Committee are provided in the Corporate Governance Report forming part of the full Annual Report. KEY MANAGERIAL PERSONNEL In terms of provisions of Section 203 of the Companies Act,2013, Mr. D. Bhattacharya: Managing Director, Mr. Satish Pai: Deputy Managing Director, Mr. Praveen Kumar Maheshwari: Chief Financial Officer and Mr. Anil Malik: Company Secretary are the Key Managerial Personnel of your Company. VIGIL MECHANISM Your Company has in place a vigil mechanism for directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of your Company''s Code of Conduct. Adequate safeguards are provided against victimisation to those who avail of the mechanism or access to the Chairman of the Audit Committee. The vigil mechanism is available on your Company''s website viz. www.hindalco.com. AUDITORS Statutory Auditors: Pursuant to provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, M/s Singhi & Co, Chartered Accountants were appointed as Statutory Auditors of the Company from the conclusion of fifty fifth Annual General Meeting held on 24th September, 2014, until the conclusion of fifty-eighth Annual General meeting to be held in the calendar year 2017, subject to ratification of their appointment at every Annual General Meeting. Resolution seeking your ratification is included in the Notice convening the Annual General Meeting. The observation made in the Auditor''s Report are self explanatory and thereofore, do not call for any further comments under Section 134(3)(f) of the Act. Cost Auditors: In terms of the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of Directors of your Company have on the recommendation of the Audit Committee, appointed M/s. Nanabhoy & Co., Cost Accountants, Mumbai as Cost Auditors, to conduct the cost audit of your Company for the financial year ending 31st March, 2017, at a remuneration as mentioned in the Notice convening the Annual General Meeting. As required under the Act, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Member''s ratification for the remuneration payable to Cost Auditors forms part of the Notice of the ensuing Annual General Meeting. Secretarial Auditor: Pursuant to provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed BNP & Associates, Company Secretaries, Mumbai as Secretarial Auditor for conducting the Secretarial Audit of your Company for the financial year ended 31st March, 2016. The Report of the Secretarial Auditor is annexed as Annexure IV to the full Annual Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. ENVIRONMENT PROTECTION AND POLLUTION CONTROL Your Company is committed to sustainable development. A detailed report of the Company''s initiatives and commitment to environment conservation is part of Sustainability & Business Responsibility Report forming part of the full and Abridged Annual Report. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS: Details of Loans, Guarantee and Investments covered under the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014 are given in the notes to Financial Statements of the full Annual Report. CORPORATE SOCIAL RESPONSIBILITY: In terms of the provisions of Section 135 of the Companies Act, 2013 (the Act) read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility (CSR) Committee which is chaired by Mrs. Rajashree Birla. The other Members of the Committee are Mr. Jagdish Khattar, Independent Director, Mr. A.K. Agarwala, Non Executive Director and Mr. D. Bhattacharya, Managing Director. Dr. Pragnya Ram, Group Executive President, Corporate Communication & CSR is a permanent invitee to the Committee. Your Company also has in place a CSR Policy and the same is available on your Company''s website viz. www.hindalco.com. The Committee recommends to the Board activities to be undertaken during the year. Your Company is a caring corporate citizen and lays significant emphasis on development of the communities around which it operates. Your Company has identified several projects relating to Social Empowerment & Welfare, Infrastructure Development, Sustainable Livelihood, Health Care and Education during the year and initiated various activities in neighbouring villages around plant locations. During the Financial Year 2015-16 the Company has spent Rs. 34.15 crore under Section 135 of the Companies Act, 2013 on CSR Activities, which represent 2.20% of average net Profits of the Company for last three Financial Years. The Annual Report on CSR activities is attached as Annexure V to the full Annual Report. RISK MANAGEMENT Pursuant to the requirement of Listing Regulations, the Company has constituted Risk Management Committee, to review the risk management plan/ process of your company. Risk evaluation and management is an ongoing process within the Organization. Your Company has comprehensive risk management policy which is periodically reviewed by the Risk Management Committee. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES During the financial year, your Company entered into related party transactions which were on arm''s length basis and in the ordinary course of business. There are no material transactions with any related party as defined under Section 188 of the Act read with Companies (Meetings of Board and its Powers) Rules, 2014 and Listing Regulations. All related party transactions have been approved by the Audit Committee of your Company. The policy on Related Party Transactions as approved by the Audit Committee and the Board is available on your Company''s website viz. www.hindalco.com. EXTRACT OF ANNUAL RETURN: In terms of the provisions of Section 92 (3) of the Companies Act, 2013 (the Act) read with the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return of your Company for the financial year ended 31st March, 2016 is given in Annexure VI to the full Annual Report. BUSINESS RESPONSIBILITY REPORT: As per Listing Regulations, a separate section of Business Responsibility Report forms part of the full and Abridged Annual Report. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY: Your Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined by the Audit Committee. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal auditors, the process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee. INTERNAL FINANCIAL CONTROL Your directors confirm having laid down internal financial controls and that such internal financial controls are adequate and were operating effectively. SUBSIDIARY, JOINT VENTURES OR ASSOCIATE COMPANIES: The financial statements of your Company''s subsidiaries and related information have been placed on the website of your Company viz. www.hindalco. com and also available for inspection during business hours at the registered office of your Company. Any Member, who is interested in obtaining a copy of financial statements of your Company''s subsidiaries, may write to the Company Secretary at the Registered Office of your Company. In accordance with the provisions of the section 129 (3) of the Act, read with the Companies (Accounts) Rules, 2014, a statement on the performance and financial position of each of the subsidiaries, associates and Joint Venture is attached as Annexure VII to the full and Abridged Annual Report. The names of Companies which have become or ceased to be subsidiaries, Joint Ventures and associates are also provided in the aforesaid statement. OTHER DISCLOSURES: - Your Company has not issued any shares with differential voting. - There was no revision in the financial statements. However the Board of Directors in the meeting held on 21st July, 2016 approved Consolidated Financial Statements (updated) as disclosed in the Directors Report. - Your Company has not issued any sweat equity shares. - Mr. D. Bhattacharya and Mr. Satish Pai are directors on the Board of Novelis Inc, wholly owned subsidiary. They are in receipt of annual fee of US$ 1,50,000 and US$ 1,50,000 respectively in the calendar year 2015. - There was no change in the nature of business. - During the year under review, your Company has not accepted any fixed deposits from the public falling under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Thus, as on 31st March, 2016, there were no deposits which were unpaid or unclaimed and due for repayment. - There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future. - There were no frauds reported by the Auditors u/s 143(12) of the Companies Act, 2013. APPRECIATION Your Directors place on record their sincere appreciation for the assistance and guidance provided by the Honorable Ministers, Secretaries and other officials of the Ministry of Mines, Ministry of Coal, the Ministry of Chemicals and Fertilizers and various State Governments. Your Directors thank the Financial Institutions and Banks associated with your Company for their support as well. Your Company''s employees are instrumental in your Company scaling new heights, year after year. Their commitment and contribution is deeply acknowledged. Your involvement as Shareholders is greatly valued. Your Directors look forward to your continuing support. For and on behalf of the Board Kumar Mangalam Birla Mumbai Chairman Dated : 21st July, 2016 (DIN: 00012813)

Director’s Report