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The Directors are pleased to present their Eleventh Annual Report on the business and operations of the Company along with the Audited Financial Statements of your Company for the year ended 31 March 2018.
A. STANDALONE FINANCIAL AND OPERATIONAL HIGHLIGHTS AND STATE OF AFFAIRS OF THE COMPANY
(Rs. in crores)
For the year ended 31 March 2018
For the year ended 31 March 2017
Revenue from Operations
Employee Benefit Expenses
Depreciation and Amortization Expenses
Profit/(Loss) before Tax
Provision for Tax
Profit/(Loss) after Tax
Other comprehensive income
Re-measurements of the defined benefit plans - Gains/(Losses)
Income tax relating to items that will not be reclassified to profit or loss
Total Other Comprehensive Income
Total comprehensive income for the period
Balance of Profit from earlier years
Balance carried forward to Reserves
No material changes and commitments affecting the financial position of the Company have occurred after the end of the financial year till the date of this Report.
Your Company recorded revenue from operations of Rs.3,220.11 crores for the year under review as against Rs.2,588.69 crores in the previous year, registering a growth of 24.39%. The total comprehensive income for the current financial year is Rs.62.08 crores (after accounting of deferred tax income of Rs.1.53 crores) as compared to Rs.44.33 crores in the previous year (after accounting of deferred tax income of Rs.2.94 crores), registering an increase of 40.04%.
The Non-Mahindra Group Consolidated Supply Chain Business grew by 32% in the current year from Rs.952.79 crores in the previous financial year to Rs.1,257.69 crores in the current financial year. The supply chain business has been positively impacted through the acquisition of several new customer accounts. Additionally, brisk account penetration in major supply chain management customers has improved significantly, as efforts centred on operating excellence and better responsiveness.
The consolidated revenue from operations for the year stood at Rs.3,416.12 crores as compared to Rs.2,666.59 crores in the previous year, registering a growth of 28.11%. The consolidated EBITDA for the year under review stood at Rs.125.61 crores, recording an increase of 46.21% over the previous year of Rs.85.91 crores. The consolidated PAT grew by 41.58% during the year under review, from Rs.46.10 crores in the financial year 2016-17 to Rs.65.27 crores in the financial year 2017-18.
In line with the Dividend Distribution Policy of the Company, your Directors are pleased to recommend a dividend of Rs.1.50 per equity share of the face value of Rs.10/- each (being 15% on face value) for the financial year 2017-18, payable to those Members whose names appear in the Register of Members as on Thursday, 26 July 2018.
The Register of Members and Share Transfer books of the Company will remain closed from Friday, 27 July 2018 to Thursday, 2 August 2018 (both days inclusive) for the purpose of payment of dividend.
The equity dividend outgo for the financial year 2017-18, if declared, inclusive of tax on distribution of profits would result in cash outflow of Rs.12.86 crores.
Your Directors have not paid any Interim Dividend during the year under review. There is no unpaid Dividend of earlier years which has been transferred or is due to be transferred to the Investor Education and Protection Fund during the year under review in terms of the applicable provisions of the Companies Act, 2013 (“Act”) read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended from time to time.
The Board of your Company has decided not to transfer any amount to the General Reserves for the financial year 2017-18.
Dividend Distribution Policy
In view of listing of equity shares of the Company and in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”), the Board of Directors (“Board”) approved the Dividend Distribution Policy encompassing the requirements mentioned in the said Regulation. The Dividend Distribution Policy is attached as Annexure I and forms part of this Annual Report and can also be accessed on the website of the Company at the weblink: http://www.mahindralogistics.com/ media//pdf files/dividenddi-e7587214c0aef68.pdf
B. CONSOLIDATED FINANCIAL STATEMENTS
As per Regulation 33 of the Listing Regulations and applicable provisions of the Act read with the Rules framed thereunder, the Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with the Act and applicable Accounting Standards along with all relevant documents and the Auditors Report form part of this Annual Report.
The Consolidated Financial Statements are also available on the website of the Company and can be accessed at the weblink: http://www.mahindralogistics.com/investor/financial-information
In accordance with Section 136 of the Act, the separate accounts in respect of each of the Subsidiaries are uploaded on the website of the Company at weblink: http://www. mahindralogistics.com/investor/financial-information and copies of the same shall be provided to Members of the Company on receipt of request from them.
The Company has two Indian unlisted subsidiaries. The Company does not have any joint venture(s)/associate company(ies) within the meaning of Section 2(6) of the Act. During the year under review, there were no additions/deletions in the number of subsidiaries of the Company.
Our subsidiaries primarily deal in the business of transportation and freight forwarding and continue to contribute to the overall growth of the Company. Details on performance of the subsidiaries for the financial year 2017-18 is given hereunder:
Lords Freight (India) Private Limited (“Lords”)
Lords recorded a gross income of Rs.177.78 crores for the year under review as against Rs.66.77 crores in the previous year, registering an increase of 166.26%.
2x2 Logistics Private Limited (“2x2”)
2X2 recorded gross income of Rs.52.69 crores for the year under review as against gross income of Rs.37.78 crores, registering a growth of 39.47%. During the year under review, 2x2 further expanded its fleet of transportation vehicles.
A report on the performance and financial position of each of the Company’s subsidiaries is included in the Consolidated Financial Statements and the salient features of the Financial Statements of the subsidiaries and their contribution to overall performance of the Company as required under Section 129(3) of the Act read with the Rules, is provided in Form AOC-1 and forms part of this Annual Report.
The Board has adopted the Policy for determining Material Subsidiaries in terms with the requirements of Regulation 16(1)(c) of the Listing Regulations. The Policy as approved by the Board is uploaded on the Company’s website and can be accessed at the weblink: http://www.mahindralogistics.com/media//pdf files/ policyford-9b54a78901883f4.pdf
In terms of the criteria laid down in the Policy and the Listing Regulations, the Company does not have any Material Subsidiaries as on 31 March 2018.
C. INITIAL PUBLIC OFFER
During the year under review, your Company listed its shares through an Initial Public Offer (“IPO”) of 1,93,32,346 equity shares of face value of Rs.10/- each for cash at a price of Rs.429/per equity share in aggregate amounting to Rs.828.88 crores through an offer for sale by:
i. Mahindra & Mahindra Limited, the Promoters and Holding Company of your Company of 96,66,173 equity shares aggregating to Rs.414.44 crores;
ii. Normandy Holdings Limited of 92,71,180 equity shares aggregating to Rs.397.50 crores; and
iii. Kedaara Capital Alternative Investment Fund - Kedaara Capital AIF 1 of 3,94,993 equity shares aggregating to Rs.16.94 crores.
The offer included a reservation of 1,25,000 equity shares for subscription by eligible employees, out of which 1,12,710 equity shares were allotted to employees aggregating to Rs.4.36 crores, at a discount of Rs.42 per equity share on the offer price. The offer net of employee reservation portion (“net offer”) aggregated to 1,92,07,346 equity shares. The offer and the net offer constituted 27.17% and 27.00%, respectively, of the post offer paid-up equity share capital of your Company.
The issue opened for subscription on 31 October 2017 and closed on 2 November 2017. The Company allotted/transferred 1,93,32,346 equity shares.
No. of times subscribed (after considering technical rejections)
Qualified Institutional Bidder portion
(excluding Anchor Investor Portion)
Retail Individual portion
Non-Institutional Bidder portion
The Board of your Company had constituted an IPO Committee to facilitate the IPO process. The IPO was successfully completed in compliance with the requirements of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time and the equity shares of your Company were listed on the BSE Limited and the National Stock Exchange of India Limited with effect from 10 November 2017.
As the Company’s IPO was through an offer for sale, the Company did not receive any proceeds from the offer and the proceeds were paid to the Shareholders who offered their shares for sale. Hence the requirement of providing explanation for variation in utilisation of funds is not applicable to the Company.
Your Company became a Listed Company with effect from 10 November 2017 and consequently the Corporate Identification Number (“CIN”) of your Company changed from U63000MH2007PLC173466 to L63000MH2007PLC173466.
In view of the listing of equity shares of the Company and to comply with the requirements of the Listing Regulations, the Board re-constituted the Audit Committee and Nomination and Remuneration Committee and constituted the Stakeholders Relationship Committee on 25 July 2017. The Board also re-constituted the Corporate Social Responsibility Committee.
The Board has inter alia adopted/amended the following statutory polices in compliance with the applicable provisions of the Act, Listing Regulations and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015:
i. Code of Conduct for Prevention of Insider Trading in Securities of Mahindra Logistics Limited;
ii. Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information;
iii. Policy on determination of Materiality for disclosure of events or information (to Stock Exchanges);
iv. Indicative guidelines to ascertain materiality of events or information under the ‘Policy for determination of Materiality for disclosure of events or information’ (to Stock Exchanges);
v. Policy for Preservation of documents;
vi. Policy for determining Material Subsidiaries;
vii. Whistle Blower Policy/Vigil Mechanism;
viii. Board Diversity Policy;
ix. Policy on materiality of and on dealing with Related Party Transactions;
x. Familiarisation Programs for Independent Directors;
xi. a) Code of Conduct for Board;
b) Code of Conduct for Senior Management and Employees;
c) Code for Independent Directors;
xii. Archival Policy;
xiii. Dividend Distribution Policy;
xiv. Corporate Social Responsibility Policy;
xv. Policy on appointment/removal of Directors and Senior Management Personnel and remuneration of Directors and Key Managerial Personnel and other employees;
xvi. Business Responsibility Polices.
D. INVESTOR RELATIONS
Your Company continuously strives for excellence in its Investor Relations engagement with International and Domestic investors through structured conference-calls and periodic investors/analyst interactions viz. individual/group meetings, quarterly earnings calls and analyst meets from time to time to communicate details of the Company’s performance, important developments and exchange of information. Your Company interacted in a number of analyst/investor meets organized by reputed Global and Domestic Broking Houses, during the year under review.
The schedule of all interactions with institutional investors, fund managers and analysts is promptly disseminated to the Stock Exchanges where equity shares of the Company are listed.
Your Company always believes in building a relationship of mutual understanding with investors/analysts and ensures that critical information about the Company is available to all the investors, by uploading all such information on the Company’s website and on the website of the Stock Exchanges where equity shares of the Company are listed. The Company also uploads print and audio transcripts of investor conference-calls on the website of the Company.
E. REGISTRAR AND SHARE TRANSFER AGENTS
The IPO Committee of the Board of Directors had, vide resolution dated 13 July 2017, appointed Link Intime India Private Limited, as its Registrar and Share Transfer Agents in place of Karvy Computershare Private Limited. Contact details of Link Intime India Private Limited are provided in the Report on Corporate Governance, which forms part of this Annual Report.
F. ADOPTION OF NEW ARTICLES OF ASSOCIATION
The Investment Agreement dated 5 February 2014, as amended by amendment agreements dated 5 March 2015 and 3 August 2017 (“Investment Agreement”) between Mahindra and Mahindra Limited, Normandy Holdings Limited and Kedaara Capital Alternative Investment Fund - Kedaara Capital AIF-1 (Normandy and Kedaara are collectively referred as “Investors”) and the Company formed a substantive part of the Articles of Association (“AOA”) of the Company with certain special rights.
In view of the IPO of the Company, the Board with consent of the Members at their meeting held on 27 July 2017, adopted a new set of Articles of Association in place of and to the exclusion of the existing Articles of Association of the Company to comply with the requirements of the Act, make them consistent with Listing Regulations and make the Investment Agreement as aforesaid form part of the AOA (as Part II thereof).
Further in terms of the Third Amendment dated 5 October 2017 to the Investment Agreement and in view of listing of the equity shares of the Company, Part II of the AOA comprising of special Investor rights was automatically terminated and ceased to have any force from the date of listing. Consequently, all rights of the Investors have fallen away, except for the right to nominate one Investor Director, on the Board of the Company provided that this right shall (i) be subject to the approval of the Members of the Company by way of special resolution and (ii) be available for as long as the Investor holds at least 5% Equity Shares in the Company. Approval of the Members is sought at the ensuing Annual General Meeting to approve the right of the Investors to nominate one Investor Director, on the Board of the Company.
G. ALTERATION OF MEMORANDUM OF ASSOCIATION
With a view to re-align the object clause and liability clause of the Memorandum of Association of the Company with the provisions of the Act, the Members of your Company at their Extraordinary General Meeting held on 27 July 2017 approved alteration of object clause and liability clause of the Memorandum of Association of the Company.
Alteration of the Memorandum of Association of the Company did not result in change of the legal status, constitution, operations or activities of the Company.
H. ENVIRONMENT, HEALTH AND SAFETY
The Company, being a leading Third-Party Logistics (3PL) organization recognizes its employees, partners and business associates as an important asset and is committed to providing a safe and healthy work environment at all operating locations. Preventing workplace accidents is a key focus for your Company and is emphasised at all levels through constant communication and training. The Company has adopted an Environment, Health and Safety (“EHS”) Policy to establish effective control measures for EHS management across all locations. The EHS policy is displayed at all prominent locations and offices and communicated to all stake holders.
The EHS policy is supported by safety management programs for Near Miss recordings, Safety Kaizen, Safety Observation tour to identify, assess and control the risks. The Company demonstrates strong leadership commitment towards EHS by the Management Safety Council, headed by the CEO of the Company. Multiple measures and actions are implemented through competency training programs like Defensive driver training, First Aid, Fire Fighting and Emergency Preparedness and Forklift driving. The first Drivers’ training program under Pradhan Mantri Kaushal Vikas Yojana through National Skill Development Corporate was conducted in Pune, Maharashtra for two consecutive days with immense support from Nidan Technologies Private Limited.
To promote and sustain a strong safety culture, the Company organises various annual events like National Road Safety Week, National Safety Week, World Environment Day and Drivers’ Day. The Company has also initiated ACE learning programs which contains safety and best practices related to EHS. A Safety Pledge is taken before starting meetings at offices and at work locations. The Company has established a dedicated safety team to oversee the implementation of a comprehensive driver safety culture at a PAN India level.
The Company carries out internal safety audits and external electrical audits of facilities for assessing and managing safety risks with respect to the warehousing and logistics verticals. The Company continued its commitment to improve the wellbeing of employees and contract workmen by organizing health examination camps, health check-ups, Eye check-up camps for drivers and blood donation camps. The Company is also a registered member of the National Safety Council.
We believe that adopting sustainable practices in all our operations is not only a business imperative for us but also provides us with a competitive advantage in long run. Hence, we integrate economic progress, social responsibility and environment concerns with the objective of improving quality of life.
Being an asset-light Company, we deploy our business partners’ assets to deliver services to our customers. We recognize the fact that Green House Gas (“GHG”) emissions have a significant impact on the environment and in this regard the Company has instituted various initiatives for monitoring and reducing GHG emission intensity across the network of assets utilised by the Company. Specific initiatives taken in this regard are detailed in Annexure VII of this Report.
J. INTERNAL FINANCIAL CONTROLS
Pursuant to Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014, and based on the representation received and after due enquiry, your Directors confirm that they have laid down internal financial controls with reference to the Financial Statements and these controls are adequate. The Company has also adopted policies and procedures for ensuring the orderly and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.
Your Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size, scale and complexity of its operations. Such controls have been assessed during the year under review taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by The Institute of Chartered Accountants of India (“ICAI”). Based on the results of such assessments carried out by Management, no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed. Regular audits and review processes ensure that such systems are reinforced on an ongoing basis.
K. CREDIT RATING
The Company continues to enjoy a strong credit rating which denotes a high degree of safety regarding timely servicing of financial obligations. During the year under review, ICRA Limited (“ICRA”) reaffirmed the long-term rating of [ICRA] AA and the short-term rating of [ICRA]A1 assigned to the Line of Credit (“LOC”) facility of Rs.55 crores of the Company. ICRA has also assigned short-term rating of [ICRA] A1 to the additional LOC (non-fund based) of Rs.10 crores of the Company.
L. MANAGEMENT DISCUSSION AND ANALYSIS
In terms of the Listing Regulations, a detailed analysis of your Company’s performance is discussed in the Management Discussion and Analysis section, which forms part of this Report.
M. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions entered during the year under review were in the ordinary course of business and on arms’ length basis. In compliance with Regulation 23(4) of the Listing Regulations, the Company had sought approval of its Members, at its Extraordinary General Meeting held on 23 October 2017, for entering into material related party transaction(s), in the ordinary course and on arms’ length basis with Mahindra & Mahindra Limited, the Holding Company for a period up to 31 March 2019.
In line with the aforesaid Members’ approval, your Company has entered into material related party transactions i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, with Mahindra & Mahindra Limited, the Holding Company of your Company during the year under review. These transactions were in the ordinary course of business and on arms’ length basis, details of which, as required to be provided in Section 134(3)(h) of the Act, are disclosed in Form AOC - 2 as Annexure II and forms part of this Annual Report.
The Policy on Related Party Transactions as approved by the Board at its meeting held on 25 September 2017 pursuant to Regulation 23 of the Listing Regulations is uploaded on the Company’s website and can be accessed at the weblink: http://www.mahindralogistics.com/media//pdf files/policy-on--0e8627c4402627e.pdf
N. AUDITORS’ AND AUDITORS’ REPORT Statutory Auditor
The Members of the Company had, at their 10th Annual General Meeting held on 14 August 2017, approved the appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No. 117366W/W-100018) (“Deloitte”) as the Statutory Auditors of the Company to hold office for a term of five years commencing from the conclusion of the 10th Annual General Meeting up to the conclusion of 15th Annual General Meeting (“AGM”) of the Company to be held in the year 2022, subject to ratification at every annual general meeting as may be required under the Act from time to time.
Deloitte have provided their consent and confirmed that they meet the eligibility criteria prescribed under Section 141 of the Act read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and that they are not disqualified to act as Statutory Auditors of the Company.
Deloitte have confirmed that the firm holds a valid certificate issued by the Peer Review Board of the ICAI. They have also furnished a declaration of independence as well as their arm’s length relationship with the Company and declared that they have not taken up any prohibited non-audit assignments for the Company.
The Auditors’ Report for the financial year 2017-18 is unmodified i.e. it does not contain any qualification(s), reservation(s) or adverse remark(s) and forms part of this Annual Report.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of your Company has appointed M/s. Sandeep P Parekh & Co. (Certificate of Practice No. 7693), Practicing Company Secretaries as a Secretarial Auditor of the Company to conduct the secretarial audit.
The Secretarial Audit Report given by the Secretarial Auditor in Form No. MR-3 as per the provisions of Section 204 of the Act read with Rules framed thereunder for the financial year ended 31 March 2018 has been annexed to this Board Report as Annexure III and forms part of the Annual Report.
The said Secretarial Audit report does not contain any qualification(s), reservation(s) or adverse remark(s).
Pursuant to Section 138 of the Act read with the Companies (Accounts) Rules, 2014, Mr. Mario Nazareth was appointed as the Internal Auditor of your Company for the financial year 2017-18. The Board at its meeting held on 2 May 2018 re-appointed Mr. Mario Nazareth as the Internal Auditor of your Company for the financial year 2018-19.
During the year under review, provisions of cost audit as stated under Section 148 of the Act and the Companies (Audit and Auditors) Rules, 2014 were not applicable to the Company.
Reporting of frauds by Auditors
During the year under review, the Statutory Auditor and Secretarial Auditor have not reported to the Audit Committee or the Board any instances of frauds committed in the Company by its officers or employees required to be reported under Section 143(12) of the Act.
O. PARTICULARS OF LOANS, GUARANTEES, INVESTMENTS AND SECURITIES
Particulars of loans given, investments made and guarantees and securities provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of loan or guarantee or security pursuant to Section 186 of the Act are given under Note No. 8 and Note No. 33 annexed to Standalone Financial Statements for the year ended 31 March 2018 and the same forms part of this Report.
P. PUBLIC DEPOSITS AND LOANS/ADVANCES
Your Company has not accepted any deposits from the public or its employees, during the year and as such no amount of principle or interest was outstanding as of the year ended 31 March 2018. There were no other deposits falling under Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 at the beginning of the year, during the year and at the end of the year. Hence there are no deposits which are not in compliance with the requirements of chapter V of the Act.
The Company has not accepted any loans from its Directors during the year under review.
The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Regulations 34(3) of Listing Regulations and Para A of Schedule V thereto.
Key Managerial Personnel (“KMP”)
Pursuant to provisions of Sections 2(51) and 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following have been designated as Key Managerial Personnel of your Company:
1. Mr. Pirojshaw Sarkari, Chief Executive Officer
2. Mr. Nikhil Nayak, Chief Financial Officer
3. Ms. Brijbala Batwal, Company Secretary
There have been no changes in the KMPs of the Company, during the year under review.
Employee Stock Option Scheme (“ESOP”)
Pursuant to the Board and the Members approval, your Company had instituted the MLL Key Executive Stock Option Scheme 2012 (“MLL ESOP Scheme”) prior to the IPO.
In view of the IPO of the Company, as required, the Board of your Company vide resolution dated 10 July 2017, and approval of the Members through special resolution dated 11 July 2017, amended the MLL ESOP Scheme to re-align and make it compliant with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”) and relevant Guidance Note issued by ICAI and Indian Accounting Standards issued in this regard. The MLL ESOP Scheme is in compliance with the SBEB Regulations. There have been no material changes to the MLL ESOP Scheme during the year under review.
Further during the year under review, the ESOP Committee, comprising of Mr. Zhooben Bhiwandiwala, Mr. Parag Shah, Mr. Ruzbeh Irani and Mr. Sunish Sharma was dissolved with effect from 10 July 2017 and all powers exercised by the ESOP Committee were subsumed by the Nomination and Remuneration Committee of the Board in line with the SBEB Regulations.
The information as required to be disclosed under Clause 14 of the SBEB Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated 16 June 2015 has been uploaded on the website of the Company and can be accessed at the weblink: http://www.mahindralogistics.com/investor The said information is also provided in the Note No. 23 of the Notes to Standalone Financial Statements.
A certificate from the Company’s Statutory Auditors, Deloitte Haskins & Sells LLP, in accordance with the SBEB Regulations will be placed at the ensuing AGM.
The existing MLL ESOP Scheme shall continue until all outstanding stock options (i.e. 459,360 stock options) are fully exercised. No further stock options shall be granted under the said MLL ESOP Scheme and the said Scheme shall be operational only to the extent of vesting, exercise and allotment of shares for ESOPs granted prior to the IPO of the Company and outstanding as of date.
With a view of further inculcating an employee ownership culture, and with a view to induct and retain talents, the Company intends to implement a new employee stock option plan namely ‘Mahindra Logistics Employee Restricted Stock Unit Plan 2018’ (“RSU 2018”/”Plan”) seeking to cover eligible employees of the Company and of its Holding Company, subject to the Members approval at the ensuing AGM.
Particulars of Employees and related disclosures
The Company had seven employees who were in receipt of remuneration of not less than Rs.10,200,000/- during the year ended 31 March 2018 or not less than Rs.850,000/- per month during any part of the year.
Details of employee remuneration as required under provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available for inspection at the Registered Office of the Company during working hours, 21 days before the ensuing AGM and shall be made available to any Shareholder on request. Such details are also available on your Company’s website and can be accessed at the weblink: http://www.mahindralogistics.com
Disclosures with respect to the remuneration of the Directors, the KMPs and the employees of the Company as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure IV to this Report.
R. EMPLOYEE RELATIONS
The financial year 2017-18 witnessed a positive Employee Relations scenario across the organization.
Your Company continues its efforts to propagate proactive employee centric practices. To that effect an Employee Relations framework titled “Sanjeevani” was crafted. This framework is based on four key pillars, i.e. Employee Communication, Welfare, Inclusive Participation and Development and aims to improve productivity and engagement of all our employees.
Some of the initiatives introduced under Sanjeevani include:
- ”Samvaad”, an employee connect program;
- Talent Development framework for ensuring development of employees at all levels;
- Works committees at locations to ensure inclusive participation of employees;
- Welfare initiatives ensuring coverage of contractual workforce under the Pradhan Mantri Beema Yojana;
- Awareness workshops on ESI and PF benefits; and
- Health camps.
During the year, your Company conducted multiple training and engagement programs covering a wide range of topics, viz. coaching skills, leadership skills, customer focus, team effectiveness, safety and environment. The Company also initiated skill building programs for contractual workers.
Significant emphasis was also laid on raising employee awareness on health and wellness through the launch of a comprehensive Employee Assistance Program (EAP), which caters to the physical, mental and emotional well-being of our employees.
Proactive and employee centric practices, a focus on transparent communication, an effective concern resolution mechanism and a firm belief that engaged employees are the most valuable assets of your Company, are the cornerstones of your Company’s employee relations approach. A proactive and continuous dialogue with employees have helped your Company build trust and harmony.
The Industrial Relations scenario continued to be largely positive across all our locations. Healthy collective bargaining discussions and negotiations, resulting in timely wage settlements during the financial year 2017-18 have helped create a peaceful, healthy and collaborative work environment.
These initiatives have contributed to your Company achieving consistently high scores on employee engagement through an internal survey mechanism.
We believe in inculcating and promoting quality culture across all operations and functions.
At the organisational level, we follow ‘The Mahindra Way’ (“TMW”), a structured approach to promote the use of comprehensive quality management tools and techniques. This covers the entire organisation through management processes and key business processes. Yearly assessment is conducted by experts and basis the feedback received, improvements are carried out by following a PDCA (Plan-Do-Check-Act) approach.
Your Company follows continuous improvement approach in its operations. At the operating locations, our teams focus on range of initiatives for driving improvements by using techniques like 5S, process mapping, waste elimination, Six Sigma etc. We have successfully implemented 7500 kaizens, crossed over 25 quality circles, and completed 50 yellow belt projects during the year under review, using advanced statistical tools.
The Company has achieved ISO 9001:2015 certification from Bureau Veritas with ZERO non-conformities for one of the largest Auto Customer.
T. BOARD & COMMITTEES Directors Appointments/Re-appointments
On recommendation of the Nomination and Remuneration Committee (“NRC”) of the Board, Mr. Ranu Vohra and Mr. Darius Pandole were appointed as Non-Executive Independent Directors, not being liable to retire by rotation, to hold office for a first term of five consecutive years commencing from 25 July 2017 upto 24 July 2022 subject to approval of the Members. The Members at their Extraordinary General Meeting held 27 July 2017 accorded their approval for the said appointments.
The Board of the Company, based on the recommendation of the NRC and results of the performance evaluation carried out by the NRC and the Board, vide resolution dated 26 March 2018 re-appointed Mr. Ajay Mehta as an Additional and Non-Executive Independent Director, not being liable to retire by rotation, for a second term of five consecutive years commencing from 27 March 2018 to 26 March 2023, subject to the approval of the Members through special resolution at the ensuing AGM.
The Board of the Company, based on the recommendation of the NRC, at its meeting held on 6 June 2018 appointed Ms. Avani Davda as an Additional and Non-Executive Independent Director, not being liable to retire by rotation, for a first consecutive term commencing from 6 June 2018 to the AGM of the Company to be held in 2022, subject to the approval of the Members through ordinary resolution at the ensuing AGM.
In terms of Section 152 of the Act, Mr. Parag Shah, retires by rotation and, being eligible, offers himself for re-appointment at the ensuing AGM.
During the year under review, Mr. Ruzbeh Irani, Mr. Sanjeev Aga and Mr. Anjanikumar Choudhari, Non-Executive Directors of the Company stepped down from the Board of your Company with effect from 25 July 2017. Consequently Mr. Anjanikumar Choudhari also ceased to be Chairman of the Board and Mr. Zhooben Bhiwandiwala was appointed as Chairman of the Board with effect from 25 July 2017.
Ms. Neelam Deo ceased to hold office as Non-Executive Independent Director with effect from 26 March 2018 on account of expiry of her first term.
The Board places on record its sincere gratitude and deep appreciation for the valuable contributions made by Mr. Ruzbeh Irani, Mr. Sanjeev Aga, Mr. Anjanikumar Choudhari and Ms. Neelam Deo during their respective tenures with the Company.
Declaration by Independent Directors
All Independent Directors of the Company have given written declarations and confirmed that they meet the criteria of Independence as provided under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations.
Pursuant to the applicable provisions of the Act and the Listing Regulations, the Board has carried out an annual evaluation of its own performance and that of its Committees as well as reviewed the performance of the Directors individually. During the year under review, the questionnaire for performance evaluation was further elaborated and made comprehensive in alignment with the guidance note on board evaluation issued by the Securities and Exchange Board of India, vide its circular dated 5 January 2017. Feedback was sought by way of a structured questionnaire covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance and the evaluation was carried out based on responses received from the Directors.
A separate evaluation exercise was carried out by the NRC of the Board to evaluate the performance of Individual Directors. The performance evaluation of the Non-Independent Directors and the Board as a whole was carried out by the Independent Directors. The performance evaluation of the Chairman of the Company was also carried out by the Independent Directors, taking into account the views of the other Non-Executive Directors.
The outcome of the performance evaluation of the Board for the year under review was discussed by the NRC and the Board at their respective meetings. All Directors expressed satisfaction with the evaluation process.
Familiarization program for Independent Directors
Details of familiarization programs imparted to Independent Directors of the Company familiarising them on their roles, rights, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company and number of hours spent by each of them in terms of the requirements of the Listing Regulations are available on the Company’s website and can be accessed at the weblink: http://www.mahindralogistics.com/media//pdf files/familiariz-09f20b333216ae8.pdf
Remuneration Policy and criteria for determining attributes, qualification, independence and appointment of Directors
In line with the principles of transparency and consistency, your Company has adopted the following policies:
i. Policy on appointment and remuneration of Directors and senior management and succession planning;
ii. Policy on remuneration of the Directors, Key Managerial Personnel and Employees (“Appointment and Remuneration Policy”).
In line with the Appointment and Remuneration Policy, the Independent Directors of the Company are entitled to payment of commission up to Rs.600,000/- per annum on the basis of recommendations made by the NRC and approved by Board within the ceiling of 1% or 3% of annual net profit of the Company, as the case may be, for each of the financial years commencing from 1 April 2017. The remuneration of the Independent Directors is determined by the Board based on their performance evaluation done by the entire Board which, inter alia, includes their participation in the Board and Committee Meetings during the year, other responsibilities undertaken, and contributions to the deliberations of the Board and to the Company.
The Appointment and Remuneration Policy is provided in Annexure V and forms part of this report. The said policy is also uploaded on website of the Company and can be accessed from the weblink: http://www.mahindralogistics.com/media//pdf files/nomination-ebe9fbadb048aed.pdf
The remuneration paid to the Directors for the financial year 2017-18 was as per the terms laid down in the said Appointment and Remuneration Policy of the Company.
Directors’ Responsibility Statement
Pursuant to Section 134(5) of the Act, your Directors, based on representation from the operating management and after due enquiry, confirm that:
a. In the preparation of the annual financial statements for the year ended 31 March 2018 the applicable accounting standards have been followed and no material departures have been made from the same;
b. They had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year on 31 March 2018 and of the profits of the Company for the financial year ended on that date;
c. They have taken proper and sufficient care 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. They have prepared the annual accounts on a going concern basis;
e. They have laid down internal financial controls to be followed by the Company and such internal financial controls were adequate and were operating effectively during the financial year ended 31 March 2018; and
f. They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively throughout the financial year ended 31 March 2018.
Board Meetings and Annual General Meeting
The Board of your Company meets at least four times in a year and the gap between two Meetings does not exceed one hundred and twenty days. An annual calendar of Meetings is circulated in advance to all Directors. In case of exigencies, resolutions are passed through circulation in terms of Section 175 of the Act.
During the year ended 31 March 2018, eight Board Meetings were held and these Meetings were well attended by the Directors. The Tenth AGM of your Company was held on 14 August 2017. Details of attendance of meetings of the Board and the AGM are included in the section titled ‘Report on Corporate Governance’, which forms part of this Annual Report.
Meetings of Independent Directors
The Independent Directors of your Company meet at least once in a financial year without the presence of Non-Independent Directors, the CEO, and the CFO of the Company.
The Meetings are conducted to enable the Independent Directors to, inter alia, discuss matters pertaining to review of performance of Non-Independent Directors, the Board as a whole and the Chairman of the Company (taking into account the views of the Non-Executive Directors) and to assess the quality, quantity and timeliness of flow of information between the Company’s Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
During the year, under review the Independent Directors met once on 29 January 2018 and the Meeting was attended by all Independent Directors.
The Audit Committee of the Board is composed of four Non-Executive Directors, of whom three Directors (i.e. more than 2/3rd), including the Chairman are Independent in line with provisions of Section 177 of the Act read with the Rules framed thereunder and Regulation 18 of the Listing Regulations. All the Members of the Committee are financially literate and possess strong accounting and financial management knowledge.
As on 31 March 2018, the Audit Committee comprised of Mr. Ajay Mehta (Independent Director and Chairman of the Committee), Mr. Chandrasekar Kandasamy (Non-Executive Director), Mr. Ranu Vohra (Independent Director) and Mr. Darius Pandole (Independent Director).
Mr. Zhooben Bhiwandiwala and Mr. Parag Shah, Non-Executive Directors are permanent invitees to the meetings of the Committee. The Company Secretary of the Company acts as the Secretary to the Committee.
All the recommendations made by the Audit Committee during the year under review were accepted by the Board of the Company.
The Board has constituted various committees in compliance with the requirements of the Act and Listing Regulations viz. Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders’ Relationship Committee and voluntary committees viz. IPO Committee and MLL Key Executive Stock Option Scheme Committee. The details of composition of the said Committees, their terms of reference, meetings held and attendance of the Committee Members thereat during the financial year 2017-18 is provided in the section titled ‘Report on Corporate Governance’, which forms part of this Annual Report.
Compliance with Secretarial Standards
The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards viz. the Secretarial Standard-1 on Board Meetings (SS-1) and Secretarial Standard-2 on General Meetings (SS-2) issued by the Institute of Company Secretaries of India and approved by the Central Government, and that such systems are adequate and operating effectively.
U. GOVERNANCE Corporate Governance
The Corporate Governance Policies guide the conduct of affairs of your Company and clearly delineate the roles, responsibilities and authorities at each level of its governance structure and key functionaries involved in governance.
Your Company has in place Codes of Conduct (“the Codes”) for its Directors and Senior Management Personnel and Employees. These Codes enunciate the underlying principles governing the conduct of your Company’s business and seek to reiterate the fundamental precept that good governance must and would always be an integral part of your Company’s ethos. The affirmation on the said Codes is received from the Directors and Senior Management Personnel and Employees on an annual basis.
Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. A Report on Corporate Governance along with a Certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Schedule V of the Listing Regulations forms part of the Annual Report.
Vigil Mechanism/Whistle Blower Policy
The Vigil Mechanism as envisaged in the Act, the Rules prescribed thereunder and Listing Regulations, is implemented through the Company’s Whistle Blower Policy, which was revised and adopted by the Board at its meeting held on 25 September 2017 to provide a mechanism for the employees and Directors of the Company to report genuine concerns and provides for adequate safeguards against victimization of persons who use such mechanism and a provision has been made to provide direct access to the Chairperson of the Audit Committee in appropriate and exceptional cases. The scope, eligibility and other procedural aspects have been mentioned in the policy. The Whistle Blower Policy of your Company is available on the Company’s website and can be accessed at the weblink: http://www.mahindralogistics.com/media//pdf files/ whistleblo-c5536963e0a165a.pdf
During the year under review, no complaints have been received by the Company and none of the Whistle Blowers were denied access to the Chairperson of Audit Committee of the Board.
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
The Company has in place a Prevention of Sexual Harassment Policy for Women in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013.
An Internal Complaints Committee has been set up to redress complaints regarding sexual harassment. All women employees (permanent, contractual, temporary, trainees) as well as who visit the premises of the Company for any purpose are covered under this Policy. Awareness and sensitisation programs were conducted across the Company.
During the year under review, no complaints were received alleging any instances of sexual harassment.
Business Responsibility Report
The Business Responsibility Report of your Company prepared as a good governance practise, highlighting the initiatives taken by the Company in the areas of social, environment and economic responsibilities of business for the financial year 2017-18 forms part of this Annual Report, although not statutorily required under Regulation 34(2)(f) of the Listing Regulations.
Your Company has developed a well-defined risk management policy which inter alia includes identification of elements of risk, if any, which in the opinion of the Board may seriously impact the Company. The risk management policy includes identification of key risks and their mitigation plans. Constitution of a Risk Management Committee of the Board is not mandatory for your Company. However, the Board and Audit Committees review the Risk Management framework on a quarterly basis.
V. CORPORATE SOCIAL RESPONSIBILITY AND RELATED MATTERS
Corporate Social Responsibility (“CSR”)
Being part of the Mahindra Group, the Company is committed to the group’s social responsibility vision to serve the communities where it operates through its various CSR activities and initiatives and Employee Social Option Programmes (ESOPs).
The Company has identified various CSR thrust areas and also laid down guiding criteria for selecting CSR projects which includes sustainability, social impact etc.
The CSR Committee monitors implementation of the Company’s CSR projects through the CSR Executive Council.
While CSR programmes are identified by the CSR Committee, it also evaluates projects submitted directly by reputed NGOs. To ensure that there is a focus and maximum impact, the CSR Committee endeavours to work on fewer projects over a longer period of time so as to ensure that the outcomes of the projects can be measured.
The Company had undertaken various CSR projects in the areas of Education and Skill Development, Rural Development and Sanitation. Some of the key initiatives undertaken by the Company during the year under review are as follows:
Project to eradicate Malnutrition
As a part of village adoption exercise, your Company launched a project to combat and eradicate malnutrition at Tembha village, Thane, Maharashtra in December 2017. The Company identified malnourished children within the age group of 1 - 5 years and based on the advice of a qualified Paediatrician, distributed nutritious recipe every day to all malnourished children. The results are extremely encouraging as most of the children’s weight increased with time. This process has also provided an additional source of income (for preparing the recipes and sweets) for women.
Pradhan Mantri Kaushal Vikas Yojana (“PMKVY”)
The Central Government launched PMKVY, a skill certification scheme in 2015. The objective of this Scheme is to enable large number of Indian youth to undergo industry-relevant skill training which will help them in securing a better livelihood. The Company has launched a program to increase availability of trained drivers as well as to train existing drivers so as to help reduce the number of road accidents. The Company has trained 450 drivers.
One of our key CSR programs, is the HIV-AIDS awareness and prevention program. This comprehensive program focuses on the communities around Nasik, Maharashtra in collaboration with MAGMO NGO. The objective of the program is to increase awareness and thus help prevention through strategic tie ups with organizations who possess the technical and capacity building capabilities to optimize our resources. We undertake these interventions through a healthcare center installed at our Nasik transport hub. More than 37,000 drivers benefited within the last 15 months. More than 600 drivers were treated for STI infection. 0.4% of the drivers were also sent for Anti-Retro Viral Therapy.
The CSR Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (“CSR Policy”) which is implemented by the Company. During the year under review, the Board of your Company amended the CSR Policy at its meeting held on 25 September 2017. The updated CSR Policy including a brief overview of the projects or programs undertaken can be accessed at the Company’s website through the weblink: http://www.mahindralogistics.com/sustainability
The Board of your Company has constituted a CSR Committee (“Committee”) in compliance with the requirements of Section 135 of the Act. The role of the Committee includes formulation and recommending to the Board, a CSR Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII of the Act and any amendments thereto, recommendation of the amount of expenditure to be incurred on the CSR activities as enumerated in Schedule VII of the Act and referred to in the CSR Policy of the Company, as also to monitor the CSR Policy from time to time.
As of the date of this report, the Committee comprises of Mr. Parag Shah, Mr. Ranu Vohra and Mr. Chandrasekar Kandasamy. Mr. Parag Shah is Chairman of the Committee and Mr. Zhooben Bhiwandiwala, Non-Executive Director is a permanent invitee of the Committee.
During the year under review, your Company incurred a CSR Expenditure of Rs.1.27 crores on its CSR activities as against a mandated spend of Rs.1.24 crores. Details of the composition of the CSR Committee, CSR Policy and projects undertaken by the Company during financial year 2017-18, in accordance with Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in the section titled ‘Annual Report on Corporate Social Responsibility (“CSR”) activities for FY 2017-18’ in Annexure VI of this Report.
W. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars relating to the energy conservation, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are provided in Annexure VII and form part of this report.
X. SECRETARIAL Share Capital
The authorized share capital of your Company is Rs.105,00,00,000/- divided into 10,50,00,000 equity shares of the face value of Rs.10/- each.
During the year under review, in view of the Initial Public Offer of the Company all partly paid equity shares of the Company i.e. 40,774 equity shares, which were partly paid up to the extent of Rs.2/- per share and 15,81,273 equity shares, which were partly paid up to the extent of Rs.1/- per share, were made fully paid up pursuant to a call of Rs.8/- per share and Rs.9/- per share, respectively. Further your Company allotted 16,86,880 equity shares of face value of Rs.10/- on the exercise of stock options under the MLL Key Executives Stock Option Scheme 2012 of the Company during the year under review.
Consequently, the issued, subscribed and paid-up equity share capital of your Company as on 31 March 2018 stood at Rs.71,14,19,240 divided into 7,11,41,924 equity shares of the face value of 10/- each.
Extract of Annual Return
Pursuant to Sections 134(3)(a) and 92(3) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return as on 31 March 2018 in form MGT-9 is annexed as Annexure VIII and forms part of this report.
Your Directors state that no disclosures or reporting(s) are required in respect of the following items, as there were no transactions/events related to these items during the year under review:
i. Change in nature of business of the Company;
ii. Issue of equity shares with differential rights as to dividend, voting or otherwise;
iii. Issue of sweat equity shares to employees of the Company under any scheme;
iv. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company’s operations in future;
v. Voting rights not exercised directly by the employees and for the purchase of which or subscription to which loan was given by the Company.
The Board of your Company wish to convey its deep gratitude and appreciation to all the employees of the Company, for their tremendous efforts as well as their exemplary dedication and contribution to the Company’s performance. We also acknowledge the invaluable support and contribution of all our business associates who continue their loyal partnership with our Company.
The Directors would also like to thank the Members, Customers, Vendors, Business Partners, Bankers, Government and all other Business Associates for their continued support extended to the Company and the Management.
On behalf of the Board of Directors
Zhooben Bhiwandiwala Parag Shah
Mumbai, 6 June 2018