Directors’ Report

To,

The Members,

Your Board of Directors is pleased to present the 23rd Annual Report together with the Audited Financial Statements for the year ended March 31, 2014 compared with previous financial year as follows:

` In Lacs

Financial results Financial Year ended March 31, 2014 Financial Year ended March 31, 2013
Net Sales 1,25,510.57 1,01,737.67
Other Income 954.38 280.75
Earnings before interest, tax, depreciation, amortization and impairment 17,155.61 12,543.48
Interest & Finance Charges/ (Income) Net 134.93 1,792.67
Depreciation, Amortization and Impairment- Tangibles 1,508.08 1,516.24
Depreciation and Amortization- Intangibles 4,652.33 4,648.28
Prior year items- Expenses - 182.71
Exceptional Item 230.07 -
Profit before tax 10,630.20 4,403.58
Provision for tax
- Current tax- (MAT Payable) 2,260.00 885.00
- MAT Credit (entitlement) (2,260.00) (885.00)
- Excess provision for current tax of earlier years 18.79 -
Profit after tax 10,611.41 4,403.58
Balance as per last Balance Sheet
– Brought forward 4,543.14 6,745.54
Balance available for appropriations 15,154.55 11,149.12
Appropriations:
Interim Dividend 1,810.23 -
Tax on Interim Dividend 307.65 -
Final Dividend on Equity Shares (Proposed) 3,620.47 4,150.59
Corp. Dividend Tax 615.30 705.39
Transfer to General Reserve 1,200.00 500.00
Transfer to Debenture Redemption Reserve 5,372.51 1,250.00
Balance Carried Forward (Profit and Loss Account) 2,228.39 4,543.140
Earning Per Share (Basic and Diluted) 6.21 2.65
Cash Profit 16,771.82 10,568.10
Cash EPS 9.82 6.37
Dividend Per Share of face value of ` 1/- 3.00 2.50

PERFORMANCE

During the financial year ended March 31, 2014, the Company recorded Net Sales at ` 1,25,510.57 lac as against ` 1,01,737.67 lac in the previous financial year. Profit after Tax for the financial year under review vis-a-vis previous financial year is as follows:


` In Lacs

Particulars 2013-14 2012-13
Profit after tax but before depreciation and amortization of Goodwill, Copyrights and Trademarks acquired due to amalgamation of JCPL 15,081.95 8,874.12
Depreciation and amortization of Goodwill, Copyrights and Trademarks acquired due to amalgamation of JCPL 4,470.54 4,470.54
Profit after Tax 10,611.41 4,403.58

During the year under review, the sales of soaps and detergents was ` 95,323.65 lac compared to ` 75,594.59 lac in previous year and the sales in homecare segment grew to ` 29,131.97 lac compared to ` 24,490.86 lac in previous year. The profitability of Soaps & Detergents segment improved to ` 12,693.18 lac from ` 7,654.71 lac in the previous year. The profitability in homecare segment improved to ` 833.76 lac from ` 794.13 lac in the previous year


ISSUE OF CAPITAL

At the beginning of the financial year under review, the Authorised Share Capital was ` 17,00,00,000/- consisting of 17,00,00,000 equity shares of ` 1/- each and paid-up share capital was ` 16,12,64,000/- consisting of 16,12,64,000 equity shares of ` 1/- each fully paid-up.

Consequent to the Scheme of Amalgamation sanctioned by Honorable High Court of Mumbai on April 12, 2013, which came into operation on May 13, 2013, the Authorised Share Capital was increased by the Authorised Share Capital of the Transferor Company viz., Jyothy Consumer Products Ltd (JCPL) i.e. by` 240 crore. On June 3, 2013, pursuant to Clause 16.2 of the said Scheme of Amalgamation, 47,59,496 (Forty Seven Lac, Fifty Nine Thousand, Four Hundred Ninety Six) Fully Paid-up Equity shares of ` 1/- each, were allotted to the shareholders of JCPL in the ratio of 1 Fully Paid Up Equity Share of the Company against 4 Fully Paid Up Equity Shares of JCPL held by them as on May 28, 2013 being the record date fixed for the purpose.

Further on December 3, 2013, pursuant to the Shareholders’ approval at the Extra-ordinary General Meeting of the Company held on November 19, 2013 and the In-Principle Approval granted by National Stock Exchange of India Ltd vide their letter dated November 27, 2013 and by BSE Ltd vide their letter dated November 29, 2013, Sahyadri Agencies Ltd was allotted 1,50,00,000 (One Crore Fifty Lac) equity shares of the Company of ` 1/- each on Preferential basis at the Issue Price of ` 175.15 per Equity Share (including ` 174.15 per share towards share premium) against receipt of entire amount payable by Sahyadri Agencies Ltd in cash aggregating to ` 262,72,50,000/- in terms of Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Consequent to the above, at the end of financial year under review, the Authorised Share Capital of the Company was ` 257 crore consisting of 257,00,00,000 equity shares of ` 1/- each and the paid-up capital was ` 18,10,23,496/- comprising 18,10,23,496 equity shares of ` 1/- each fully paid-up.


DIVIDEND

The Board of Directors in its meeting held on January 28, 2014 declared interim dividend @100% of face value of Equity share of ` 1/- each (` 1/- per equity share), aggregating to total cash outflow of ` 2,117.88 lac (including dividend distribution tax of ` 307.65 lac). Further, the Board is pleased to recommend a final dividend @ 200% of face Value of Equity Shares of ` 1/- each (i.e. ` 2/- per equity share), aggregating to cash outflow of ` 4,235.77 lac including dividend distribution tax of ` 615.30 lac. With this, the total dividend for the year amounts to 300% of the face value of Equity Shares of ` 1/- each or ` 3/- per Equity Share on the enlarged capital and the total cash outflow on account of dividend for the financial year under review comes to ` 6,353.65 lac including dividend distribution tax of ` 922.95 lac. In the previous financial year, the Board had recommended and paid a dividend @ 250% of face Value of Equity Shares of ` 1/- each (i.e. ` 2.50 per equity share) involving total cash outflow of ` 4,855.98 lac including dividend distribution tax of ` 705.39 lac.

The final dividend will be paid to eligible members if approved at the ensuing Annual General Meeting of the Company.


MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management Discussion & Analysis Report is attached and forms part of this Report.


CORPORATE GOVERNANCE

As per Clause 49 of the Listing Agreement with the stock exchanges, a Report on compliances with Corporate Governance is presented separately and forms part of this Report.


CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21, issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements have been provided in the Annual Report. These Consolidated Financial Reports provide financial information about your Company and its subsidiary companies as a single economic entity. The Consolidated Financial Statements form part of this Annual Report.


SUBSIDIARY COMPANIES

The Central Government vide General Circular No. 2/2011 dated February 8, 2011 has exempted the holding companies from attaching Annual Accounts and other documents in respect of its subsidiaries to the Annual Report of the holding companies from the financial years ended on or after March 31, 2011. As required vide above Circular, statement in respect of each of its subsidiary, giving details of capital, reserves, total assets and liabilities, details of investments, turnover, profit before taxation and proposed dividend is attached to the Consolidated Balance Sheet. Annual accounts of the subsidiary companies and the related detailed information will be made available to the shareholders of the Company, seeking such information and will also be made available for inspection at the Registered Office of the Company.


EMPLOYEE RELATIONS

Employee relations remained cordial during the year under review.


FIXED DEPOSITS

The Company did not accept/renew any fixed deposits from the public and no fixed deposits were outstanding or unclaimed as on March 31, 2014.


DIRECTORS

Various provisions in respect of Directors contained in the Companies Act, 2013 (“the 2013 Act”) were notified with effect from April 1, 2014 repealing the corresponding provisions in the Companies Act, 1956 (“the 1956 Act”).


Independent Directors

As per provisions of Section 149 of the 2013 Act, independent directors shall hold office for a term up to five consecutive years on the board of a company, but shall be eligible for re-appointment for another term up to five years on passing of a special resolution by the company and disclosure of such appointment in Board’s Report. Further Section 152 of 2013 Act provides that the independent directors shall not be liable to retire by rotation in the Annual General Meeting (‘AGM’) of the Company.

As per Revised Clause 49 of the Listing Agreement (applicable from October 1, 2014), any person who has already served as independent director for five years or more in a company as on October 1, 2014 shall be eligible for appointment, on completion of the present term, for one more term of up to 5 (five) years only.

Pursuant to the extant provisions of the 1956 Act, Mr. Nilesh B. Mehta and Mr. R. Lakshminarayanan, Independent Directors would have been liable to retire by rotation in the AGM to be held in 2014 and Mr. K.P. Padmakumar and Mr. Bipin R. Shah, independent directors would have retired in the AGM to be held in 2015. However, in view of the provisions contained in 2013 Act, the Company has been advised that all independent directors are required to be appointed in the ensuing AGM.

Mr. Nilesh B. Mehta, Mr. K. P. Padmakumar, Mr. Bipin R. Shah and Mr. R. Lakshminarayanan are eligible for appointment as Independent Directors of the Company for a term upto five years in the ensuing AGM. The said Independent Directors fulfill the conditions specified in the 2013 Act and the Rules made thereunder and are independent of the management. The Board has conducted the performance evaluation of aforesaid Independent Directors and on the basis of the same, recommend to the shareholders the appointments of Mr. Nilesh B. Mehta, Mr. K. P. Padmakumar, Mr. Bipin R. Shah and Mr. R. Lakshminarayanan as Independent Directors of the Company for a term upto March 31, 2019.


Non-Independent Directors

In terms of Section 152 of the 2013 Act, two-third of total strength of the Board (excluding Independent Directors) shall be liable to retire by rotation. One-third of such directors who are liable to retire by rotation shall retire at every AGM.

Accordingly, in case of the Company, out of 4 non- independent directors, three directors (i.e. not less than 2/3rd) shall be liable to retire by rotation. The Board decided to continue the status of Mr. M.P. Ramachandran, Chairman & Managing Director, as ‘Director not liable to retire by rotation’ and Mr. K. Ullas Kamath, Ms. M. R. Jyothy and Mr. S. Raghunandan (constituting not less than two-thirds of total non-independent directors) shall be the directors who shall be liable to retire by rotation and one of them (i.e. 1/3rd) will retire every year starting from AGM 2014. Mr. K. Ullas Kamath, being the longest serving director in this category, shall retire by rotation in the ensuing AGM of the Company. Mr. K. Ullas Kamath being eligible, offers himself for re-appointment as director and the Board recommends his re- appointment in the ensuing AGM.


Executive Directors

The Board in its meeting held on January 28, 2014 re-appointed Mr. M. P. Ramachandran as Managing Director of the Company subject to approval of shareholders in the ensuing AGM for a term of five years commencing from April 1, 2014 to March 31, 2019. He has expressed his desire to the Board that he shall be permitted to accept a nominal salary of ` 1/- per annum which the Board accepted. The Board had placed on record its deep appreciation for his dedication, commitment and generous gesture towards the Company.

The Board in its meeting held on May 22, 2014 approved re-appointment of Mr. S. Raghunandan as Whole Time Director & CEO for a term of three years from June 1, 2014 to May 31, 2017 subject to approval of shareholders in the ensuing AGM on terms and conditions specified in the Statement pursuant to Section 102 of the 2013 Act attached to Notice of AGM. This appointment is in supersession of existing contract dated August 16, 2012 insofar as it relates to unexpired period of that contract.

The Board in its meeting held on May 22, 2014 also approved re-appointment of Ms. M. R. Jyothy as Whole Time Director for a term of three years from June 1, 2014 to May 31, 2017 subject to approval of shareholders in the ensuing AGM on terms and conditions specified in the Statement pursuant to Section 102 of the 2013 Act attached to Notice of AGM. This appointment is in supersession of existing contract dated September 20, 2011 insofar as it relates to un-expired period of that Contract.

The Board recommends for approval of aforesaid Executive Directors in the ensuing AGM.


Woman Director

The composition of the Board of Directors of the Company includes a woman director viz. , Ms. M. R. Jyothy. Accordingly,the Company is in compliance with the requirement of third proviso to Section 149 (1) of 2013 Act read with Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014.


AUDITORS

M/s S. R. Batliboi & Associates and the present auditors, M/s S. R. Batliboi & Associates LLP, both being part of same network of audit firms, together have completed more than 10 (Ten) years as auditors of the Company. However, the provisions contained in Section 139 of the Companies Act, 2013 provide for a transition period of three years for complying with the requirement of rotation of auditors. The Company is advised that the present auditors or any audit firm associated with them or within the same network of audit firms can be appointed as auditors for a maximum period of three years i.e. for financial years 2014-15, 2015-16 and 2016-17, subject to annual ratification by the shareholders in the Annual General Meetings (AGMs) to be held in the years 2015 and 2016.

M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, Mumbai, present auditors of the Company, who hold office until conclusion of the 23rd AGM, are eligible for re-appointment. However, they have expressed their unwillingness to be reappointed as Auditors of the Company. In view of the same, Audit Committee in its meeting held on May 22, 2014, recommended appointment of M/s S R B C & Co LLP, Chartered Accountants, Mumbai, a network firm of M/s. S. R. Batliboi & Associates LLP, as Auditors of the Company.

A certificate prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014 has been received from M/s S R B C & Co LLP to the effect that they are eligible for appointment as auditors, and are not disqualified for appointment under the Companies Act, 2013, the Chartered Accountants Act, 1949, or the rules and regulations made there-under; the proposed appointment is as per the term and within the limits laid down by or under the authority of the Companies Act, 2013 and that there are no proceedings pending against them or any of their partners with respect to professional conduct.

The Board recommends the appointment of M/s S R B C & Co LLP, Chartered Accountants, Mumbai as Auditors of the Company for three years i.e. from the conclusion of ensuing AGM till the conclusion of 26th AGM in 2017, subject to annual ratification by the members at AGMs to be held in the year 2015 and 2016.


Auditors’ Report

Auditors in their report, under heading ‘Emphasis of Matter’, have observed that managerial remuneration paid/ provided by the Company for the year ended March 31, 2013 is in excess of the limits prescribed under the Companies Act, 1956. We draw your attention to Note 41 of the financial statements forming part of this Annual Report which is self-explanatory and therefore, does not require further explanation.

The Auditors’ Report does not contain any qualification, reservation or any adverse remark.


Cost Auditors

In compliance with the Central Government’s order No. 52/26/CAB-2010 dated June 30, 2011, the Board has appointed M/s R. Nanabhoy & Co., Cost Accountants, Mumbai to carry out cost Audit in respect of various specified products of the Company for the financial year 2014-15. Cost Audit Report for the year 2012-13 was filed within due date. The due date for filing of the Cost Audit Report for the year 2013-14 is September 30, 2014.


DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to requirements of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

1. in the preparation of the annual accounts for the financial year ended March 31, 2014, the applicable accounting standards have been followed;

2. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the Profit of the Company for the financial year ended on that date;

3. the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. the Directors have prepared the annual accounts for the financial year ended March 31, 2014 on a ‘going concern’ basis.


CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION

With regard to the requirements of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the Company has nothing specific to report.


FOREIGN EXCHANGE EARNINGS AND OUTGO

` In Lacs

Particulars 2013-14 2012-13
Foreign exchange earnings 1,191.40 890.74
Foreign exchange outgo 1,223.85 1,072.85

PARTICULARS OF EMPLOYEES

Particular of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended and forming part of the Directors’ Report for the year ended March 31, 2014 are set out as an annexure to this report. However, as per provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and the accounts are being sent to all the shareholders excluding the aforesaid information. Any shareholder desirous of obtaining such particulars may write to the Company Secretary at the registered office of the Company.


INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

The Company has adequate internal control systems and procedures in place for effective and smooth conduct of business and to meet exigencies of operation and growth. The key business processes have been documented. The transactions are recorded and reported in conformity with generally accepted accounting practices. The internal control systems and procedures ensure reliability of financial reporting, compliance with the Company’s policies and practices, governmental regulations and statutes. Internal Audit is conducted by independent firm of auditors. Internal Auditors regularly check the adequacy of the system, their observations are reviewed by the management and remedial measures, as necessary, are taken.


CAUTIONARY NOTE

Certain statements in the “Management discussion and Analysis” section may be ‘forward-looking’. Such ‘forward looking’ statements are subject to risks and uncertainties and therefore actual results could be different from what the Directors envisage in terms of future performance and outlook.


ACKNOWLEDGEMENT

The Board of Directors express their sincere appreciation for the contribution and commitment of the employees of the Company and for the excellent support provided by the shareholders, customers, distributors, suppliers, bankers, media and other service providers, during the financial year under review.


For and on behalf of the Board of Directors

For Jyothy Laboratories Limited


Mumbai,
May 22, 2014

M. P. Ramachandran

Chairman & Managing Director