& Management Discussion and Analysis
for the year Ended 31st March, 2023
The Directors of your Company have pleasure in presenting before you the Annual Report
together with the Audited Statements of Accounts for the year ended 31st March, 2023.
FINANCIAL SUMMARY |
|
|
|
|
( Lakhs) |
|
2022-23 |
2021-22 |
Revenue from Operations |
167251 |
156067 |
Profit after Tax |
32698 |
32023 |
Balance available for Appropriation in Retained Earnings |
103894 |
91764 |
Amount transferred to General Reserves |
3000 |
3000 |
Dividend paid |
21538 |
17599 |
Balance in retained earnings |
79356 |
71165 |
Key Ratios |
|
|
Earnings per Share () |
211.75 |
207.38 |
Dividend per Share () |
140.00 |
114.00 |
Value creation during the decade has been Compounded Annual Growth Rate (CAGR), 8.1% in
Earnings Per Share (EPS) and 7.2% in Dividend Per Share (DPS).
DIVIDEND AND TRANSFER TO GENERAL RESERVE
The Directors are pleased to recommend a dividend of
150/- per equity share of 10/- each on the paid up equity share capital of the
Company, for consideration and approval of Members at the ensuing Annual General Meeting
(AGM). It is proposed to carry forward an amount of 3000 Lakhs to General Reserve.
Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (Listing Regulations'), the Company adopted a Dividend
Distribution Policy which sets out the principles and factors that should be considered by
the Board for determining the distribution of dividend to its shareholders. The policy can
be accessed on the Company's website at https://www.vsthyd.com/
mainsite/documents/Dividend-Distribution-Policy.pdf
MATERIAL CHANGES AND COMMITMENTS
Except as disclosed elsewhere in the Report, there have been no material changes and
commitments which affect the financial position of the Company that have occurred between
the end of the financial year to which the financial statements relate and the date of
this Report. There has been no change in the nature of business of the Company during the
year.
SHARE CAPITAL
The paid up Equity Share Capital as on 31st March, 2023 was 1544.19 Lakhs . The
Company has neither issued shares with differential rights as to dividend, voting or sweat
equity shares.
EMPLOYEE STOCK OPTION PLAN
During the year under review, there has been no change in the VST Employee Stock Option
Plan-2020 (VST-ESOP 2020) of the Company and further the said VST-ESOP 2020 are in
compliance with SEBI (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021.
During the financial year, the Company has granted 35,060 stock options pursuant to VST
Employee Stock Option Plan 2020 (VST-ESOP 2020) to eligible employees.
The necessary disclosures for the year ended 31st March, 2023 in compliance with
Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations,
2021 is available on the website of the Company at https://
www.vsthyd.com/mainsite/Annual-Reports.html
MANAGEMENT DISCUSSION & ANALYSIS REPORT _MD&A_
Based on feedback from Members on the Annual Report and Accounts, this report includes
MD&A as appropriate so that duplication and overlap between the Directors' Report and
a separate MD&A is avoided and the entire material with Company's state of affairs is
provided in a composite and comprehensive document.
INDUSTRY PERFORMANCE
The year 2022-23 started off building on the momentum generated in the fourth quarter
of the preceding year. Industry volumes grew consistently throughout the year and were
higher than pre-pandemic level. This growth was driven by sustained price stability.
16% hike in National Calamity Contingent Duty (NCCD) was announced in the Union Budget
on 1st February 2023. This has resulted in an increase of about 1.6% on the overall tax.
Illegal non-duty paid cigarettes remain a threat for legal players as they continue to
benefit from a large price gap versus fully taxed cigarettes.
COMPANY PERFORMANCE
Industry growth was driven at higher price points, premium and mid premium, where your
Company has no presence, therefore limiting growth. Despite the headwinds, your Company's
refreshed brand portfolio led by TOTAL has the wherewithal to overcome these challenges.
TOTAL, your Company's flagship trademark continues to be a leader in the capsule
segment. TOTAL's variant with indigenous flavours launched in 2021-22 continues to gain
consumer share in some large markets. TOTAL's new master brand architecture' was
successfully introduced. Similar brand initiatives were successfully executed for other
key trademarks such as Charms and Editions. Your Company is strongly focused and continues
to invest in strengthening its brand portfolio. Your Company remains committed to
strengthening its presence across the markets by investing in sales infrastructure.
Significant progress has also been made in leveraging digital platforms for market
specific insights and initiatives.
Your Company remains committed in new markets such as Gujarat and Maharashtra while
strengthening its foothold in existing geographies. Significant progress has also been
made in leveraging digital platforms for market specific insights and initiatives.
LEAF TOBACCO
Your Company's leaf function has shown remarkable resilience and delivered a very
strong performance with an elevation in quality of the wide range of products offered and
achieved an excellent profit of around 41 Crores. The strong performance was made
possible by team work, and special efforts with meticulous planning by senior most team
members.
The functions focus was to remain agile, making smart positive changes to the business
model and by adopting long term customer centric approach. Function continues its centre
of attention on expanding international foot prints for enhancing growth.
Function has leveraged its expertise in all varieties of tobaccos and your Company
procured highest quality tobaccos for its own manufacturing in line with the changing
volumes. It continues highest focus on export sales and remains optimistic on maintaining
the growth momentum in spite of adverse challenging conditions. Specific focus is directed
towards the need to foster your Company's development of new varieties and high nicotine
tobaccos to meet the changing requirements of tobacco in domestic and international
markets. Function is committed to evolve and grow business in line with changing customer
preferences, penetrate into new geographies.
In the backdrop of changing climatic conditions, where the farming community face
challenges on cultivation your Company is paying attention to farmers' interest to sustain
the tobacco cultivation. It is satisfying to note that your Company's farmers continue to
grow tobacco with the Lowest pesticide residue levels and low TSNAs (Tobacco Specific
Nitrosamines) that are well within international standards. This also resulted in the
development of backward regions in the leaf growing areas.
To further strengthen our commitment, we remain conscious for uplifting Social and
Economic conditions of Companies' tobacco growing areas and your Company is continuing the
sponsorship of initiatives like House Hold Toilets, Solar street lighting and School
infrastructure to ensure and are striving hard towards holistic growth for supporting the
farming society.
PRODUCTION AND PLANT MODERNISATION
Your Company has gained a competitive edge against other products in the market, with
the introduction of an innovative new category of products from your Company's end. Your
Company continue to invest in upgrading its machinery which enhances both productivity as
well as product quality.
The focus at the plants continues to be extended towards enhancement of capital
efficiencies and cost optimisation.
RESEARCH & DEVELOPMENT ACTIVITY
To offer the differentiated products with high Product Quality, your Company's R&D
has played a key role. This focus resulted in the development of Quality Blends with
Innovative capsule filter/differentiated flavor variants for new category of Product
Brands, which have been well appreciated in the marketplace.
The R&D lab of your Company received a "Certificate of continuation" of
ISO 17025:2017, from NABL, Quality Council of India, Government of India, for the year
2022-23.
HUMAN RESOURCE DEVELOPMENT
The success of your Company is built on the longstanding belief that people make all
the difference. Your Company is ambitious to become a vibrant and a well-balanced
organisation, strengthened by the diversity of its employees in their thought, ideas and
actions and also leverage the power of One VST. Your Company is building a culture that
embraces the traits and characteristics to drive Collaboration, Empowerment and Ownership
(CEO's) at all levels, this will enable your company to grow with purpose.
The post-pandemic world calls for a new set of paradigms, beliefs, and strategies for
success. Hence, for businesses to grow sustainably, people paradigm needs to change in a
way that reflects the realities of a new world, therefore your company has embarked on a
journey to reimagine the outlook for VST. Towards this endeavour there are three key
drivers that provide impetus to all internal people initiatives Capability &
Talent, Culture & Connect, Reimagine, Realign & Refresh. In the year 2022, a
focused attention was put on people development and engagement initiatives. The people
function reoriented itself to Business HR partnering model to bring on board solutions
that impact business directly in real time and shape the business outcomes.
Your Company's goal for capability & talent development is to foster a learning
culture supported by a digital ecosystem, where people have a growth mindset, have access
to and feel inspired to continuously learn new skills, thereby realising their full
potential and personal ambitions resulting in sustainable personal & professional
growth as well as business growth for VST today & tomorrow. The learning strategy is
focused on creating a continuous learning environment, upskilling our team, utilising
digital tools and measuring results using data analysis. To continually develop and
enhance employees skills, your Company provided employees with opportunities for effective
learning and development through programs like "Personal Effectiveness Program
(PEP)", Sales Capability workshops focused on building strong functional and
behavioral skills. Driving a high performance culture has been the long term objective for
your Company and therefore your Company practices the Management by Objectives method to
drive individual performance in the organization. This year your company used data
oriented approach to assess performance. Your Company has launched the VST Gold Star
Recognition Program to create a culture of appreciation and recognise desired behaviors
for success where there are five categories where internal permanent employees were
recognised every quarter. This initiative also hosted the Board members, who gave away the
awards to appreciate the winners for the quarter April- June'22.
Your Company, rolled out several engagement initiatives to help employees connect
better to the leadership and among themselves, one such initiative is the Flight to Future
- Annual conference. All VSTians came under one roof_with this initiative, signifying one
powerful VST ready to deliver. Your Company has also initiated two way communication where
newly joined employees are given a platform to hear from the leadership team and also
share their views with them directly.
Your Company has been focused on recruiting, retaining and developing diverse
employees, creating awareness of diversity issues and embedding accountability for
diversity throughout the organization.
To create a safe environment for its female employees, your Company has constituted an
Internal Complaints Committee as per the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder.
However, no cases were filed during the year under the above Act.
As of 31st March 2023, your Company's workforce was 768 employees, with 366 Management
staff and 402 Workmen.
ENVIRONMENT, HEALTH & SAFETY _EHS_ AND COMMUNITY SERVICES
339 employees and 110 contract workmen have undergone EHS training, mock drills were
also conducted for workers and management during the period to comply with the Company's
EHS guidelines. Half-yearly and Annual EHS audits of the Company's operations were carried
out to ensure compliance of EHS requirements. ISO 14001:2015 & ISO 45001:2018
Surveillance Audit was held at Azamabad & Toopran premises which was carried out by
M/s. Rina India Pvt. Ltd. and received a continuation certificate for ISO 14001:2015 &
ISO 45001:2018 for both Azamabad & Toopran locations.
Your Company has received Commendation Certificate for "Safety Innovation Award
2022" from the Institution of Engineers (India), New Delhi.
Your Toopran facility is awarded "Platinum rating" in IGBC green building
certification from CII, Hyderabad. It is an improvement from the current Gold standard
rating.
RENEWABLE/GREEN ENERGY
Your Company has enhanced PV technology solar power plant from 1MW to 1.2MW (900 KW for
Azamabad and 300KW for Toopran plants). The solar plant has been commissioned in September
2022, which is VST's initiative on renewable energy towards the sustainable development.
Your Company's focus is on accelerating the usage of renewable sources of energy and
contributing to the goals of sustainability adopted by the Company. This Solar power plant
generates 30% of our electricity requirement and reduces 35% of Carbon foot print. Your
Company has setup EV charging stations in collaboration with M/s. Tata Power Limited for
promoting the Electric Vehicles (two & four wheelers).
CLEANER FUEL FOR BOILER/INCINERATOR
As a part of reducing the emissions and carbon footprint, your Company has Converted
Incinerator primary fuel from High Speed Diesel (HSD) to cleaner eco-friendly fuel Piped
Natural gas (PNG) in incinerator operations instead of using HSD. PNG is economical, safer
and one of the cleanest burning fuel and helps improve the quality of air. Your Company
has taken this conversion towards environmental benefits in order to reduce the Carbon
foot print of overall 49% and fuel cost saving by 156 Lakhs per Annum for Boiler and
Incinerator.
FINANCE a. Profits
The Profit after Tax of your Company for the year is
326.98 Crores.
b. Treasury Operations
Your Company follows a SLR model (Safety, Liquidity and Return) in deployment of
earmarked funds. The changes (change of 25% or more) as compared to the immediately
previous financial year ratios of the Company including those listed out and specified
under Schedule V (B)(1)(i) read with Regulation 34(3) and 53(f) of the Listing
Regulations, as amended are disclosed in Note No.32 of Notes on Financial Statements to
the Accounts in the Annual Report.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The Company has not taken any loans or given guarantees or made investments in any
other Company covered and provided under Section 186 of the Companies Act, 2013 during the
year.
RATING
The Credit Rating Information Services India Limited (CRISIL) has re-affirmed the
rating of your Company to "AA+/Stable" under their revised nomenclature for
Fixed Deposit Schemes, "AA+/Stable" for Long-Term Non-Convertible Debentures and
"A1+" for Non-fund based liabilities (Letter of Credit and Bank Guarantee).
FIXED DEPOSITS
Your Company has not accepted any deposits from public as per the provisions of the
Companies Act, 2013 and as such no amount on account of principal or interest on deposits
from public was outstanding as on the date of the balance sheet.
UNCLAIMED DIVIDENDS
Pursuant to the provisions of Sections 124 and 125 of the Companies Act, 2013, the
Company has transferred on due dates, the unpaid or unclaimed dividends for the financial
year ended 31st March, 2015 to the Investor Education and Protection Fund (IEPF)
established by the Central Government. Further, as per the provisions of Investor
Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed
amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid
and unclaimed amounts lying with the Company as on 31st March, 2022 on the website of the
Company (www.vsthyd.com), and also on the website of the Ministry of Corporate Affairs,
Government of India. The details of the dividend due for transfer to IEPF as on 31st
March, 2023 is given in the Report on Corporate Governance. The Company has completed the
process of complying with the provisions of Section 124(6) of the Companies Act, 2013 read
with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and as
amended by the Second Amendment Rules of 2017 by transferring 5216 shares on 29th
September, 2022. Details of shares/dividend transferred to IEPF can also be obtained by
accessinghttps://www.vsthyd.com/mainsite/ unclaimed-dividend.html
UNCLAIMED SHARE CERTIFICATES
Your Company has communicated to the Members whose share certificates have been
returned undelivered to the Company that these would be transferred to the Unclaimed
Suspense Account if not claimed by them, as required under Regulation 34(3) read with
Schedule V[F] of the Listing Regulations as amended. The status of unclaimed shares as on
31st March, 2023 is given in the Report on Corporate Governance.
CORPORATE GOVERNANCE
In terms of Regulation 34 of the Listing Regulations, a Report on Corporate Governance
along with Compliance Certificate issued by the Statutory Auditors of the Company is
annexed as "Annexure A" and forms part of this Report. Your Company has
taken adequate steps for strict compliance with the Corporate Governance guidelines, as
amended from time to time.
MEETINGS
The Board met five times during the financial year. The Board and Committee Meetings
are pre-scheduled and a tentative calendar of the Meetings finalised in consultation with
the Directors are circulated to them in advance to facilitate them to plan their schedule.
However, in case of special and urgent business needs, the approval is obtained by way of
circular resolution. The details of the meetings held during the year are given in the
Corporate Governance Report.
INTERNAL CONTROL SYSTEMS a. Your Company maintains an adequate and effective
internal control system commensurate with the size and complexity. Your Company also has
well documented Standard Operating Procedures (SOPs) for various processes which are
periodically reviewed for changes warranted due to business needs. b. Your Company
remains committed to improve effectiveness of internal financial controls and processes
which would help in efficient conduct of its business operations, ensure security to its
assets and timely preparation of reliable financial information. The policies and
procedures laid out by your Company capture the control environment prevalent in the
organisation. Over a period of three years, the business processes of your Company are
reviewed through an internal audit process which reviews the systems on a continuous
basis. The objective being to identify potential risk areas and come up with a
comprehensive risk mitigation plan. The Audit Committee of your Board met four times
during the year. Review of audit observations covering the operations, consideration of
accounts on a quarterly basis and monitoring the implementation of audit recommendations
were some of the key areas which were dealt with by the Committee. The Statutory
Auditors/Internal Auditors were invited to attend the Audit Committee Meetings and make
presentations covering their observations on adequacy of internal financial controls and
the steps required to bridge gaps, if any. Chief Financial Officer is a permanent invitee
to the Audit Committee and other executives of the Company are invited to address, respond
or provide clarifications to relevant issues as and when required.
RISK MANAGEMENT
Your Company has constituted the Risk Management Committee as mandated by Listing
Regulations to frame, implement and monitor the risk management plan for the Company. The
Committee comprises of Directors and Senior Management as its Members as prescribed under
Regulation 21 of the Listing Regulations as amended. The Company Secretary is the
Secretary of the Committee. The Committee is responsible for monitoring and reviewing the
risk management plan and ensuring its effectiveness. Pursuant to the amendments notified
by SEBI in its circular dated 5th May, 2021, the Board at its meeting held on 27th July,
2021 revised the terms of reference of Risk Management Committee to include the Business
Continuity Plan (BCP), sustainability and reviewing the risk management policy at least
once in two years.
Your Company has always endeavoured to bring together elements of best practices for
risk management in relation to existing and emerging risks faced by it at both strategic
and operating level. The Company faces a variety of risks from external and internal
sources. However, the objective is to be aware of different kinds of risks affecting the
business. Rather than eliminating these risks, the decision making process at your Company
considers sensible risk taking, and thereby proactive steps are taken to ensure that
business is undertaken in an environment which encourages a reasonable amount of risk
taking and enables the Company to leverage market opportunities effectively. The Board is
responsible for determining the nature and extent of the principal risks that your Company
is willing to take to achieve its strategic objectives and for maintaining sound risk
management system. With the support of the Audit Committee, it carries out a review of the
effectiveness of your Company's risk management process covering all material risks
including strategic, financial, operational and also compliance levels. Your Company has
substantial operations all over the country and competes on the basis of brand appeal,
loyalty, price value connotations and strong trade relationships. The Company's position
is influenced by the economic, regulatory and political situations both nationally and at
a state level and of the competitors. The principal risks impacting your Company's
business and steps undertaken to mitigate them are as under:
i. Regulatory restrictions could have an impact on long
term revenue growth of the Company.
The Company operates under increasingly stringent regulatory regime (COTPA guidelines
on packaging and labeling, advertising and promotion). This further gets complicated with
adoption of differing regulatory regimes in different states and/or lack of consensus on
interpretation/application. Such restrictive regulations which are subjected to
interpretation could result in not only penalties being imposed/ loss of reputation, but
also impair the Company's ability to communicate with adult smokers and/ or to meet
consumer expectations through new/ innovative brand launches or geographic expansion. The
Company addresses this risk by engaging in continuous social dialogue with stakeholders
and regulatory community through industry bodies. At the same time, it works on developing
strategies and capabilities to effectively launch competitive and consumer acceptable
brands within the changing regulatory environment.
ii. Taxation changes could have an impact on short-term revenue growth of the
Company.
The Company's business is subjected to GST, excise and other cesses as may be made
applicable, which could require the Company to take up product prices and in absence of
such action, impact its business. The impact increases when due to changes in economic
situation, consumer's disposal income reduces, resulting in down-trading to cheaper
cigarettes including non-duty paid illicit cigarettes or alternative tobacco products.
Such risks are addressed by the company through: (a) engagement with tax authorities at
levels where appropriate; (b) regular management review to build a well laddered brand
portfolio across new segments including new brand creation; and (c) capability buildup
through investments in distribution infrastructure to increase geographical spread.
iii. Geopolitical tension could have a short-term impact on company's revenue
growth and profitability. The Company's supply chain and normal business processes are
exposed to the risk of disruption. Such disruption could be caused through geopolitical
tension, civil unrest, economic policy changes, health crisis, violent weather conditions
or other natural disasters, This could result in potential loss of assets and increased
costs due to more complex supply chain arrangements and/or maintaining inefficient
facilities. Such risks are mitigated through a robust business continuity planning process
and having multiple sourcing / delivery (supply chain) strategy.
iv. Illicit Trade could have a risk to Company's long term revenue growth and
profitability.
Non-Duty Paid (NDP) Cigarettes in the form of counterfeit product, contraband (genuine
smuggled product) and locally manufactured products on which applicable taxes are evaded,
represents a significant and growing threat to the legitimate cigarette industry. Factors
such as increased product prices (either for retailer or consumer) and economic downturn
among others encourage consumers shift to cheaper cigarettes which results in
commoditisation of the Product and erosion of brand value resulting in undermining
company's investment in trade marketing and distribution. As part of its mitigation plan
the company both directly as well as through trade bodies engages with key external
stakeholders including periodical interaction with law enforcement agencies in pursuit of
priority targets.
v. Infringement of Intellectual property could have a short term impact on revenue
growth and profitability. The Company relies on its registered designs, trademarks and
copyrights under which it sells its products to get competitive advantage. Risk of
Infringement happens due to delay in identification and action taken including limitation
of judicial protection.Inaddition,asthird-partyrights(registered trademarks) are not
always identifiable, there may be claims against the company for infringement of their
intellectual property rights. Such infringement of trademarks results in reputational
impact due to inability to protect its trade marks, disruption to normal business
processes resulting in potential loss of revenue, unnecessary protracted litigation. Such
risks are mitigated through constant training to all team members to recognise misuse of
Company's trademarks and report to take legal protection, Further, process is in place to
ensure new trademarks do not infringe with trademarks belonging to others.
vi. Cyber Security the company's operations place high reliance on its
digital data. Loss or misuse of any such sensitive information, or its disclosure to
outsiders, including competitors and trading partners could potentially have a significant
adverse impact on the Company's business operations and/or give rise to legal liability.
For this purpose, the Company has put in place cyber security policies and procedures
which are reviewed regularly. In addition, for continuity of the operations we perform
periodic assessment of information technology controls implemented like data back-up
mechanism, Disaster recovery centre, authorisation verification, firewalls, etc.
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
Your Company has formulated a Corporate Social Responsibility Policy with the objective
to promote inclusive growth and equitable development of identified areas by contributing
back to the society. Over the years, your Company has been involved in various social
activities focusing on Rural Development, Health & Sanitation like construction of
toilets under Swachh Ghar mission, Education and Environment sustainability.
The Company has with the help of Gramalaya, a non-profit organization, was involved in
creating awareness among women on menstrual hygiene and usage of cloth sanitary pads under
project Naari Shakti as part of our Rural development initiative. Towards this initiative
women were mobilised and self-help groups were formed for better execution of the project
and made this project a self-sustaining one. Your organization also supported women
entrepreneurs and aspiring entrepreneurs in skill development programs conducted by the
FTCCI, Hyderabad.
Your Company has also in collaboration with Gramalaya constructed toilets in individual
homes (of farmers living) in and around Jogulamba-Gadwal district of Telangana where your
Company has its operations, under the Swachh Ghar' programme of your Company. These
villages and the communities in the area were also sensitised regarding the importance of
health & sanitation. Over 850 household toilets have already been constructed during
the financial year, and your Company has plans to extend it further to other houses in the
same area and thereafter extend it to other areas. In addition to toilets under Health,
your Company has supported Chitranjan Cancer Hospital, Kolkata in treatment of the cancer
patients and also supported in procuring a Pediatric Ambulance in KIMS Hospital,
Hyderabad.
In the field of Education your Company supported purchase of Braille printing machines
for education of the blind children at Devnar School for Blind, Hyderabad and also
supported construction of school infrastructure at Hindi Mahavidyala School, Hyderabad and
a Government School at Toopran.
Your Company had provided Mid-day meals for more than 8,500 Government school children
& 15,165 Anganwadis in Medak district, Hyderabad this financial year.
Your Company has taken up an initiative of supporting environment sustainability by
installing 100 solar street lights in Mupireddypalli village of Medak district in
Telangana.
Pursuant to the provisions of Section 135 read with Schedule VII of the Companies Act,
2013 as amended by the Companies Amendment Act of 2019 & 2020, the Corporate
Social Responsibility (CSR) Committee of the Board of Directors was formed to recommend
the policy on Corporate Social Responsibility and monitor its implementation. The
composition of the CSR Committee is given in the Corporate Governance Report forming part
of this Annual Report. The CSR policy and the projects approved by the Board are available
on the Company's website at: https://www.vsthyd.
com/mainsite/documents/corporate-social-responsibility-policy.pdf The CSR Policy and the
Annual Report on CSR activities is annexed herewith as "Annexure B" and
forms part of this Report.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
In terms of Regulation 34(2)(f) of the Listing Regulations, a report on Business
Responsibility and Sustainability Report (BRSR) in the prescribed format forms part of
this Report.
RELATED PARTY TRANSACTIONS
The related party transactions entered into by the Company during the year are in its
ordinary course of business and on arm's length basis. There were no materially
significant related party transactions between your Company and the Directors, Promoters
or Promoter group, Key Managerial Personnel and other designated persons which may have a
potential conflict with the interest of your Company at large. During the year, the
Company has not entered into any transactions with any person or entity belonging to the
promoter or promoter group which holds 10% or more shareholding in the listed entity other
than the corporate actions applicable uniformly to all the shareholders. Prior approval
for all the related party transactions is obtained from the Audit Committee.
Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2)
of the Companies (Accounts) Rules, 2014 for disclosure of particulars of contracts/
arrangements, entered into by your Company with related parties for the year ended 31st
March, 2023 is annexed herewith as "Annexure C" and forms
part of this Report.
BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 as amended and Listing
Regulations, the performance evaluation of the Board, the committees of the Board and
individual Directors [including Independent Directors and Chairperson] has been carried
out. The manner in which the evaluation has been carried out has been explained in the
Corporate Governance Report. The performance evaluation of the Chairman and the
Non-independent Directors was carried out by the Independent Directors. The Board of
Directors expressed their satisfaction with the evaluation process.
REMUNERATION POLICY
Nomination and Remuneration Committee has formulated a policy relating to remuneration
of directors, key managerial personnel and other employees which has been revised and
approved by the Board. The Remuneration Policy and the criteria for determining
qualification, position, attributes and independence of a Director as required under
Section 178(3) of Companies Act, 2013 are stated in the Corporate Governance Report. The
policy is also placed on the website of the Company and can be viewed at
https://www.vsthyd.com/mainsite/documents/ remuneration-policy.pdf
MEETING OF INDEPENDENT DIRECTORS
During the financial year under review, all the Independent Directors of the Company
met on 26th April, 2022 through video conference, inter alia, to discuss:
EvaluationoftheperformanceoftheNon-Independent Directors and the Board as a whole.
Evaluation of the performance of the Chairman of the Company, Chairman of the
Committee's considering the views of the Executive and Non-Executive Directors.
Evaluation of the quality, content and timelines of flow of information between the
Management and the Board that is necessary for the Board to perform its duties effectively
and reasonably.
VIGIL MECHANISM
In terms of Section 177 of the Companies Act, 2013, and Regulation 22 of Listing
Regulations, the Company has formulated a Whistle-Blower Policy as a vigil mechanism to
encourage all employees and Directors to report any unethical behavior, actual or
suspected fraud or violation of the Company's Code of Conduct and Ethics Policy'
which also provides for adequate safeguard against victimisation of person who use such
mechanism and there is a provision for direct access to the chairman of the Audit
Committee in appropriate/exceptional cases. The details of the Whistle Blower Policy is
given in the Corporate Governance Report and also posted on the Company's website at:
https:// www.vsthyd.com/mainsite/documents/whistle-blower-policy-2022.pdf
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Directors retiring by rotation Mr. S. Thirumalai
Mr. S. Thirumalai (DIN: 00011899) was reclassified as a Non-Executive Non-Independent
Director of the Company in compliance with Section 152(6) of the Companies Act, 2013 as
amended, at a Meeting of the Board held on 26th July 2019, which was subsequently approved
by the Members at their AGM held on 28th August, 2019 whose office is subject to
retirement by rotation.
Pursuant to Article 93 of the Articles of Association of your Company, Mr. S.
Thirumalai is liable to retire from the Board and being eligible, offers himself for
re-election. Your Board recommends his re-appointment. Further, in terms of Regulation
17(1A) of the Listing Regulations, the Board recommends continuation of his directorship
on attaining the age of 75 years on 2nd September, 2023. A suitable Resolution
for continuation of his directorship pursuant to Regulation 17(1A) of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015, is being put up for your
approval.
Mr. Thirumalai (74 years) is a Fellow Member of Institute of Chartered Accountants of
India, Institute of Company Secretaries of India, Certified Associate of Indian Institute
of Bankers and also a law graduate. He has also attended the Advanced Management Program
at Harvard Business School, Boston, USA. He has diversified experience of over four
decades including a major portion in the tobacco sector and specialises in Finance,
Taxation, Legal and General Management. The Board feels that the vast and diversified
experience of Mr. Thirumalai will prove to be an asset to the Company.
Mr. Thirumalai is not a Director in any other Company in India. He is a Member of the
Audit Committee, CSR Committee, Stakeholders Relationship Committee and Risk Management
Committee. He has attended all the Board and Committee meetings held during the year. Mr.
Thirumalai holds 25 shares in the Company and is not related to any other Director of the
Company.
INDEPENDENT DIRECTORS
At the Annual General Meeting of the Company held on 28th August, 2019, the Members
have approved the appointment of Ms. Rama Bijapurkar, Mr. Sudip Bandyopadhyay and Mr.
Rajiv Gulati as Independent Directors of the Company in accordance with Section 149 of the
Companies Act, 2013, with effect from 1st April, 2019, 1st June, 2019 and 26th July, 2019
respectively to hold the office for a term of five consecutive years from their respective
dates.
All the Independent Directors have given a declaration in terms of Section 149(6) of
the Companies Act, 2013 as amended and Regulation 25 and 16(1)(b) of the Listing
Regulations as amended for the financial year ended 31st March, 2023, that they meet the
criteria of independence. They also declared that they are not aware of any circumstance
or situation, which exist or may be reasonably anticipated, that could impair or impact
their ability to discharge their duties as an Independent Director with an objective
independent judgement and without any external influence. The Board carried out an
assessment of the declarations and took the same on record. None of the Independent
Directors are related to any other director of the Company.
KEY MANAGERIAL PERSONNEL
The Managing Director & CEO Mr. Aditya Deb Gooptu, the Chief Financial Officer Mr.
Anish Gupta and the Company Secretary Mr. Phani K. Mangipudi are the Key Managerial
Personnel as per the provisions of Section 203 of the Companies Act, 2013.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 134
(5) of the Companies Act, 2013 your Directors confirm that: 1. in the preparation of
the annual accounts, the applicable accounting standards have been followed along with
proper explanation relating to material departures, if any; 2. appropriate accounting
policies have been selected and applied consistently. Judgement and estimates which are
reasonable and prudent have been made so as to give a true and fair view of the state of
affairs of your Company as on 31st March, 2023 and of the profits of the Company for that
period; 3. proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 2013 for
safeguarding the assets of your Company and for preventing and detecting fraud and other
irregularities; 4. the annual accounts have been prepared on a going concern basis; 5.
proper internal financial controls have been laid down to be followed by your Company and
such internal financial controls are adequate and were operating effectively; and 6.
proper systems to ensure compliance with the provisions of all applicable laws have been
devised, and such systems were adequate and operating effectively.
CRITERIA FOR SELECTION AND APPOINTMENT OF DIRECTORS
The Nomination and Remuneration Committee is responsible for identifying, screening,
recommending to the Board a candidate for appointment as Director. Based on the
recommendation of the Committee, the Board identifies the candidate for the position of
Director. While identifying the candidate, inter alia the following are taken into
consideration:
Qualification, experience and expertise;
Skills, abilities and personal contribution;
Commitment to spare time to attend Board/ Committee and other Meetings as may be
necessary;
Diversity of perspectives brought to the existing Board;
Existing composition of the Board.
The qualification of the candidate is scrutinised by the Committee considering
educational degree, college/ institution, professional qualification if any, etc. In
addition, there is also a criteria regarding minimum work experience and the positive
attributes such as leadership quality, level of maturity, management capabilities,
strategic vision, problem solving abilities, etc., on which the candidate is judicially
scrutinised. In case of an internal candidate, the senior management employee is also
evaluated on the above criteria before being recommended for promotion as a Director.
While considering re-appointment of the Directors, their performance evaluation report is
considered. In case of Independent Director, the independence, integrity, expertise,
experience and interest pecuniary or otherwise as per the statutory provisions are also
assessed before appointment.
SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
There are no significant or material orders passed by the Regulators, Courts or
Tribunals which impact the going concern status of the Company and its future operations.
However, Members' attention is drawn to the following:
TAXATION i. Luxury Tax
The then Government of Andhra Pradesh introduced a levy of luxury tax on cigarettes and
its virus was challenged before the then High Court of Andhra Pradesh and before the
Supreme Court which was struck down. The Commercial Tax department claimed that during
pendency of the matter before the courts between 1999-2005, your Company had collected
luxury tax amounting to 34.86 Crores but not paid to the Government. Your Company denied
collecting luxury tax and the litigation on the same was pending before the appellate
authority of the department and the High Court of Telangana. During the year, the Company
has settled its Luxury Tax matter under amensty scheme by paying 50% of the disputed tax
amount.
ii. Entry Tax
Entry Tax levy by the States of West Bengal, Jharkhand and Assam has been challenged
before the respective State High Courts by your Company, basis the directions of the
Hon'ble Supreme Court. Demand of interest on entry tax was challenged before the High
Court of Allahabad and is pending adjudication. In the State of West Bengal, the High
Court remanded the matter to Taxation Tribunal and the said Tribunal was pleased to allow
the Petitions filed by your Company and it is likely the State may prefer an appeal before
the High Court of Kolkata.
iii. Excise
a. Wrapping Materials
The Excise department has issued show cause notices demanding payment of duty of 4.51
crores on the ground that Gay Wrappers (printed paper used for wrapping cigarette packets)
had been manufactured and consumed by your Company without payment of duty during the
period April 1996 to July 2015. Demand for the period till March 2002 has been adjudicated
and the CESTAT decided in favour of your Company. Department preferred an appeal before
the Supreme Court which is pending. Demands for period after March, 2002 till July, 2015
are yet to be adjudicated by the original authority.
b. Tobacco Refuse
Your Company has received show cause notices demanding recovery of duty on cut tobacco
used in the manufacture of tobacco refuse since January 2005 till June 2017 amounting to
14.52 crores. Demand for the period till October, 2013 has been adjudicated and the CESTAT
decided in favour of your Company. Department preferred an appeal before Supreme Court
which is pending. Demands for period after October, 2013 till June, 2017 are yet to be
adjudicated by the original authority
. c. Service Tax
Your Company has received show cause notices from the Excise Department seeking to deny
CENVAT credit availed on various input services on the ground that the same are not in
relation to the manufacture of final products. Upon adjudication, credit on most of the
services was allowed in favour of your Company. Some of them have been disputed. Since
2005 till 2017, the matters are pending before various adjudicating authorities and before
the CESTAT and are being effectively contested.
PUBLIC INTEREST LITIGATION _PIL_
i. Your Company has been impleaded in the petition
filed in the Supreme Court by an NGO called Centre for Transforming India'
against the Union of India along with other cigarette manufacturers, Tobacco Institute of
India, Bidi Manufacturers and Bidi Manufacturers' Association, seeking prohibition/ban of
the manufacture, storage and sale of all forms of tobacco within the territory of India.
This is being contested.
ii. Petitions have also been filed in other courts such as High Court of Madhya
Pradesh - Jabalpur, National Green Tribunal, Delhi seeking ban on sale of cigarettes and
before High Court of Madhya Pradesh Indore Bench seeking directions to mention tar
and nicotine content on cigarette packs by the manufacturers. All of the above are being
effectively contested by your Company.
FINANCIAL SERVICES BUSINESS
The Company petition filed by the Official Liquidator before the High Court of Andhra
Pradesh (now Telangana High Court) seeking directions against some of the Ex-Directors of
ITC Agro Tech Finance and Investments Limited (ITCATF), the Company in liquidation, into
which one of the subsidiaries of your Company, viz. VST Investments Limited was
amalgamated, and its related matters are still pending final adjudication.
THE CIGARETTES AND OTHER TOBACCO PRODUCTS _PROHIBITION OF ADVERTISEMENT AND REGULATION
OF TRADE AND COMMERCE, PRODUCTION, SUPPLY AND DISTRIBUTION_ ACT, 2003 _COTPA_ i. In
view of the provisions of COTPA, various restrictions such as ban on advertising in print,
visual media and outdoors, regulation of in-store advertising, prohibition of sale of
cigarettes to persons below the age of 18 years, etc. have been in force. Printing of
pictorial warnings on cigarette packets, came into effect from 31st May 2009 were further
revised and the pictorial warning covering 85% of the front and back side of the packets
was implemented w.e.f. 1st April 2016 and is being duly complied with by your Company. ii.
Your Company also filed a writ petition in the Hon'ble High Court of Andhra Pradesh
(now Telangana High Court) challenging The Cigarettes and Other Tobacco
Products (Packaging & Labelling) Rules, 2006 and the Amendment Rules 2008, on the
grounds interalia that they are ultra vires of COTPA and therefore the notifications
issued there under (including those seeking implementation of graphic health warnings)
should be quashed. The said writ petition has been admitted but no interim orders were
passed by the Hon'ble Court. ii
i. Before the High Court of Karnataka, a Writ Petition was filed by Tobacco Institute
of India (TII) on behalf of your Company and other manufacturers against the proposed
notification dated 15th October 2014 by Health Ministry to print health warning on both
sides of the pack occupying 85% of space. The 85% health warning came into effect from 1st
April 2016. Your Company also filed a Writ Petition before the High Court bench at Dharwad
against the implementation of 85% health warning. The Hon'ble Supreme Court on hearing a
PIL filed by Health for Millions, constituted a Bench before the Karnataka High Court to
hear all the matters relating to graphical health warning. The Writ Petitions filed by TII
and your Company were heard before the Bangalore Bench and it was held on 15th December
2017 that the amendment made to the Packaging Rules imposing 85% graphic health warning is
ultra vires the Constitution. Against the said Judgement, an appeal was filed by the
Ministry of Health before the Supreme Court. A stay has been granted on the said judgement
and the case is pending before the Supreme Court.
REAL ESTATE i. During the year, your Company, pursuant to the in-principal approval
granted by the Board of Directors for availing conversion of the factory cum registered
office premises from a leasehold to freehold property in the Azamabad Industrial Area, has
purchased the said property from the Government of Telangana for a consideration of
324.10 crores excluding stamp and other duties. ii. The then Government of Andhra
Pradesh had filed a land grabbing case against your Company in 1991 in relation to a piece
and parcel of vacant land which has been under possession and occupation by your Company
for over four decades. By its judgement dated 28th July 2010, the Special Court had held
that your Company is not a land grabber but had given the State Government the right to
initiate proceedings to recover possession of the land at some future date. Against this
part of the judgement, your Company
filed a writ petition before the then Hon'ble High Court of Andhra Pradesh to expunge
that part of the Order giving such liberty to the Department despite the fact that your
Company has already been declared not to be a land grabber. The writ petition is still
pending. The State Government has also filed a writ petition in the Hon'ble High Court of
Andhra Pradesh seeking to set aside the said judgement of the Land Grabbing Court. An
interim Order was passed restraining your Company from changing the status of the land or
creating any third party interest therein. Your Company is taking all the necessary steps
for speedy disposal of the above writ petitions which are pending before the Court.
One more case of land grabbing was filed by the then Government of Andhra Pradesh
against your Company in the year 1989 on a piece of land along with building called
Lal-e-Zar', before the Special Court. In the year 2010, the Special Court passed a
judgement stating that your Company is not a land grabber. After 7 years, the Government
of Telangana filed an appeal before the Hon'ble High Court of Telangana and Andhra Pradesh
seeking a direction from the court that the nature of the land is not to be altered and no
third party interest to be created. Your Company filed a counter and vacate stay
application seeking permission to construct on the said land. Judgement was pronounced on
the vacate stay petition allowing your Company to construct but with certain conditions.
The State Government preferred an appeal before the Supreme Court which was dismissed.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
The information required pursuant to Section 197(12) of the Companies Act, 2013 read
with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014 as amended in respect of employees of the Company, are annexed herewith as
"Annexure D" and forms part of this Report. The statement containing
particulars of employees as required under Section 197 of the Act read with Rule 5(2) of
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided
in a separate annexure forming part of this Report. However, in terms of Section 136 of
the Act, the Report and Accounts are being sent to the Members and others entitled
thereto, excluding the information on employees' particulars which is available for
inspection by the Members at the Registered Office of the Company during business hours on
working days of the Company up to the date of the ensuing AGM. In case any Member is
interested in obtaining a copy thereof, such Member may write to the Company Secretary of
the Company.
The Nomination and Remuneration Committee of the Company has affirmed that the
remuneration is as per the Remuneration Policy of the Company. Your Directors take this
opportunity to record their deep appreciation of the continuous support and contribution
from all employees of your Company.
The Company has complied with provisions relating to the constitution of Internal
Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013. The information as regards the number of cases filed
and their disposal under this Act is given in the Business Responsibility and
Sustainability Report.
ANNUAL RETURN
As required under Section 92(3) of Companies Act, 2013 and Rule 12(1) of Companies
(Management and Administration) Amendment Rules, 2020, Annual Return is available on the
Company's website at https://www.vsthyd.com/mainsite/Annual-Returns.html
AUDITORS
Statutory Auditors
In compliance with the provisions of Sections 139 and 141 of the Companies Act, 2013 as
amended and Companies (Audit and Audit Rules), 2014, including any statutory
modification(s), re-enactments and amendments thereof, for the time being in force, M/s.
BSR & Associates, LLP, Chartered Accountants, were re-appointed as the Statutory
Auditors of the Company to hold office for a second term of five years from the conclusion
of the 90th AGM to the conclusion of the 95th AGM. The Report given by the Auditors on the
financial statements of the Company is part of the Annual Report. There has been no
qualification, reservation or adverse remark in their Report. During the year under
review, the Auditors have not reported any matter under Section 143(12) of the Companies
Act, 2013 and hence, no details is required to be disclosed under Section 134(3)(ca) of
the Companies Act, 2013.
Secretarial Auditor
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company
appointed M/s. Tumuluru and Company Firm as Secretarial Auditor of the Company for the FY
2022-23. The Secretarial Audit Report is annexed herewith as
"Annexure E" and forms part of this Annual Report. There are no
qualifications, reservations or adverse remarks in the Secretarial Audit Report.
COMPLIANCE WITH SECRETARIAL STANDARDS
Your Company has complied with applicable Secretarial standards, i.e. on Meetings of
the Board of Directors [SS-1] and on General Meetings [SS-2] issued by The Institute of
Company Secretaries of India (ICSI) and approved by the Central Government under Section
118(10) of the Companies Act, 2013.
COST ACCOUNTS AND RECORDS
The maintenance of cost accounts and records as specified by the Central Government
under Section 148(1) of the Companies Act, 2013 are not applicable for the business
activities carried out by the Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Information in accordance with clause (m) of sub-section (3) of Section 134 of the
Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014 is given in the
"Annexure F" forming part of this Report.
SUBSIDIARY / ASSOCIATES / JOINT VENTURES
Addition or cessation of subsidiaries, associates or joint ventures is not applicable
to the Company as the Company does not have any subsidiary company, associates and joint
ventures.
INSOLVENCY AND BANKRUPTCY CODE 2016
There was no application made or any proceedings pending under the Insolvency and
Bankruptcy Code 2016 (31 of 2016) during the financial year.
UTILISATION OF FUNDS
Your Company has not raised any funds during the year through preferential allotment or
Qualified Institutional Placement, as a result question of providing details of
utilisation of such funds does not arise. Further, during the year, there were no
transaction relating to difference between amount of valuation done at the time of
one-time settlement and the valuation done while taking loan from the Banks or Financial
Institutions.
DEBENTURE TRUSTEES
Your Company does not have any debentures and as a result the requirement to appoint
debenture trustees does not arise.
WAY FORWARD
A vibrant and consumer centric brand portfolio remains a top priority for your Company.
This will be fuelled by actionable consumer insights, robust product pipeline,
best-in-class quality and a fully functional digital ecosystem.
ACKNOWLEDGEMENTS
The Directors are grateful to all valuable stakeholders of the Company viz. customers,
shareholders, dealers, vendors, banks and other business associates for their excellent
support rendered during the year. The Directors also acknowledge the unstinted commitment
and valued contribution of all employees of the Company.
|
On behalf of the Board, |
|
Naresh Kumar Sethi |
Dated this 25th day of April, 2023 |
Chairman |
New Delhi |
DIN: 08296486 |
|