#MDStart#
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED 31ST MARCH, 2024
The Directors of your Company have pleasure in presenting the 93 rd
Annual Report together with the Audited Financial Statements for the financial year ended
31st March, 2024.
FINANCIAL SUMMARY
|
2023-24 |
2022-23 |
Revenue from Operations |
183750 |
167251 |
Profit after Tax |
30157 |
32698 |
Balance available for Appropriation in Retained Earnings |
109605 |
103894 |
Amount transferred to General Reserves |
3000 |
3000 |
Dividend paid |
23077 |
21538 |
Balance in retained earnings |
83528 |
79356 |
Key Ratios |
|
|
Earnings per Share (?) |
195.29 |
211.75 |
Dividend per Share (?) |
150.00 |
140.00 |
Value creation during the decade has been Compounded Annual Growth Rate
(CAGR), 7.1% in Earnings Per Share (EPS) and 7.9% in Dividend Per Share (DPS).
DIVIDEND AND TRANSFER TO GENERAL RESERVE
The Directors are pleased to recommend a dividend of Rs. 150/-
per equity share of Rs. 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 Rs. 3000 Lakhs to General
Reserve. Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ('Listing Regulations'), the Company has adopted a
Dividend Distribution Policy. This 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, 2024 was Rs. 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. The necessary disclosures in compliance with Regulation 14 of the SEBI
(Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are available on the
website of the Company at https://www.vsthyd.com/mainsite/
documents/vst-employee-stock-option-plan-2020.pdf
During the year under review, the VST Employee Phantom Stock Option
Plan (VST EPSOP-2023) of the Company with respect to the grant of phantom options to the
eligible employees of the Company including the KMPs and Senior Management was approved.
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
Industry volumes grew incrementally in 2023-24 after a
higher-than-normal growth the preceding year. The regulatory environment including
taxation remained largely stable. With the stable tax regime, the leading brands in the
industry have kept prices unchanged for several years, causing structural change of
premiumisation in the industry. The industry has witnessed intensified competition, with
price-based competition from both new brands as well as existing players.
Illegal non-duty paid cigarettes continue to pose a threat to legal
players as they benefit from a large price gap versus legally taxed cigarettes. Though,
the Government through a co-ordinated effort of various agencies is taking action on an
ongoing basis to control the menace of illicit cigarettes, this continues to be an
ever-present threat to the legal industry.
Some of the other challenges faced by the industry during the year were
hyper-inflation of raw material, particularly tobacco leaf and filter tow and muted demand
in rural markets.
COMPANY PERFORMANCE
Your Company's strength has historically been in the low-price segment
of the industry. Within this operating price segment your Company's performance was better
than the industry. However, with the trend of premiumisation emerging, it is necessary to
invest into new brand launches in higher price segments. Accordingly, we have taken rapid
steps to launch new brands and innovative varieties in the mid-price segment, where
significant headway has been made in establishing a presence.
The unprecedented raw material cost inflation and intensified
competition put pressure on the Company's margins in the short run. However, these were
mitigated partially through restructuring business processes and leveraging digitisation
for efficiency improvements.
TOTAL, your Company's national trademark, continues to be among the top
10 brands in the industry. Your Company is focused on strengthening TOTAL's consumer
appeal through relevant brand upgradations & variants. In addition, EDITIONS has been
launched in many parts of the country at a mid-price segment during the year. Your Company
is continuously strengthening the overall brand portfolio through a combination of product
upgradations and launch of new consumer relevant variants. Heritage brands such as CHARMS,
SPECIAL and MOMENTS have been refreshed in this manner during the year.
Our Distribution has been strengthened over the last 3 years, with
significant strides in leveraging digital infrastructure for informed decision making and
driving market specific initiatives. This has also helped in driving portfolio depth in
both existing and new geographies.
With green shoots in rural markets being visible and the expectation of
a favourable monsoon, we look forward to a greater buoyancy in rural demand for the entire
brand portfolio.
LEAF TOBACCO
In 2023-24, our leaf tobacco business has once again proven its
exceptional resilience and delivered an outstanding performance, achieving the highest
ever turnover of Rs. 442.37 Crores and a PBIT of about Rs. 51 Crores. We
have also been successful in broadening our customer base and the geographies to which we
export. This remarkable performance was made possible through exemplary teamwork and
dedicated efforts of the team and stands as a testament to our ability to overcome
challenges posed by adverse weather conditions and an aggressive competitive landscape.
We have concentrated our efforts on enhancing our green tobacco
procurement processes by adopting a digital approach. A special emphasis has been placed
on traceability to ensure transparency and accountability in our operations. Additionally,
your Company focused on developing new varieties, particularly high-nicotine tobaccos, and
high-nicotine burley types, to meet the dynamic demands of international markets. Our
commitment to innovation and quality positions us to meet the evolving preferences of our
customers.
The Company acknowledge the challenges that changing climatic
conditions pose to tobacco cultivation and have prioritised the interests of our farmers
to sustain it. We take pride in the fact that our contracted farmers cultivate tobacco
with the lowest pesticide residue levels and low TSNAs (Tobacco Specific Nitrosamines),
adhering to international standards. This commitment not only ensures the quality of our
products but also contributes to the development of less-advanced regions in the
leafgrowing areas.
In our continuous effort to uplift the social and economic conditions
of our tobacco-growing communities, we have sustained our sponsorship of initiatives such
as Women empowerment, Mobile health clinics, Household smart toilets, Digital classrooms
in government secondary schools, infrastructure upgrades in government schools, and Solar
Street lighting. These initiatives are part of our holistic approach to supporting the
farming society and ensuring sustainable growth.
As we move forward, the Leaf Function remains dedicated to evolving and
growing our business in alignment with changing customer preferences and penetrating new
geographies.
PRODUCTION AND PLANT MODERNISATION
Your Company is in the process of shifting its production to a new
modern facility at Toopran near Hyderabad. Along with machinery upgradation, this will
enable us to make further big improvements in product quality, capital efficiency and cost
optimisation.
RESEARCH & DEVELOPMENT ACTIVITY
Your Company's Research & Development Centre has played a vital
role in developing and offering first of its kind new age innovative products which have
been well appreciated by consumers and gaining traction in markets.
The R&D Centre Laboratory of your Company has received
"Certification of Continuation" of ISO 17025:2017, from NABL, Quality Council of
India, Government of India, for the year 2023-24.
HUMAN RESOURCE DEVELOPMENT
On the journey towards building a Winning organisation, your Company
takes pride in its unique culture, rooted in a deep sense of purpose, a passion for
winning, and a personal connection to the brands and with each other. Collaboration,
Empowerment, Ownership with a performance orientation approach - these are the attributes
that are deeply ingrained in each and every employee of the organisation.
Your Company's strategic people charter is completely aligned with the
business priorities and its long-term goals. With this as a backdrop your Company
continues to build the right capabilities at all levels, strengthen its talent to drive
superior business results.
The capability building and talent development plan was extended this
year through Development Centers, focused leadership roadmaps and action plan and change
management initiatives.
We strengthened our flagship recognition program that encourages
employee efforts and right behaviors to shape the culture of the organisation.
"Pragathi" - a quarterly sales incentive plan to drive superior business results
was also introduced during the year.
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 there
under. However, no cases were filed during the year under the above Act.
As of 31st March, 2024, your Company's workforce was 772 employees,
with 383 Management staff and 389 Workmen.
ENVIRONMENT, HEALTH & SAFETY (EHS) AND COMMUNITY SERVICES
330 employees and 100 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 Recertification 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 Toopran facility is awarded "Gold rating" in Water
Stewardship Certification from Water Stewardship and Assurance Services, AWS, Scotland.
RENEWABLE / GREEN ENERGY
Your Company has Installed PV technology solar power plant 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.
With better maintenance and managing the solar Plant, efficiency has
improved by 6.5% compared to FY 2022-23. This Solar power plant generates 32% of our
electricity requirement and reduces 36% of Carbon foot print.
Your Company has setup EV charging stations in Azamabad and Toopran
Plants (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 Rs. 165
Lakhs per Annum for Boiler and Incinerator.
FINANCE
a) Profits
The Profit after Tax of your Company for the year is Rs. 301.57
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.
c) The financial statements have been prepared in accordance with
Indian Accounting Standards specified under Section 133 of the Companies Act, 2013 read
with Rule 3 of the Companies (Indian Accounting Standard) Rules, 2015, as amended from
time to time. The accounting policies which are consistently applied have been set out in
the Notes to the Financial Statements.
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.
FIXED DEPOSITS
The 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 SHARE CERTIFICATES
The 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, 2024 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 seven 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 of the Board and
Committees held during the year are given in the Corporate Governance Report, which is
part of this report.
INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY
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. The Audit Committee
has additional oversight in the area of financial risks and controls. The major risks
identified by the businesses and functions are systematically addressed through mitigating
actions on a continuing basis.
Your Company has always endeavored 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 shortterm 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 shortterm 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, r 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. In addition, as third-party rights (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 & Sports and Environment
sustainability.
The Company has with the help of Gramalaya, a nonprofit organisation,
was involved in creating awareness and training 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 make this project a self-sustaining one. Your
organisation also supported women entrepreneurs and aspiring entrepreneurs in skill
development programs conducted by the FTCCI, Hyderabad. In addition to this Vocational
skill programs were planned for youth to provide employment opportunities in Toopran, near
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 575 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
villages in Toopran with Health checkups and Eye checkups in partnership with Red Cross
society and M/s L.V.Prasad eye hospital respectively. Your Company has a robust plan to
address the health care needs in Kurnool region through its Mobile Dispensary program
(Ambulance), with this the villagers shall have access to health checkups regularly.
In the field of Education, your Company supported the sponsoring of Pan
India Chess tournament for the Blind children at M/s Devnar school for Blind, Hyderabad
and also supported construction of school infrastructure at Hindi Mahavidyalaya School,
Hyderabad and Three Government Schools at Toopran and Brahmanpally.
Your Company had provided Mid-day meals for more than 5,000 Government
School children in Medak and Toopran, Hyderabad this financial year.
In the field of sports your Company has sponsored for Coaching to Asian
& Olympics Yacht games participant.
Your Company has taken up an initiative of supporting environment
sustainability by installing 125 solar street lights in Cherlapalli Jail, Hyderabad in
Telangana. Apart from this, installation of solar roof tops in 16 schools in Toopran were
also set up.
In order to protect environment, your Company has sponsored two
electric vehicles to M/s Akshaya Patra foundation and M/s Devnar School for Blind for
their causes to service children in Hyderabad.
Your Company has also supported conservation of Wildlife and protection
of biodiversity by sponsoring the conservation of M/s Whale sharks project in Kerala.
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 of the Company and the Annual Report on CSR activities
during the year 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 the Board's 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, 2024 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 disclosed in the Corporate Governance
Report. The policy is also placed on the website of the Company 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 25th April, 2023, inter-alia, to discuss:
Evaluation of the performance of the NonIndependent 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 NonExecutive
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 inappropriate/exceptional cases. The details of the Whistle Blower Policy is
given in the Corporate Governance Report and also available 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. Naresh Kumar Sethi
Mr. Naresh Kumar Sethi [DIN:08296486], a nominee of the Raleigh
Investment Company Limited, a British American Tobacco group Company was appointed as a
Director of the Company with effect from 14th December, 2018 whose office is subject to
retirement by rotation. His appointment was approved by the Members at the Annual General
Meeting of the Company held on 28th August, 2019.
Pursuant to Article 93 of the Articles of Association of your Company,
Mr. Naresh Kumar Sethi is liable to retire from the Board and being eligible, offers
himself for reelection. Your Board recommends his reappointment.
Mr. Naresh Kumar Sethi's [58 years] career spans 32 years as a Global
Marketer, General Manager and Strategy Transformation Officer. He has held various
marketing roles in India, Indonesia, West Africa Area and Australasia prior to moving to
Japan as President of British American Tobacco, Japan. Mr. Sethi is a chemical engineer
from Indian Institute of Technology, Varanasi and has an MBA from the Indian Institute of
Management, Calcutta, India.
Mr. Naresh Kumar Sethi is not a Director in any other Company in India.
He is a Member in CSR Committee, Stakeholders Relationship Committee, Risk Management
Committee and the Nomination & Remuneration Committee. Mr. Naresh Kumar Sethi does not
hold any shares in the Company and is not related to any other Director of the Company.
Independent Directors
In accordance with Section 149 of the Companies Act, 2013, the Members
at the Annual General Meeting of the Company held on 28thAugust, 2019 have
approved the appointment of Mr. Rajiv Gulati as Independent Director of the Company with
effect from 26th July, 2019 and the Members through Postal Ballot by way of Special
Resolution have approved the re-appointment of Ms. Rama Bijapurkar and Mr. Sudip
Bandyopadhyay to be effective from 1st April, 2024 and 1st June, 2024 respectively to hold
the office for a further 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, 2024, 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 judgment 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,
2024 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. 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, during the year, the Company has settled its Entry Tax matter under amnesty scheme
by paying 50% of the disputed tax amount.
ii. Excise
a) Wrapping Materials
The Excise department has issued show cause notices demanding payment
of duty of H 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 was
dismissed on monetary limits. 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 H 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 favor of your Company. Some of them have been
disputed. Except for 3 show cause notice periods, all the matters that were pending before
the CESTAT were adjudicated and Final Orders passed in favour of your Company.
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 he High
Court of Andhra Pradesh (now Telangana High Court) seeking directions against some of the
ExDirectors 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 inter-alia 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. The matter came up for hearing and the same was
dismissed as infructuous.
iii. 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 Judgment, 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
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
judgment 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 judgment 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 judgment 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 aid land. Judgment 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
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 financial year 2023-24. 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).
COST ACCOUNTS AND RECORDS
The maintenance of cost accounts and records and requirement of cost
audit as specified 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
Your Company does not have any subsidiary company, associates or 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 onetime settlement and the valuation done while taking loan from the Banks or
Financial Institutions.
WAY FORWARD
A highly consumer relevant brand portfolio remains a top priority for
your Company. This will be rigorously driven by market level consumer insights, innovative
product pipeline, best-in-class quality standards, execution excellence at market level
fully supported by a cohesive digital ecosystem to deliver superior top & bottomline
performance.
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.
#MDEnd#