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DIRECTOR'S REPORT

Tata Coffee Ltd.

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Market Cap. (₹) 1515.64 Cr. P/BV 1.28 Book Value (₹) 63.19
52 Week High/Low (₹) 134/72 FV/ML 1/1 P/E(X) 22.04
Bookclosure 03/06/2019 EPS (₹) 3.68 Div Yield (%) 1.85
Year End :2018-03 

To the Members,

The Directors are pleased to present the 75th Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2018.

FINANCIAL RESULTS:

The Company's financial performance for the year ended 31st March 2018 is summarized below:

(Rs, in Crores)

Standalone 2017-18 2016-17

Consolidated 2017-18 2016-17

Revenue from Operations

706

779

1567

1606

Other Income

56

69

22

23

Total Income

762

848

1589

1629

Profit Before Exceptional Items and Taxes

81

184

197

320

Add: Exceptional Income/(Expenses)

-

(2)

(11)

(2)

Profit Before Tax

81

182

186

318

Provision for Tax

18

43

(1)

108

Profit After Tax

63

139

187

210

Less: Non-controlling Interests

-

-

(80)

(59)

Profit After Tax attributable to Shareholders of the Company

63

139

107

151

Surplus brought forward from Previous Year

461

364

539

430

Amount available for appropriation

524

503

646

581

General Reserve No. I

-

(14)

-

(14)

General Reserve No. II

(7)

(8)

(7)

(8)

Reversal of Dividend Distribution Tax/Deferred Tax

2

9

7

9

Dividend paid relating to Previous Year

(33)

(24)

(33)

(24)

Tax on Dividend

(7)

(5)

(7)

(5)

Balance carried forward

479

461

606

539

1. Revenue from Operations:

Standalone:

Your Company's total income during the year under review was Rs, 762 Crores as compared to Rs, 848 Crores in the previous year, registering a decrease of 10% over the previous year.

Consolidated:

The Consolidated total income during the year under review was Rs, 1589 Crores as compared to Rs, 1629 Crores in the previous year, registering a marginal decrease of 2% over the previous year.

2. Profits:

Standalone:

The Profit before Tax for the year 2017-18 was Rs, 81 Crores as against Rs, 182 Crores in the previous year. Profit after Tax in 2017-18 stood at Rs, 63 Crores as against Rs, 139 Crores in the previous year.

Consolidated:

On a Consolidated basis, Profit before Tax for the year 2017-18 was Rs, 186 Crores as against Rs, 318 Crores in the previous year. Profit after Tax (net of minority interest) in 2017-18 stood at Rs, 107 Crores as against Rs, 151 Crores in the previous year.

3. Dividend & Reserves:

Your Directors have recommended a Dividend of Rs, 1.50/- per share (face value of Rs, 1 per share) for the year ended 31st March 2018. The total Dividend amount aggregates to Rs, 28.02 Crores plus applicable Dividend Distribution Tax thereon.

4. Share Capital:

The Paid-up Equity Share Capital of the Company as on 31st March, 2018 was Rs, 18.68 Crores comprising of 18,67,70,370 Shares of Rs, 1/- each. The Company has not issued shares with differential voting rights, employee stock options and sweat equity shares. The Company has paid Listing Fees for the Financial Year 2018-19 to each of the Stock Exchanges, where its equity shares are listed.

5. Material changes and commitment - if any, affecting financial position of the Company from the end of the financial year till the date of this Report:

There has been no material change and commitment, affecting the financial performance of the Company which occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

6. Global Coffee Scenario:

The Global Coffee markets in 2017-18 continued to be mainly influenced by the alternating Brazilian "on"and"off"crops. Global coffee production was 159.66 million bags, 1.2% higher than

2016-17 with a 12.1% increase in Robusta output offsetting a 4.6% decline in Arabica production.

The decline in Arabica production is driven by lower output of Colombian Milds at 15.21 million bags (-4.6%) and Brazilian Naturals estimated at 50.23 million bags (-9.6%).

Robusta production rose from 55.6 million bags in 2016-17 to

62.24 million bags in 2017-18 largely due to increases in output from Vietnam and Indonesia. Vietnam's production is estimated at 29.5 million bags in coffee year 2017-18, 15.5% higher than the last year.

Coffee year 2017-18 was surplus for the second consecutive year, with production exceeding consumption. This excess is weighing down on global coffee prices in the current coffee year.

The New York (ICE) terminal, representing Arabica settled at 118.15 c/lb on 29th March 2018, and was 139.30 c/lb on 31st March 2017.

As on 29th March 2018, London Robusta May futures settled at USD 1725/MT and were USD 2149/MT on 31st March 2017.

7. Company's Performance:

A. Plantations:

Coffee:

During the financial year 2017-18, the Company has harvested a Robusta crop of 3736 MT as against 6,000 MT in the previous year. In the case of Arabica, a production of 1,890 MT has been harvested in, being an on year as against 1,628 MT in the previous season. The coffee harvesting operation and post-harvest operations has been completed as per schedule.

Prolonged drought coupled with high temperature and reduced number of wet days resulted in depletion of soil moisture during crucial "bud differentiation period" September to October 2016. In addition to this unprecedented early blossom shower on 27th January 2017 on standing crop narrowed the gap between crop harvest and blossom for healthy flowering and fruit set.

Early rain induced immature flower bud opening, which adversely affected crop setting and production.

Tea:

The Company produced a total of 5.629 Million Kgs of Made tea for the financial year 2017-18 as against 5.666 Million kgs in the previous year. The current year's production is less by 0.39%. Shortfall in quantum of rainfall recorded during the season and very erratic rain in Q3 affected the flush growth and thereby impacted crop.

Pepper:

The Company has achieved a pepper production of 909 MT for the financial year 2017-18 compared to 544 MT harvested during 2016-17. The density and primary grade percentage of pepper this year has been good. The Company has initiated actions to increase the production base of pepper in the coming years.

Curing Works:

The Company's Curing Works at Kushalnagar (KNW) cured a total of 11,940 MT Coffee during the current year as against 11,528 MT in the previous year. In addition, a record quantity of 748 MT of Monsoon Coffee was processed against 520 MT in 2016-17.

Pepper Processing Unit:

The Pepper Grading Center is certified for Export Inspection Agency (EIA), which entails the Company to export Pepper meeting all the Global Standards. The unit has graded & processed 644 MT of Pepper during the financial year 2017-18, when compared with 537 MT in 2016-17. The unit is also certified under ISO 22000:2005 and SA 8000:2008.

Green Coffee Exports:

During the financial year 2017-18, your Company exported 6,100 MT of green coffee as against 6,420 MT in the previous year. Your Company continues to focus on growth, through Premium Differentiated Coffees and today differentiated coffee is 42% of our portfolio (sold at healthy premiums).

Specialty Coffee:

In line with the strategy to premiumize, differentiate and disinter mediate, the Company continues to develop its Specialty Coffees portfolio. The Monsooning Facility has undergone an expansion to bring about more focus on process and innovation. The Company offers Monsooned Malabar and Monsooned Robusta Coffees. 'Microlots', forming about top 1% of the Company's Arabica production have been widely appreciated. These are offered in special wet and dry milling processes. The Company's Specialty Coffees portfolio capitalizes on its quality, sustainability, storytelling and heritage. Apart from creating value on their own, these coffees are also helping the Company target and develop new niche Roasters across the world.

Plantation Trails:

Plantation Trails, our hospitality business, continues to grow and perform exceedingly well recording the highest ever revenues and profits since inception. Primary business focus has been on delivering a premium coffee experience for its guests. Global vacation trends continue to indicate Coorg as one of the top holiday destinations for India.

Plantation Trails was the recipient of several industry awards during the year including prestigious recognitions by Booking.com and Trip Advisor. Operationally a newly upgraded food experience resulted in a complete turnaround of the food & beverages business. Cottabetta and Thaneerhulla bungalows had very positive guest feedback and continue to be best sellers. Chickmagalur as a destination has again outperformed expectations.

For a first, Plantation Trails hired students from Swastha to help with its operations. This initiative was well received and appreciated by the guests.

B. Instant Coffee Operations:

The financial year 2017-18 saw the Instant Coffee Division achieving noteworthy sales and production with the given external conditions. The total sales volumes for the financial year 2017-18 was 7531 MT compared to 8812 MT in the previous financial year, registering a drop of 15% over the previous year. The production for the year was 8150 MT compared to 8474 MT in the last fiscal. The plant capacity utilization was lower compared to previous year due to lower sales. The state-of-the-art Freeze Dried Coffee (FDC) facility underwent for a debottlenecking project successfully, safely and achieved an increased capacity up to 300 tonnes per annum. We could attract seven new customers and developed products with customized quality for them post debottlenecking project.

The sales volume was lower during 2017-18 compared to previous year due to loss of sales from one of our key customer. The Company significantly increased its value added focus in terms of product and packaging. New product variants developed for selected markets helped the Company to provide right value to the buyers and also differentiated itself from the competition. The Company also strengthened its sales and marketing team to ensure widespread reach and deeper customer connect.

New product development wing extended its focus on coffee mixes and specialized instant coffees during 2017-18 & developed 10 blends which gave sales of around 1350 MT.

Tata Coffee Grand:

The Company manufactures 'Tata Coffee Grand', an Instant Coffee for sale in domestic market, which is being distributed and marketed by the Holding company, Tata Global Beverages Ltd. The Brand has received positive response in the market. The two product variants HTS (Hot Tea Shops) with blend of Spray Dried Coffee with Chicory, and R&G with blend of Roasted and Ground coffee with Chicory, packed for the domestic market as part of overall Tata Coffee Grand portfolio got good response from market resulting increased trend in sales.

C. Starbucks Roastery:

The Unit has recorded 26% higher production and processed 150 MT during the current year as against 119 MT in the previous year, which shows an increasing trend. The Unit successfully added additional retail SKU known as cold brew as required by Starbucks with Kenyan origin roasted coffees. The Unit continues to cater exclusively to the requirements of TATA Starbucks outlets in India from its state-of-the-art Coffee Roasting Facility at Kushalnagar Works. The Unit continues to be certified under ISO 9001:2008 (Quality Management System), FSSC22000 (Food Safety & Standards Certification), ISO 14001:2004 (Environment Management System) and FSSAI (Food Safety and Standards Authority of India).

8. Business Excellence:

The Company participated in a full assessment in the TBEM EA 2017. The Assessment Team, consisting of members from diverse Tata companies, perused the Application and visited all the operational sites in the Coffee and Tea plantations and the ICD units. There were extensive deliberations with the functional heads and the senior leadership at the Corporate Office. Inputs were also sought from the Chairman to provide direction to the Assessment Team. The Assessment Team has since presented its feedback highlighting the Strengths and Opportunities for Improvement (OFI) to the Leadership Team of the Company and also to the Board during December 2017. The Company obtained a score of 519 out of 1000 on the Model's scoring scale. This is an increase of 32 points from its previous score. The Company is in the process of formulating Action Plans to retain its strengths and address the OFIs. The Company has also contributed to the Business Excellence journey with 4 persons having participated in assessments of other Tata Group Companies. Training of personnel across functions is also being done to spread awareness and build a group of TBEM assessors for deployment within the organization.

9. Quality Awards:

(i) Sustainability Awards:

- Two Arabica microlots of Yemmigoondi Estate was recognized as Starbuck Reserve during 2017-18.

- In the second edition of the Ernesto Illy International Coffee Award in New York for the Year 2017, Nullore and Coovercolly Estates have received the award for their excellence in quality.

- I n 2nd National Safety Practices Competition held in Chennai on 26th April 2018 by Confederation of Indian Industry, the Company was awarded for Excellence in Workplace Safety (Working at height -Pepper).

(ii) Instant Coffee Operations (ICD):

Awards

a) I CD-Theni stepped in to a milestone of achieving EHS 4 star award during 2017-18 & ICD Toopran unit sustained EHS 4 Star award which has proven the continual improvement in the areas of Environmental, Occupational Health and Safety Management Systems.

b) ICD-Toopran also achieved the prestigious FTAPCCI (Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry) Award for excellence in Industrial Productivity.

c) I CD Toopran received Legasis excellent performer award - 2017 on statutory compliance.

d) ICD Theni received four awards from MPEZ for high productivity & highest Net foreign exchange earnings

e) ICD-Theni received SEEM (Society of Energy Engineers and Managers) National Energy Management Award this year.

Certifications

i) Instant Coffee Unit, Toopran

Toopran Unit was certified for Integrated Management System (IMS) comprising of ISO 9001, ISO 14001, OHSAS 18001 along with certifications on FSSC 22000, HALAL, KOSHER, FSSAI, SA 8000, UTZ, SAN-RFA & GMP.

ii) Instant Coffee Unit, Theni

Theni Unit was certified for Integrated Management System (IMS) comprising of ISO 9001, ISO 14001, BS OHSAS 18001 along with certifications on ISO 22000, HALAL, KOSHER, BRC, IFS, FSSAI, SA 8000, UTZ, SAN-RFA & GMP.

The Theni Unit Laboratory was certified with NABL (National Accreditation Board for Testing and Calibration Laboratories).

10. Capital Expenditure:

During the financial year 2017-18, Rs, 66.37 Crores was incurred towards capital expenditure primarily on account of welfare, modernization, up gradation, replanting and other programmes undertaken in the various units of the Company.

11. Subsidiary Companies and Consolidated Financial Statements:

Subsidiary Companies:

I. Eight O' Clock Coffee Company (EOC):

The Total Income of EOC during the financial year

2017-18 was at Rs, 860 Crores, compared to Rs, 827 Crores for the previous year. EOC in USA had a stable performance in its base business in 2017-18 with Bag coffee volume sales improving from the previous year led by effective promotion, distribution gains and new items. The Company's Profits grew over the previous year aided largely by good control over costs. The Company continued its focus on new product launches. EOC Coffee, a premium coffee brand with over a 150 year legacy, introduced a game changer to the coffee category that delivers an enhanced coffee-drinking experience to consumers. The Company launched a new coffee infusions line in the US, which offers thoughtfully crafted coffees blended with added ingredients to help enhance your day. Through this launch, EOC is delivering an enhanced coffee drinking experience to consumers. The launch is being supported through a multi-faceted marketing campaign and the consumer response has been positive. EOC and Keurig Green Mountain, Inc. (Keurig) have announced a multiyear expansion of their successful partnership for the manufacturing, sales, licensing and distribution of the EOC Coffee brand in K-Cup pods for use in Keurig brewers.

II. Consolidated Coffee Inc. (CCI):

CCI is the Holding Company of EOC. The Consolidated Net Profit after taxes was Rs, 161 Crores as compared to ' 117 Crores for the previous year.

Performance of Subsidiaries:

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 ('the Act'), a statement containing salient features of Financial Statements of subsidiaries in Form AOC-1 is annexed as Annexure - A.

The Company does not have any Associate or Joint Venture Companies. The Company has adopted a policy for determining the criteria of material subsidiaries which can be viewed on the Company's website at www.tatacoffee.com.

12. Freeze Dried Instant Coffee Facility in Vietnam:

The Board of Directors of the Company at their meeting held on 19th December 2016 had approved setting up of a state-of-the-art greenfield Freeze Dried Instant Coffee facility in Vietnam of 5000 MT capacity per annum through a Subsidiary Company, with an estimated Project Cost of Rs, 350 Crores. Pursuant thereto, the Company has infused an amount of Rs, 38.77 Crores in the equity capital of"Tata Coffee Vietnam Company Limited", which is a Wholly-owned Subsidiary of the Company.

The plant is being setup at the Vietnam-Singapore Industrial Park in Southern Binh Duong province, Vietnam. This trailblazing move marks a very important phase in the Company's Instant Coffee business. The Directors are happy to report that the Project is making satisfactory progress and that the Instant Coffee plant is expected to be operational early 2019.

13. Directors' Responsibility Statement:

Based on the framework of Internal Financial Controls and compliance systems established and maintained by the Company, the work performed by the Internal, Statutory, Cost and Secretarial Auditors including Audit of Internal Financial Controls over financial reporting by the Statutory Auditors and the reviews performed by the Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's Internal Financial Controls were adequate and effective during the financial year 2017-18.

Accordingly, pursuant to Section 134(3)(c) and 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:

(i) I n the preparation of the accounts for the financial year ended 31st March, 2018, the applicable accounting standards have been followed and that there are no material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for that period;

(iii) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the Accounts for the financial year ended 31st March, 2018 on a 'going concern' basis;

(v) they have laid down Internal Financial Controls to be followed by the Company and such Internal Financial Controls are adequate and are operating effectively;

(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and are operating effectively.

14. Disclosure on compliance with Secretarial Standards

Your Directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India, have been complied with.

15. Directors & Key Managerial Personnel:

Based on the recommendation of the Nomination & Remuneration Committee, the Board of Directors at its meeting held on 18th May 2017, appointed Dr. P. G. Chengappa as an Additional Director (Non-executive Independent) of the Company with effect from that date. Further, at the same meeting, the Board of Directors re-appointed Mr. K. Venkataramanan as Executive Director - Finance and Chief Financial Officer for a further term of 3 years with effect from 25th October 2017, on terms of remuneration as recommended by the Nomination & Remuneration Committee. These appointments have further been approved by the Shareholders at the Annual General Meeting of the Company held on 17th July 2017.

I n view of the planned relocation of Mr. T Radhakrishnan to Vietnam during FY 2018-19 to head the Instant Coffee Plant of the Company's Subsidiary - Tata Coffee Vietnam Company Limited at Vietnam, Mr. T Radhakrishnan resigned as Executive Director - ICD Operations of the Company, with effect from 7th November 2017. Your Directors place on record their appreciation of the valuable services rendered by him during his tenure as Executive Director of the Company.

Based on the recommendation of the Nomination & Remuneration Committee, the Board of Directors at its meeting held on 7th November 2017, appointed Mr. L Krishnakumar as an Additional Director (Non-executive Non-Independent) of the Company with effect from that date. Pursuant to the provisions of Section 161 of the Act, Mr. Krishnakumar holds office till the date of the ensuing Annual General Meeting and is eligible for appointment. A resolution in this behalf is set out at Item No.4 of the Notice of Annual General Meeting, for members' approval.

The Board of Directors at its meeting held on 23rd March 2018, subject to the approval of the shareholders in the general meeting, re-appointed Mr. Sanjiv Sarin as the Managing Director & CEO of the Company for a further period i.e., from 25th April 2018 to 31st March 2019 on terms of remuneration as recommended by the Nomination & Remuneration Committee. A resolution in this behalf is set out at Item No.5 of the Notice of Annual General Meeting, for members' approval.

The Board of Directors at its meeting held on 7th May 2018, subject to the approval of the shareholders in the general meeting, re-appointed Mr. Chacko Purackal Thomas as the Executive Director & Dy. CEO of the Company for a further period of 3 years i.e., from 4th August 2018 to 3rd August 2021 on terms of remuneration as recommended by the Nomination & Remuneration Committee. A resolution in this behalf is set out at Item No.6 of the Notice of Annual General Meeting, for members'approval.

Pursuant to the provisions of Section 152 of the Act, Mr. R. Harish Bhat, Director, will retire by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. The Board recommends his re-appointment.

In terms of Section 203 of the Act, the following are the Key Managerial Personnel of the Company:

- Mr. Sanjiv Sarin, Managing Director & CEO

- Mr. K.Venkataramanan, Executive Director- Finance & CFO

- Mr. N. Anantha Murthy, Head - Legal & Company Secretary

All the Independent Directors of the Company have given their declarations stating that they meet the criteria of independence as laid down under Section 149(6) of the Act and Regulation 16(1 )(b) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 ('the Listing Regulations'). In the opinion of the Board, they fulfil the conditions of independence as specified in the Act and the Listing Regulations and are independent of the management.

16. Board and Committee Meetings:

The Annual Calendar of Board and Committee Meetings planned during the year were circulated in advance to the Directors.

The Board has constituted an Audit Committee comprising of Mr. S. Santhanakrishnan as Chairman, Mr. V Leeladhar and Ms. Sunalini Menon as its Members. There have been no instances during the year where recommendations of the Audit Committee were not accepted by the Board.

The details of the composition of the Board and its Committees and the number of meetings held and attendance of Directors at such meetings are provided in the Corporate Governance Report, which forms part of the Annual Report.

17. Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The Governance Guidelines encompasses aspects relating to composition and role of the Board, Chairman and Directors, Board Diversity, Definition of Independence, Term of Directors, Retirement Age and Committees of the Board. It also covers aspects relating to Nomination, Appointment, Induction and Development of Directors, Directors' Remuneration, Subsidiary oversight, Code of Conduct, Board Effectiveness Review and Mandates of Board Committees.

18. Policy on Director's Appointment and Remuneration and other details:

(a) Procedure for Nomination and Appointment of Directors:

The Nomination and Remuneration Committee (NRC) has been mandated to oversee and develop competency requirements for the Board based on the industry requirements and business strategy of the Company. The NRC reviews and evaluates the resumes of potential candidates for appointment of Directors and meets them prior to making recommendations of their nomination to the Board. Specific requirements for the position, including expert knowledge expected, are communicated to the appointee.

On the recommendation of the NRC, the Board has adopted and framed a Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the provisions of the Act and the Listing Regulations. The remuneration determined for Executive/ Independent Directors is subject to the recommendation of the Nomination and Remuneration Committee and approval of the Board of Directors. The Non-Executive Directors are compensated by way of profit sharing commission and the criteria being their attendance and contribution at the Board/Committee Meetings. The Executive Directors are not paid sitting fees; the Non-Executive Directors are entitled to sitting fees for attending the Board/Committee Meetings.

I t is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is in accordance with the Remuneration Policy of the Company. The Company's Policy on Directors Appointment and Remuneration and other matters provided in Section 178(3) of the Act and Regulation 19 of the Listing Regulations have been disclosed in the Corporate Governance Report, which forms part of the Annual Report.

(b) Familiarization/Orientation program for Independent Directors:

The Independent Directors attend a Familiarization / Orientation Program on being inducted into the Board. The details of Familiarization Program are provided in the Corporate Governance Report and are also available on the Company's website. The Company issues a formal letter of appointment to the Independent Directors, outlining their role, function, duties and responsibilities, the format of which is available on the Company's website at https://www.tatacoffee.com.

19. Dividend Distribution Policy:

As required under Regulation 43A of the Listing Regulations, the Company has formulated a Policy on Dividend Distribution.

This Policy can be viewed on the Company's website at https:// www.tatacoffee.com.

20. Annual Evaluation of Board Performance and Performance of its Committees and of Directors:

Pursuant to the applicable provisions of the Act and the Listing Regulations, the Board has carried out an Annual Evaluation of its own performance, performance of the Directors and the working of its Committees on the evaluation criteria defined by the Nomination and Remuneration Committee (NRC) for performance evaluation process of the Board, its Committees and Directors.

The Board's functioning was evaluated on various aspects, including inter-alia the structure of the Board, meetings of the Board, functions of the Board, degree of fulfilment of key responsibilities, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning.

The Committees of the Board were assessed on the degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of Meetings. The Directors were evaluated on aspects such as attendance, contribution at Board/Committee Meetings and guidance/support to the Management outside Board/Committee Meetings.

The performance assessment of Non-Independent Directors, Board as a whole and the Chairman were evaluated in a separate meeting of Independent Directors. The same was also discussed in the meetings of NRC and the Board. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

21. Internal Control Systems & their adequacy:

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

22. Reporting of Frauds:

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of the Act and the rules made thereunder.

23. Transfer to Investor Education and Protection Fund:

a) Transfer of unclaimed dividend / debenture redemption / debenture interest to IEPF:

As required under Section 124 of the Act, the unclaimed dividend amount aggregating to ' 13,63,703/- pertaining to the financial year ended on 31st March, 2010, ' 9,47,690/- in respect of interim dividend declared for the financial year ended on 31st March 2011 and Unclaimed Interest on Debentures including Debenture redemption amount aggregating to ' 2,70,203/- lying with the Company for a period of seven years were transferred during the year 2017-18, to the Investor Education and Protection Fund established by the Central Government.

b) Transfer of shares to IEPF:

As required under Section 124 of the Act, 12,42,821 equity shares, in respect of which dividend has not been claimed by the members for seven consecutive years or more, have been transferred by the Company to the Investor Education and Protection Fund Authority (IEPF) during the financial year 2017-18. Details of shares transferred have been uploaded on the website of IEPF as well as the Company.

24. Auditors:

(i) Statutory Auditors:

The Members at the 73rd Annual General Meeting of the Company held on 26th July, 2016, had appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018) as the Statutory Auditor of the Company to hold office for a term of five years i.e., from the conclusion of the said Annual General Meeting until the conclusion of 78th Annual General Meeting of the Company to be held in 2021, subject to ratification of their appointment by the shareholders, every year. The Ministry of Corporate Affairs vide its Notification dated 7th May 2018, has dispensed with the requirement of ratification of Auditor's appointment by the shareholders, every year. Hence, the resolution relating to ratification of Auditor's appointment is not included in the Notice of the ensuing Annual General Meeting.

(ii) Cost Auditors:

In terms of the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Board of Directors, based on the recommendation of the Audit Committee, has appointed M/s. Rao, Murthy & Associates, Cost Accountants, as Cost Auditor of the Company for conducting the Cost Audit for the financial year 2018-19, on such remuneration as mentioned in the Notice of the ensuing Annual General Meeting.

A resolution seeking Member's ratification for the remuneration payable to the Cost Auditor forms part of the Notice of 75th Annual General Meeting and the same is recommended for your consideration and ratification.

(iii) Secretarial Auditor:

Pursuant to the provisions of Section 204 of the Act and the rules made there under, the Company had appointed M/s. BMP & Co., LLP, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the year ended 31st March, 2018. The Secretarial Audit Report issued in this regard is annexed as Annexure - B.

The Auditors' Report and the Secretarial Audit Report for the financial year ended 31st March, 2018 do not contain any qualification or reservation or adverse remark.

25. Risk Management:

The Company has constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) approving the Company's Risk Management Framework and (b) overseeing all the risks that the organization faces such as strategic, financial, liquidity, security, regulatory, legal, reputational and other risks that have been identified and assessed to ensure that there is a sound Risk Management Policy in place to address such concerns/risks. The Risk Management process covers risk identification, assessment, analysis and mitigation. Incorporating sustainability in the process also helps to align potential exposures with the risk appetite and highlight risks associated with chosen strategies.

The Audit Committee has additional oversight in the area of financial risks and controls. Major risks identified by the business and functions are systematically addressed through mitigating actions on continuing basis.

The Company has adopted a Risk Management Policy in accordance with the provisions of the Act and Regulation 21 of the Listing Regulations.

26. Particulars of Loans, Guarantees and Investments:

The details of Loans and Investments and Guarantees covered under the provisions of Section 186 of the Act are given in the Notes to the Financial Statements forming part of Annual Report.

27. Fixed Deposit:

During the year under review, your Company has neither accepted nor renewed any deposits from the public within the meaning of Section 73 of the Act and the Companies (Acceptance of Deposits) Rules, 2014.

28. Related Party Transactions:

All Related Party Transactions that were entered into during the financial year under review were on an arm's length basis and in the ordinary course of business and is in compliance with the applicable provisions of the Act and the Listing Regulations. There were no materially significant Related Party Transactions made by the Company during the year that required shareholders' approval under Regulation 23 of the Listing Regulations.

All Related Party Transactions are placed before the Audit Committee for prior approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature or when the need for them cannot be foreseen in advance.

None of the transactions entered into with related parties falls under the scope of Section 188(1) of the Act. Details of transactions with related parties as required under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure - C in Form AOC-2 and forms part of this Report.

The Company has adopted a Policy for dealing with Related Party Transactions. The Policy as approved by the Board may be viewed on the Company's website at the web link: http:// www.tatacoffee.com/investors/related_party.pdf.

29. Corporate Governance & Management Discussion & Analysis Report:

Your Company is in compliance with all the applicable provisions of Corporate Governance as stipulated under Chapter IV of the Listing Regulations. A detailed report on Corporate Governance as required under the Listing Regulations is provided in a separate section and forms part of the Annual Report. Certificate from the Practicing Company Secretary regarding compliance with the conditions stipulated in the Listing Regulations forms part of the Corporate Governance Report.

The Management Discussion and Analysis Report as required under the Listing Regulations is presented in a separate section and forms part of the Annual Report.

30. Business Responsibility Report:

As required under Regulation 34 of the Listing Regulations, the Business Responsibility Report is provided in a separate section and forms part of the Annual Report.

31. Employees Welfare:

The Company continues to focus on welfare and improving the quality of lives of its employees by providing educational assistance to their children, employee wellness sessions, periodic occupational health checks, merit scholarships to employee children, spiritual peace by yoga

provisions at cost through co-operative stores and providing housing loan interest subsidy & interest free loans for the employee family wellness.

Apart from the welfare initiatives implemented during last year, the following were the main focus areas in the welfare initiatives during FY 2017-18:

- improvement in housing infrastructure for Plantation workers)

- Introduction of new mobile toilets in plantations for the workers use in the work spots.

- Digitalization of TCL employees health records through TDHP

- Implementation of uniform colour coded waste segregation measures across locations.

32. Policy on Prevention, Prohibition and Redressal of Sexual Harassment at Work place:

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made thereunder. The Policy aims to provide protection to employees at workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to enquire into complaints of sexual harassment and recommend appropriate action.

During the financial year 2017-18, the Company received 4 complaints on sexual harassment, which have been disposed of and appropriate actions were taken.

33. Whistle Blower Policy/Vigil Mechanism:

The Company has adopted a Whistle Blower Policy to provide a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or Ethics Policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Whistle Blower Policy has been posted on the website of the Company at www.tatacoffee.com.

34. Corporate Social Responsibility (CSR):

The Annual Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure - D, which forms part of this Report.

The Company has a Corporate Social Responsibility Policy and the same has been posted on the website of the Company at www.tatacoffee.com.

35. Extract of Annual Return:

Pursuant to the provisions of Section 92(3) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return in the prescribed form i.e., Form MGT-9 is annexed herewith as Annexure - E, which forms part of this Report.

36. Particulars of Employees and Remuneration:

I n terms of the first proviso to Section 136 of the Act, the Reports and Accounts are being sent to the shareholders excluding the information required under Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any shareholder interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. The said information is available for inspection by the Members at the Registered Office of the Company on any working day of the Company upto the date of the 75th Annual General Meeting.

The statement containing information as required under the provisions of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure - F and forms part of this Report.

37. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

The information on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo stipulated under Section 134 (3) (m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure - G and forms part of this Report.

38. Significant and Material Orders passed by the Regulators or Courts:

There are no significant or material orders which were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's Operations in future.

39. Green Initiatives:

I n commitment to keep in line with the Green Initiative and going beyond it to create new green initiatives, electronic copy of the Notice of 75th Annual General Meeting of the Company are sent to all Members whose email addresses are registered with the Company/Depository Participant(s). For members who have not registered their e-mail addresses, physical copies are sent through the permitted mode.

40. Acknowledgement:

Your Directors take this opportunity to thank the Parent Company - Tata Global Beverages Limited, the employees, customers, vendors, investors and the communities in which the Company operates, for their unstinted co-operation and valuable support extended to the Company during the year.

Your Directors also thank the Government of India, Government of various States in India and concerned government departments/agencies for their co-operation.

Your Directors appreciate and value the contributions made by every member of Tata Coffee family.

For and on behalf of the Board

Place: Bengaluru R. HARISH BHAT

Date: 7th May 2018 Chairman

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