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DIRECTOR'S REPORT

Huhtamaki PPL Ltd.

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Market Cap. (₹) 1876.34 Cr. P/BV 3.37 Book Value (₹) 73.68
52 Week High/Low (₹) 285/155 FV/ML 2/1 P/E(X) 53.79
Bookclosure 09/05/2019 EPS (₹) 4.62 Div Yield (%) 1.21
Year End :2018-12 

Directors’ Report

The Directors have pleasure in presenting the 69th Annual Report of the Company along with the Audited Financial Statements for the year ended December 31, 2018.

Financial Highlights:

Your Company's financial performance during the year was as under:

(Rs. in Lakh)

Particulars

2018

2017

Net Sales

233,211

219,904

Profit before Tax

11,357

11,497

Less: Provision for Current Tax

7,916*

5,440

Provision for Deferred Tax

(47)

(305)

Profit after Tax

3,488

6,362

Add: Balance of profit for earlier years

39,065

37,412

Profit available for appropriation

42,553

43,774

Transfer to General Reserve

-

-

Transfer to Debenture Redemption Reserve

1,925

1,925

Proposed Dividend on Equity Shares & Dividend Tax thereon

2,731

2,784

Balance Carried forward

37,897

39,065

*Provision for Current Tax includes provisions for disputed Income tax matter of earlier years amounting to Rs.2,107 Lakh (Refer Note 42 of Notes to Account)

Dividend:

Your Directors are pleased to recommend a dividend of Rs.3/-(Rupees Three only) per equity share (150%) having face value of Rs.2/- each, for the year ended December 31, 2018. The said dividend will absorb an amount of Rs.2,731 Lakh, including the dividend distribution tax and cess thereon.

The Dividend Distribution Policy of the Company is annexed to this Report as Annexure 1 and is also available on the Company's website at -https://www2.huhtamaki.com/web/ flexible-packaging-india/policies.

Deposits:

The Company did not invite or accept any deposits covered under Chapter V of the Companies Act, 2013 during the year under review and there are no deposits pending with the Company.

Transfer to Reserves:

Debenture Redemption Reserve is created to the extent of 25% of the Non-Convertible Debentures (NCDs) equally, over the period till maturity of the NCDs, as per the requirements of applicable laws. There has been no transfer to reserve during the year.

Acquisition of Business:

During the year under review, the Company acquired the entire business of M/s Ajanta Packaging (India) as a going concern, on slump sale basis for a net consideration of Rs.9,078.46 Lakh, effective June 1, 2018.

This strategic move adds excellent asset to the Company's existing strong portfolio in Pressure Sensitive Label Business and also creates new opportunities for growth.

Subsidiary Companies and Financial Statements:

Your Company does not have any subsidiaries and hence Form AOC-1 is not applicable.

In accordance with the provisions of Section 136 of the Companies Act, 2013, the audited financial statements, and related information of the Company are available on the website of the Company - www.ppl.huhtamaki.com.

These documents will be made available to the Members for inspection at the Registered Office of the Company on all working days between 10.00 a.m. to 12.00 noon up to the date of 69th Annual General Meeting.

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

Information pursuant to the provisions of Section 134 of the Companies Act, 2013 and the rules framed thereunder, relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, forms part of this Report and is given at Annexure 2.

Corporate Governance Report:

The Report on Corporate Governance and the Certificate of the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in Part C of Schedule V of the Listing Regulations, 2015, are enclosed as a separate section and forms part of this Report. A declaration signed by the Managing Director in regard to compliance with the Code of Conduct by the members of the Board and Senior Management Personnel also forms part of this Report.

Management Discussion and Analysis:

A detailed review of the operations, performance and future outlook of the Company and its businesses are given in the Management Discussion and Analysis, and forms a part of this Report.

Directors & Key Managerial Personnel:

Mr Murali Sivaraman was appointed as Non-Executive Independent Chairman of the Company for a period of 5 (Five) years w.e.f. January 1, 2019 in place of Mr Suresh Gupta, Executive Chairman who stepped down from Board of Directors of the Company on expiry of his term w.e.f. December 31, 2018. The Board has placed on record its deep gratitude and appreciation for the leadership and direction provided by Mr Suresh Gupta, over the last 3 decades.

Mr Arunkumar Gandhi will cease to be an Independent Director of the Company effective March 31, 2019, close of business hours, pursuant to the provisions of Regulation 17(1A) of SEBI (Listing Obligations and Disclosures Requirements) Regulations 2018. The Board of Directors places on record its sincere appreciation & gratitude for the vital contributions made by Mr Arunkumar Gandhi during his tenure as Independent Director.

Mr Jukka Moisio, has decided to step down from the position as CEO of Huhtamaki Group, and accordingly tendered his resignation from the position of Non-Executive Director of the Company w.e.f. March 26, 2019. The Board places on record its appreciation for the contribution made by Mr Moisio during his association with the Company.

Mr Sami Pauni who was Alternate Director to Mr Jukka Moisio (Non-Executive) Director resigned as Alternate Director and has been appointed as Additional Director (Non-Executive) of the Company w.e.f. February 18, 2019.

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr Olli Koponen retires by rotation and being eligible, offers himself for re-appointment.

The details of the proposed appointment/re-appointment of Directors are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of 69th Annual General Meeting (AGM) of your Company.

Mr Parag Vyavahare, Chief Financial Officer of the Company and Key Managerial Personnel, resigned from the services of the Company w.e.f. January 18, 2019.

Declaration by Independent Directors:

The Company has received necessary declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and SEBI Listing Regulations, 2015.

Evaluation of Performance of Board, Its Committees and of Directors:

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, 2015 the Board carried out annual performance evaluation of its own performance, its committees and individual directors. The manner in which the performance evaluation was carried out is given in detail in the Corporate Governance Report, annexed to this Report.

The Company has in place a policy for appointment & remuneration of Directors and Key Managerial Personnel, encompassing the criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) of the Act and Part D of Schedule II of the Listing Regulations, appended as Annexure 3 to the Directors' Report. The above Policy along with the criteria for selection is available on the Company's website at -https://www2.huhtamaki.com/web flexible-packaging-india/policies.

Familiarisation Programme for Independent Directors:

Your Company has put in place a Familiarisation Programme for Independent Directors to familiarise them with their roles, rights, responsibilities, nature of the Industry, Company's strategy, business plan, operations, markets, products, etc.

The details of the Company's Familiarisation Programme is available on the Company's website -https://www2.huhtamaki. com/web/flexible-packaging-india/policies

Meetings of the Board:

During the year, six meetings of the Board of Directors were held, particulars of attendance of directors at the said meetings are given in the report on Corporate Governance Report, which forms part of this Report.

Auditors and Auditors’ Report:

Pursuant to provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, S R B C & CO. LLP, Chartered Accountants (SRBC) were appointed as Statutory Auditors for a term of five years to hold office from the conclusion of 65th Annual General Meeting up to the conclusion of the 70th Annual General Meeting, subject to ratification at every Annual General Meeting.

The requirement of seeking ratification of the members for continuance of Statutory Auditors appointment has been withdrawn consequent upon the changes made by the Companies (Amendment) Act, 2017 w.e.f. May 7, 2018.

Hence, the resolution seeking ratification of the members for their appointment is not being placed at the ensuing Annual General Meeting.

The Auditors' Report to the Members on the Accounts of the Company for the year ended December 31, 2018 is a part of the Annual Report. The said Audit Report does not contain any qualification, reservation or adverse remark. During the year 2018, the Auditors had not reported any matter under Section 143(12) of the Act, therefore no detail is required to be disclosed under Section 134(3)(ca) of the Act.

Cost Accounts and Cost Auditors:

In terms of the Section 148 of the Companies Act, 2013 (‘the Act') read with Rule 8 of the Companies (Accounts) Rules, 2014, it is stated that the cost accounts and records are made and maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.

The Board has appointed M/s R Nanabhoy & Co., Cost Accountants as the Cost Auditors of the Company to conduct the Cost Audit for the Financial year 2019. Members approval is being sought for ratification of their remuneration as Cost Auditors of the Company for the Financial Year 2019.

M/s R Nanabhoy & Co., have confirmed that they are free from any disqualification as specified under the Act and of their Independent Status.

Secretarial Auditor:

The Board has appointed M/s S N Ananthasubramanian & Co., Practicing Company Secretaries, to conduct Secretarial Audit for the Financial year 2018. The Secretarial Audit Report in prescribed format is annexed as Annexure 4 to this Report.

During the Year 2018, your Company has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India.

Particulars of Contracts and Arrangements with Related Parties:

Your Company has formulated a policy on related party transactions which is also available on Company's website athttps://www2.huhtamaki.com/web/flexible-packaging-india/policies. This policy deals with the review and approval of related party transactions. The Board of Directors of the Company has approved the criteria for making omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on arm's length basis. All related party transactions are placed before the Audit Committee for review and approval.

All related party transactions entered during the Financial Year 2018 were in ordinary course of the business and on arm's length basis. During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Accordingly, the disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable to your Company. However, members may refer to Notes to the financial statement which sets out related party disclosures pursuant to the Accounting Standards.

None of the Directors and the Key Managerial Personnel has any pecuniary relationship or transactions vis-a-vis the Company.

Particulars of Loans, Guarantees or Investments:

The Company has not granted any loans, guarantees and investments covered under Section 186 of the Companies Act, 2013, during the financial year ended December 31, 2018.

Corporate Social Responsibility:

Your Company is committed to Corporate Social Responsibility (CSR) and strongly believes that the business objectives of the Company must be in congruence with the legitimate development needs of the society in which it operates.

During the year under review the Company incurred a CSR Expenditure of Rs.238.26 Lakh which was higher than the statutory limits. The CSR projects of the Company mainly focused in the areas of promotion of education & skill development, social Welfare & rural development and providing drinking water, sanitation facilities and hygiene.

A detailed report on CSR activities is given in Annexure 5, forming part of this Report.

Pursuant to the provisions of the Section 135 of the Companies Act, 2013 (the Act), your Company has constituted a CSR Committee to monitor the CSR activities of the Company, details of which are provided in the Corporate Governance Report, forming part of this Report.

Vigil Mechanism/Whistle-Blower Policy:

The Company has in place a Whistle-blower Policy with a view to provide a mechanism for its directors/employees to approach the Chairman of the Audit Committee, in case of any grievances or concern. The Whistle-blower Policy can be accessed on the Company's website -https://www2. huhtamaki.com/web/flexible-packaging-india/policies.

During the year, the Company reached out to employees through e-learning modules and face-to-face training sessions for creating greater awareness on anti-bribery and code of conduct policies formulated by the Company/Group.

Huhtamaki Speak Up channel is a new web-based system where any employee can report any suspected violations of any of the Company policies, Code of Conduct, or any laws or regulations.

Risk Management & Internal Financial Controls:

The Company has in place a mechanism to inform Board Members about the Risk Assessment and Minimisation procedures which are periodically reviewed to ensure that risk is controlled by the Executive Management. The Company has also formulated Risk Management Policy to review and control risk.

Details in respect of adequacy of internal financial controls with reference to the Financial Statements are given in the Management Discussion and Analysis, which forms part of this Report.

Internal Financial Controls and their Adequacy:

The Directors have laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to 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 information. The Audit Committee evaluates the internal financial control system periodically.

At the beginning of each Financial Year, an annual Internal audit plan is rolled out after it has been approved by the Audit Committee. The Audit Plan is aimed at evaluation of the efficacy and adequacy of internal control system and compliance, robustness of internal processes, policies and accounting procedures and compliance with laws and regulations. The respective Process Owners take the requisite corrective action, based on internal audit reports/findings. Further, the Internal Auditors place their significant audit observation & corrective actions thereon are presented to the Audit Committee for their review.

Annual Return:

The Extracts of the annual return of the Company has been placed on the website of the Company and can be accessed at link -https://www2.huhtamaki.com/web/ flexible-packaging-india/132

Directors’ Responsibility Statement:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 of the Act:

a) that in the preparation of the annual financial statements for the year ended December 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies as mentioned in Note 2 of the Notes to the Accounts have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on December 31, 2018, and of the profit of the Company for the year ended on that date;

c) that 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 the Company and for preventing and detecting fraud and other irregularities;

d) that the annual financial statements have been prepared on a going concern basis;

e) that proper internal financial controls laid down were followed by the Company and such internal financial controls are adequate and were operating effectively; and

f) that proper systems to ensure compliance with the provisions of all applicable laws have been devised and such systems were adequate and were operating effectively.

Human Resources & Particulars of Employees:

Your Company considers people as its biggest assets.

The Company has been providing continuous skill upgradation and learning opportunities through structured career discussions and individual development plans. A detailed note on Human Resources is mentioned in the MDA section.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure 6.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report. Further, the report and the financial statements are being sent to the members excluding the aforesaid statement. Further, in terms of provisions of Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company.

The said information is open for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary at the Registered Office and the same will be furnished on request.

Disclosure as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

Your Company has zero tolerance sexual harassment policy at workplace. As per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (‘Act') and Rules made thereunder, the Company has constituted an Internal Complaints Committees (ICC).

The Company conducts awareness programmes at its units to sensitise the employees to uphold the dignity of their female colleagues at workplace. During the year, the Company received one Complaint of harassment and same has been disposed off after inquiry by Internal Complaints Committee by taking requisite disciplinary action against guilty employees.

Material Order Passed by the Regulators or Courts:

MPCB Matter

The Company, in relation to its Thane manufacturing facility, had received a closure notice on November 20, 2018 from Maharashtra Pollution Control Board (‘MPCB'), pursuant to

the provisions of Water & Air Pollution Act, against which the Company filed an appeal with the National Green Tribunal (‘NGT'). The Company submitted documentary evidence of requisite compliance under the Plastic Waste Management Rules, 2016, (PWM Rules) to MPCB and on December 14, 2018 withdrew its appeal before the NGT, with liberty to file appeal, which has been accepted by NGT. On January 3, 2019, the Central Pollution Control Board (‘CPCB') certified the Company as ‘Producer' as per the PWM Rules, notified under the Environmental (Protection) Act, 1986 covering all its manufacturing sites. The Company is awaiting formal withdrawal of the closure notice by MPCB.

Rudrapur Tax Matter

The Hon'ble Supreme Court vide its Order dated August 20, 2018, concerning other assesses, had given a ruling in favour of the Income Tax Department wherein it had held that 100% deduction under Section 80-IC of the Income Tax Act, 1961 cannot be claimed beyond 5 years, even if “substantial expansion" is undertaken after the initial period of 5 years. As a result of the above ruling, in relation to the substantial expansion undertaken at its Rudrapur Unit, the Company recognised a provision for income tax of Rs.2,107 Lakh and interest thereon amounting to Rs.1,000 Lakh, in the Financial year ended December 31, 2018.

Further, the Hon'ble Supreme Court by its Order dated February 20, 2019, recalled its earlier judgement dated August 20, 2018, by passing a ruling in favour of the assesses. In light of the above ruling, the Company is examining the impact on the tax provisions made by the Company.

Other Disclosures/Reporting:

Your Directors state that no disclosure and/or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

- Issue of equity shares with differential rights as to dividend, voting or otherwise;

- Issue of shares (including sweat equity shares) to employees of the Company under any scheme;

- The Managing Director of the Company receive remuneration or commission from any of its subsidiaries;

- There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report, except as stated above.

Appreciation & Acknowledgements:

The Board wishes to place on record its gratitude for the assistance and co-operation received from Banks, Government Authorities, Customers, Vendors and all its shareholders for the trust and confidence reposed in the Company. The Board further wishes to record its sincere appreciation for the significant contributions made by employees at all levels for their commitment, dedication and contribution towards the operations of the Company.

For and on behalf of the Board of Directors

Murali Sivaraman, Chairman

(DIN:01461231)

March 26, 2019

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