The Board of Directors (Board) presents the Company’s Annual Report, together with the audited financial statements for the financial year ended March 31, 2017.
The Company remains focused on cash and building further on balance sheet. The improvement has been driven by the commodity market upturn, production ramp-up as per our commitment and the simplification of our group structure, and we now aspire to attain the next investment level. There was record production of aluminium, power and copper cathodes. Cost optimisation initiatives were implemented across the businesses, which helped us to maintain cost positions on the global cost curves and generate positive cash during FY 2017 before investment for growth capex.
We expect FY 2017-18 to be a transformative year for your Company. With an already strong balance sheet, a record Q4 FY 2016-17 EBITDA of Rs.7,275 Crore, continuing growth from the ongoing ramp-ups across most of our businesses, a clear capital allocation strategy and a defined dividend policy, we are confident about Vedanta’s prospects for the coming years and are optimistic about the long-term outlook for the global resources sector.
FINANCIAL HIGHLIGHTS FOR FY 2016-17
FY 2017 has seen strong performance both in terms of volumes and costs. Aluminum and Power continued to ramp up and Zinc India delivered a strong performance in last quarter in line with the mine plan. Margin improved further by about 500 basis points sequentially to exit at 44%.
Attributable PAT before exceptional and DDT for the year was at Rs.7,323 Crore, nearly 3 times that of previous year, reflecting the operational leverage flowing through to the bottom line. EPS is the highest in the last four years since the existence of Vedanta Limited in its current form, post the Sesa Goa-Sterlite merger.
Debt reduction continued to remain one of our key priorities. Excluding temporary borrowing by Zinc India to bridge its dividend payment and investment maturities, gross debt reduced by over Rs.4,000 Crore during the year. Our net debt to EBITDA and gearing ratios are best-in-class, and the lowest and strongest among the Indian and global peers.
Some of the key financial highlights for FY 2017 are:
Solid Financial Performance
- PAT1 up 2.6 times at Rs.7,323 Crore and Revenues up 12% to Rs.71,721 Crore
- EBITDA up 41% to Rs.21,437 Crore
- Free cash flow of Rs.13,312 Crore
Delivering on committed cost savings
- Delivered cumulative cost and marketing savings of US$712 Mn over the last 8 quarters; ahead of plan to deliver US$1.3 Bn in four years
Strong Balance sheet
- Gross Debt2 reduced by c. Rs.4,115 Crore during the year; further reduction of c. Rs.6,200 Crore post 1st April
- Net Debt/EBITDA at 0.4x - lowest and strongest among Indian and global peers
- Strong financial position with total cash and liquid investments of Rs.63,471 Crore
Highest-ever dividends declared
- Vedanta Limited announced interim dividend of Rs.6,580 Crore in March 2017
- Hindustan Zinc announced interim dividend of
Rs.13,985 Crore including dividend distribution tax in March 2017
Contribution to the ex-chequer in FY 2017 at c. Rs.40,0003 Crore
1. Attributable PAT before exceptional items & Dividend Distribution Tax (DDT)
2. Excluding Temporary short term borrowing (Rs.7,908 Crore) at Zinc India taken for dividend payment
3. Including Dividends to Government
The Company’s financial highlights in accordance with IND AS are provided below:
(Rs. in Crore)
Year ended March 31, 2017
Year Ended March 31, 2016
Year ended March 31, 2017
Year ended March 31, 2016
Net Sales/Income from Operations (including excise duty)
Profit from operations before other income, finance costs and exceptional items
Profit /(loss) before tax
Net Profit/(loss) after tax
Share of profit/(loss) of associate
Net Profit after taxes, minority interest and consolidated share in profit/(loss) of associate
Paid-up equity share capital (Face value of Rs.1 each) *
Reserves excluding revaluation reserves as per balance sheet
Earnings per share (?)
Transferred to General Reserve
Transferred to Debenture Redemption Reserve
Proposed dividend on equity shares (incl. Dividend distribution tax)......
* Pursuant to the merger the increased paid up share capital would be Rs.371.75 Crores.
** Proposed dividend of erstwhile Cairn India Limited paid to external shareholders (excluding the share of dividend in Vedanta Limited and fellow subsidiaries)
OPERATIONAL HIGHLIGHTS FOR FY 2016-17
In line with Vedanta’s strategic priority to ramp up production at our Zinc, Aluminium, Power and Iron Ore businesses, we achieved strong results on this front during the year. In particular, record production levels at Hindustan Zinc and the ramp-up at Aluminium are well-timed in these strong commodity markets.
We have maintained our commitment to prudent cost management, thereby delivering strong returns for all stakeholders.
Some of the key operational highlights for FY 2017 are:
- Record annual production at Aluminium, Power, Zinc India (Zinc and Silver) and at Copper-India
- Oil & Gas: Successful ramp up from Mangala EOR with production level of 56,000 boepd in Q4
- Iron Ore: Achieved 2.6 million tonnes of the additional production capacity granted in Goa
- Zinc International: Gamsberg project on track to commence production in mid CY 2018
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed report on the Management Discussion and Analysis in terms of the provisions of Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), is provided as a separate chapter in this Annual Report.
BUSINESS RESPONSIBILITY REPORT
A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of the Listing Regulations is available as a separate section in this Annual Report.
CHANGE OF THE REGISTERED OFFICE OF THE COMPANY
The Regional Director, Western Region, Mumbai (RD), vide its order dated February 2, 2017, approved the shifting of the Company’s registered office from the State of Goa to the State of Maharashtra, Mumbai.
The Board on February 3, 2017, vide their resolution passed through circulation have approved the registered office address in Mumbai as Vedanta Limited, 1st floor, C Wing, Unit 103, Corporate Avenue, Atul Projects, Chakala, Andheri (East), Mumbai - 400093, Maharashtra, India with effect from February 4, 2017.
MERGER OF CAIRN INDIA LIMITED
The Board on July 22, 2016, revised the terms of Scheme of Arrangement between the Company and Cairn India Limited (‘Cairn India’) and their respective shareholders and creditors (the ‘Scheme’), which was initially announced on June 14, 2015. The Company received all approvals necessary for effecting the merger during the year and merger was made effective on April 11, 2017. This merger consolidates Vedanta’s position as one of the world’s largest diversified natural resources companies, with world-class, low-cost assets in Metals & Mining and Oil & Gas. As on the date of merger, pro forma market cap of the merged Company was US$ 15.6 Bn and a higher free float of 49.9%. The combined entity is uniquely positioned to unlock India’s wealth of world-class energy and mineral resources. The merged company is committed to enhance oil & gas production, and preserving the ‘Cairn’ brand.
As per the terms of the merger, public shareholders of Cairn India received for each equity share held by them in erstwhile Cairn India Limited, one equity share of face value of Rs.1 each and four 7.5% Non-Convertible Non-Cumulative Redeemable Preference shares of Rs.10 each in Vedanta. Cairn India shareholders, who became shareholders of Vedanta, also received the second interim dividend of Rs.17.70 per equity share as approved by the Board on March 30, 2017.
INDIAN ACCOUNTING STANDARDS (IND AS)
The Company adopted Ind AS from the current financial year with the transition date of April 1, 2015. As required under Ind AS, the comparative period financial statements have been restated for the effects of Ind AS. The effect of the transition has been explained in more detail in the notes to the financial statements. The Company has also accounted for the Cairn merger as per the pooling of interests method as prescribed under Ind AS 103. The impact of the merger on the carrying value of investments in various subsidiaries including foreign subsidiaries has been accounted for as part of the merger accounting.
Pursuant to the Scheme becoming effective, the Company’s authorised share capital stands changed from
51,620,100,000 (Rupees Five thousand One Sixty Two Crore & One Lakh only) divided into 51,270,100,000 (Five Thousand One Twenty Seven Crore & One Lakh) number of equity shares of Rs.1/- (Rupee One) each and 3,50,00,000 (Three Crore Fifty Lakhs Only) redeemable preference shares of Rs.10/- each to Rs.74,12,01,00,000 (Seven Thousand Four Hundred Twelve Crores and One Lakh only) divided into 44,020,100,000 (Four Thousand Four Hundred and Two Crore and One Lakh only) number of equity shares of Rs.1/- (Rupee One) each and 3,010,000,000 (Three Hundred and One Crore) redeemable preference shares of Rs.10/- (Rupees Ten) each.
The Board approved the payment of 1st and 2nd interim dividend of Rs.1.75 per equity share and Rs.17.70 per equity share of Rs.1 each on October 28, 2016 and March 30, 2017, respectively. In view of the record interim dividend declared in March, 2017, no final dividend is recommended.
TRANSFER TO GENERAL RESERVE
The Company proposes not to transfer any funds out of its total profit of Rs.11,068.70 Crore for the financial year to the General Reserve.
DIVIDEND DISTRIBUTION POLICY
Your Board has approved and adopted a dividend distribution policy on May 15, 2017. The policy is available on the website of the Company at www.vedantalimited.com/ media/107147/vedl_dividend_policy_may_15_final.pdf
As reported last year, the Company has discontinued the renewal of its fixed deposits on maturity. As at March 31, 2017, all fixed deposits had matured, while deposits amounting to Rs.54,000 remained unclaimed. Since the matter is sub judice, the Company is maintaining status quo.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of Section 125 of the Companies Act, 2013, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the IEPF established by the Central Government pursuant to Section 125 of the said Act.
The Company has been rated by CRISIL Limited (CRISIL) and India Ratings and Research Private Limited (India Rating) for its banking facilities in line with Basel II norms.
During the year, CRISIL upgraded the ratings for the Company’s long-term bank facilities and its Non-Convertible Debentures (NCDs) programme to CRISIL AA / Stable Outlook from our ratings at CRISIL AA- / Negative. The revision happened in three steps in September 2016 -Change in Outlook from Negative to Stable; February 2017- change in Outlook from Stable to Positive and April 2017 - Upgrade of Ratings from CRISIL AA- / Positive outlook to CRISIL AA / Stable Outlook. The Company has the highest short-term rating on its working capital and Commercial Paper programme at CRISIL A1 . The agency expects that the ramp-up of aluminium, iron ore and power capacities; and stable commodity prices shall aid higher cash flow generation and leverage reduction for the Company in near to medium term. Also, the agency shall be guided by extent and timeline for reduction in gross debt for further positive rating action.
India Ratings affirmed the Company’s ratings on long-term scale at IND AA and short-term rating at IND A1 while keeping the Outlook Negative in December 2016. The agency expected the merger to have been completed by 1HFY17 and the shift in timelines to 4QFY17 led to maintaining of Negative Outlook. With necessary approvals for completion of merger along with consolidated leverage (including parent debt) of less than 3x, we are engaging with the agency for review of the ratings.
Overall, we believe that stable price environment along with improved scale of operations across businesses shall aid faster deleveraging during FY 2017-18.
At Vedanta, Sustainable Development is integral to the core business strategy. We continue to be a transparent and responsible corporate citizen; committed to a ‘social license to operate’ and partner with communities, local governments and academic institutions to help catalyse socio-economic development in the areas where we operate.
The Company reaffirms its Core Values of Trust, Entrepreneurship, Innovation, Excellence, Integrity, Respect and Care, which are the basis of Vedanta’s Sustainable Development Model. The model continues to be centred on the four strategic pillars: Responsible Stewardship; Building Strong Relationships; Adding and Sharing Value; and Strategic Communications.
With the Sustainable Development model, we built the Sustainable Development framework, which is aligned to global best practices and standards, including the United Nations Global Compact’s (UNGC) 10 principles; the International Finance Corporation (IFC) performance standards; the International Council on Mining and Metals (ICMM) principles; UN Sustainable Development Goals (SDGs); and the Organisation for Economic Cooperation and Development (OECD) promoted Multinational Guidelines.
This robust framework provides the business and the leadership teams parameters on which to assess, monitor, review key sustainability priorities, such as safety, health and environment, stakeholder engagement and community development activities, as per the Company’s approach on ‘social license to operate’.
Vedanta Sustainability Assurance Programme (VSAP) has been bedrock in promoting transparency and compliance of all our businesses with the Group’s Sustainable Development Framework. In continuation with last year, the big focus areas have been on implementation of six key safety performance standards across the Group; VSAP process has categorically focused on compliance level to these standards and highlighted areas of improvement.
During the year, we focused heavily on safety performance of our businesses under the overarching umbrella of Health, Safety and Environment (HSE) best practices. Community engagement and development programmes were geared with emphasis on need assessments and longevity of the project and related outcomes/benefits.
Our resolve is strong and we continue to work towards achieving zero harm.
Vedanta’s teams across businesses are driving various capacity-building and behavioural programmes. Our awareness campaigns aim to entrench a culture of safety and risk awareness. Training programmes on ‘Making Better Risk decisions’ is one such programme rolled out across the businesses to improve safety decision making of people at the shop floor level. Similarly, ‘Experience Based Quantification’ (EBQ) using Bow Tie Risk Assessment as methodology was utilised in identifying critical risks from safety and environmental perspective for key businesses.
In FY 2016-17, over 11,155,62 hours of safety training were delivered to employees and contractors.
COP 21 (Conference of partius) has been a remarkable event in changing the dynamic of climate change discourse, globally. We are pleased to see India’s inclusion as a signatory, and as an Indian company, we do respect the country’s unique issues in the carbon debate. We formed a multi-disciplinary committee headed by the CEO Power business to oversee development and implementation of carbon policy/strategy and action plan in lieu of Intended Nationally Determined Contribution (INDC) commitments of the Government of India (GoI).
We ensure that our Biodiversity Management Plans are in place, and our environmental footprint follows the most rigorous global standards. We have developed specific objectives and targets, particularly with regards to water and energy management.
Finding innovative ways to reduce waste is a priority for us at Vedanta. This year we focused on the concept of ‘Waste to Wealth’ and through a house e-platform, Eureka, we invited ideas from our employees on the same. Overwhelming response was received, and presently implementable ideas are being taken as a project with dedicated teams for execution. Efforts on recycling/reuse of mineral waste is ongoing across the businesses with ultimate aim of achieving 100% recycling/reuse.
We are present in some of the world’s most unique, remote and underdeveloped regions. We are committed to respect, learn from and create a shared understanding with our communities. Connecting with our communities is not just the right thing to do; it is a fundamental imperative of our ‘license to operate’.
Periodic stakeholder meetings with Socially Responsible Investors (SRI) Investors and lenders were undertaken and the update was provided in the Group Sustainability Committee; and will be considered as a stakeholder feedback for materiality analysis.
It is heartening to note that the key outcomes included positive validation of our sustainability model is in line with global practices on engaging with civil society, communicating performance on community development, human rights as well as addressing legacy issues.
INFORMATION & TECHNOLOGY
Cutting-edge technology is in Vedanta’s DNA, and over the years, the Company has leveraged technology and innovation to ensure sustainable operations. Over the past few years, the Company has taken various steps to promote innovation and embrace digital technologies. It has a strong Innovation and Technology programme that emphasises on funding in-house opportunities for R&D across mining, exploration and production. As part of the programme, the Company has created ‘Eureka’, a web-based platform to nurture and incubate in-house innovation and technology.
Technology within Vedanta is shifting towards being a partner at the frontlines, directly enabling business, especially in areas like logistics automation, connected mines, integrated operations centre, mobility, IoT based analytics and wearables. The Company has invested in concepts, such as digital mining that allow them to take their mining operations to new levels of performance, from pit to port, across the whole mine value chain. Digital Oil Field (DOF) is a key technology project deployed in the Oil & Gas fields. It integrates the production process with efficient well monitoring — thus optimising the entire asset. DOF provides a user friendly, web-based interface with enhanced data mining and visualisation capabilities. It also acts as a central location for accessing real-time data available through distributed control systems/ supervisory control and data acquisition (DCS/SCADA) systems. To have a digitally enabled workforce, the organisation has undertaken many initiatives which empower the teams to deliver above par performance with real time data. Integrated enterprise platforms and ecosystems are being upgraded across the organisation. Analytics is being adopted to improve information availability on demand.
Organisation is adopting latest security standard and deploying state-of-the-art tools like DLP, SIEM, Anti-APT, PIM, MFA and more to secure digital assets.
Vedanta appreciates that the technology landscape is continuously changing at a rapid pace and the Company must constantly evolve and adapt to leverage these changes for competitive advantage. It recognises the need to develop a comprehensive digital strategy and drive transformational change across the organisation that instills digital expertise in all facets of the business and creates value proposition for all stakeholders.
Towards this end, Vedanta has created a new position of ‘Chief Digital Officer’ (CDO). This position will be an integral part of the Executive Committee. The Company is looking at an innovative model to fill this position in partnership with the global technology giants to bring in cutting-edge technology and expertise to unleash the full potential of the business. This position shall be part of the top thought leadership and shall have the critical responsibility for developing and implementing Vedanta’s digital strategy. Move towards digitisation shall play a key role in adding value to the business through a combination of reduction in costs, improving efficiencies and enabling decision making, among others all culminating into a positive impact on the bottom-line.
As part of our governance philosophy, the Board has formed a Risk Management Committee to ensure a robust risk management system in line with the applicable laws. The details of Committee and its terms of reference are set out in the Corporate Governance Report, which is part of the Board’s Report and is available as a separate section in this Annual Report.
Our businesses are exposed to a variety of risks, which are inherent to an international mining and resources organisation. Our risk-management framework is designed to be simple, consistent and clear for managing and reporting risks from the Group’s businesses to the Board. Our management systems, organisational structures, processes, standards and code of conduct together form the system of internal controls that govern how we conduct business and manage associated risks. We have a multilayered risk management framework to effectively mitigate the various risks, which our businesses are exposed to in the course of their operations.
The Risk Management Committee supports the Audit Committee and the Board in developing the group-wide risk-management framework. Risks are identified through a consistently applied methodology. The Company has put in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives.
Major risks identified by businesses and functions are systematically addressed through mitigating actions. Risk officers have also been formally nominated at operating businesses, as well as at Group level, to develop the risk-management culture within the businesses.
Our Risk Management Framework is designed to help the organisation meet its objectives through alignment of operating controls with the Group’s mission and vision.
INTERNAL FINANCIAL CONTROLS
The Board has devised systems, policies and procedures / frameworks, which are currently operational within the Company for ensuring the orderly and efficient conduct of its business. This includes adherence to the Company’s policy, safeguarding assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. In line with best practices, the Audit Committee and the Board reviews these internal control systems to ensure they remain effective and are achieving their intended purpose. Where weaknesses, if any, are identified as a result of the reviews, new procedures are put in place to strengthen controls. These controls are in turn reviewed at regular intervals.
The systems/frameworks include proper delegation of authority, operating philosophies, policies and procedures, effective IT systems aligned to business requirements, an internal audit framework, an ethics framework, a risk management framework and adequate segregation of duties to ensure an acceptable level of risk. Documented controls are in place for business processes and IT general controls.
Key controls are tested by entities to assure that these are operating effectively. Besides, the Company has also adopted a SAP GRC (Governance, Risk and Compliance) framework to strengthen the internal control and segregation of duties/ access. It also follows a half-yearly process of management certification through the Control Self-Assessment framework, which includes financial controls/exposures.
The Company has documented Standard Operating Procedures (SOP) for procurement; project / expansion management capital expenditure; human resources; sales and marketing; finance; treasury; compliance; safety; health; and environment (SHE); and manufacturing.
The Group’s internal audit activity is managed through the Management Assurance Services (MAS) function. It is an important element of the overall process by which the Audit Committee and the Board obtains the assurance on the effectiveness of relevant internal controls.
The scope of work, authority and resources of MAS are regularly reviewed by the Audit Committee. Besides, its work is supported by the services of leading international accountancy firms.
The Company’s system of internal audit includes: covering monthly physical verification of inventory; a monthly review of accounts; and a quarterly review of critical business processes. To enhance internal controls, the internal audit follows a stringent grading mechanism, focusing on the implementation of recommendations of internal auditors. The internal auditors make periodic presentations on audit observations including the status of follow-up to the Audit Committee.
The Company is also required to comply with the Sarbanes Oxley Act Sec 404, which pertains to Internal Controls over Financial Reporting (ICOFR). Through the SOX 404 compliance programme, which is aligned to the COSO framework, the Audit Committee and the Board also gains assurance from the management on the adequacy and effectiveness of ICOFR.
Additionally, as part of their role, the Board and its Committees routinely monitors the Group’s material business risks. Due to the limitations inherent in any risk management system the process for identifying, evaluating and managing the material business risks is designed to manage, rather than eliminate risk. Besides, it has been created to provide reasonable, but not absolute assurance against material misstatement or loss.
Since the Company has strong internal control systems which are further strengthened by periodic reviews as required under the Listing Regulations and SOX compliance by the Statutory Auditors, the CEO and CFO recommend to the Board continued strong internal financial controls.
Based on the information provided, nothing has come to the attention of the Directors to indicate that any material breakdown in the function of these controls, procedures or systems occurred during the year. There have been no significant changes in the Company’s internal financial controls during the year that have materially affected or are likely to materially affect.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their objectives. Moreover, in the design and evaluation of the Company’s disclosure controls and procedures, the management was required to apply its judgment in evaluating the cost-benefit relationship.
The Company has in place a robust vigil mechanism for reporting genuine concerns through the Company’s Whistle Blower Policy. As per the Policy adopted by various businesses in the Group, all complaints are reported to the Director -Management Assurance, who is independent of operating management and the businesses. In line with global practices, dedicated email IDs and a centralised database has been created to facilitate receipt of complaints. A 24x7 whistle blower hotline and a web-based portal was also launched during the year. All employees and stakeholders can register their integrity related concerns either by calling the toll free number or by writing on the web-based portal which is managed by an independent third party. The hotline provides multiple local language options. After the investigation, established cases are brought to the Group Ethics Committee for review and decision-making. All cases reported as part of whistle blower mechanism are taken to their logical conclusion within a reasonable timeframe. All Whistle Blower cases are periodically presented and reported to the Company’s Audit Committee. The details of this process are also provided in the Corporate Governance Report and the Whistle Blower Policy is posted on the Company’s website.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
The Company has zero tolerance for sexual harassment at workplace. It 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 thereunder for prevention and redressal of complaints of sexual harassment at workplace.
As part of Vedanta Group, the Company is an equal opportunity employer and believes in providing opportunity and key positions to women professionals. The Group has endeavoured to encourage women professionals by creating proper policies to tackle issues relating to safe and proper working conditions, and create and maintain a healthy and conducive work environment that is free from discrimination. This includes discrimination on any basis, including gender, as well as any form of sexual harassment. During the year, there were two complaints received, all of which were resolved. Your Company has constituted Internal Complaints Committee (ICC) for various business divisions and offices, as per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
CORPORATE SOCIAL RESPONSIBILITY
The Company is committed to conduct its business in a socially responsible, ethical and environment friendly manner and to continuously work towards improving quality of life of the communities in its operational areas.
We believe that the sustainable development of our businesses is dependent on sustainable, long lasting and mutually beneficial relationships with our stakeholders, especially the communities we work with. As a responsible corporate citizen, we have a role to play in the integrated and inclusive development of the country, in partnership with government, corporates and civil society/community institutions. We also believe that our employees have the potential to contribute not just to our business, but also towards the goal of building strong communities.
The Company complies with Section 135 of the Act and the approach is focused on long- term programmes aligned with community needs.
Nandghar Project has emerged as the Company’s flagship CSR initiative. We have made a bold commitment of building 4,000 state-of-the-art Nandghars in India to secure our children’s future. The same Nandghars will also serve as vehicles for women’s empowerment and entrepreneurship. During the year, we completed 97 Greenfield Nandghars in four states (Rajasthan, Uttar Pradesh, Madhya Pradesh and Goa) and four brownfield Nandghars in Rajasthan.
Other than Nandghar, the various business units of the Company continue to focus on healthcare, education, skill development, women’s empowerment, agriculture and animal husbandry in our neighbourhood communities. Some of the programme highlights from our business units are -
- Since its inception in 2008-09, the Subhalaxmi Cooperative Society promoted by Vedanta Jharsuguda, has formed over 277 Self Help Groups (SHGs) consisting of 3,235 members in 63 peripheral villages of Jharsuguda, Kolabira and Kirmira Blocks. It has promoted over 2,392 micro entrepreneurs in its operational villages.
- At Lanjigarh, under Project Sakhi, around 2,183 women are engaged in 186 SHGs across 45 villages surrounding our area of operation. Out of the cumulative saving of Rs.7.3 Mn, approximately Rs.2.5 Mn has been disbursed as internal loan to various members. Additionally, the SHGs have managed to create credit linkages worth Rs.6.9 Mn resulting in around 1,085 women being engaged in various income generating activities.
- Sterlite Copper’s ‘Ilam Mottukal’ aims to ensure that every girl child is provided with quality school education in an enabling environment so that they can realise her fullest potential. This project is impacting 8,046 girl children across 86 schools in Thootukudi district of Tamil Nadu. The project, in its fifth year now, has resulted in 80% improvement in the learning level of girl children and 95% pass percentage in the class 10 exams.
- With the objective of promoting digital education and literacy in the rural areas, Vedanta Foundation & Vedanta Limited, in collaboration with the Directorate of Education, Government of Goa and Government of Karnataka, have launched Smart Class and Science Lab pilot project for students. The aim is to get these students oriented to smart technology in a friendly manner.
- To improve medical facilities for the community and medical education in the region, Vedanta has partnered with Odisha Government to set-up a Government Medical College in Bhangabari at Bhawanipatna, Kalahandi District at an estimated investment of Rs.100 Crore. Vedanta will provide infrastructural support and the college is scheduled to be completed by 2018. The state-of-the-art hospital, being built as part of the college, will provide easy access to medical treatment for the communities residing in the region.
- Since 2010, Vedanta’s Skill School at BALCO (Korba, Chhattisgarh) has, in partnership with International Leasing & Financial Services (IL&FS), trained nearly 6,120 youth and linked the marginalised sections of society with the mainstream economy.
- Yuvantaran (Mining Academy of HZL) - Underground mining is the future of mining, but there is a dearth of enough skilled manpower in this area. HZL is working to change this and has initiated possibly the largest such initiative, focused on preparing manpower for underground mining. We are currently running two programmes - one is an intense 18 month residential training for Heavy Earth Moving Machinery (with 110 rural youth), and the other is an 8 month residential programme for Winding Engine Drivers (with 47 rural youth). Both programmes are being implemented in partnership with the Skill Council of Mining Sector (SCMS) and Indian Institute of Skill Development (IISD).
- Skorpion Zinc is spearheading the ‘It Begins With Youth’ (IBWY) project in partnership with Omayembeko Hope Foundation (OHF). The project targets young people aged between 13 and 35 years, who are experiencing social problems related but not limited to alcohol and drug abuse, crime, discrimination, HIV/AIDS, immorality, sexual and domestic violence, poverty and unemployment. The overall objective of the project is to empower young people, ensuring that they can develop and reach their potential. The project reaches out to over 6,000 youth.
- CAIRN Ind ia established an RO plant in Sewniwala, which is probably the largest community drinking water plant in India running on solar power, and will have a far-reaching impact with an environment friendly process.
During the year, the Company’s divisions spent Rs.48.48 Crore on CSR activities, while on a consolidated basis it spent about Rs.110.04 Crore on CSR in India.
A brief overview of CSR initiatives forms part of the Directors’ Report and is annexed hereto as Annexure A.
Your Company’s CSR Policy addresses the Company’s commitment to conduct its business in a socially responsible, ethical and environment friendly manner; and to continuously work towards improving the quality of life of the communities in the areas where it operates.
The CSR policy may be viewed on: http://www. vedantalimited.com/media/85867/csr policy final.pdf
BOARD OF DIRECTORS
During the year under review, on the recommendation of Nomination and Remuneration Committee (‘NRC’) and in accordance with provisions of the Companies Act, 2013,
Mr. G.R. Arun Kumar (DIN: 01874769) was appointed as an additional Whole-Time Director for a period of three years w.e.f. November 22, 2016 and holds office upto the date of the ensuing Annual General Meeting (‘AGM’) and being eligible has offered himself for appointment as a Whole-Time Director. Mr. GR Arun Kumar is also designated as CFO of the Company. The appointment is subject to approval of the members.
Further, the Board at its meeting held on March 30, 2017, approved the appointment of Mr. K. Venkataramanan (DIN: 00001647), as an additional Non Executive Independent Director for a fixed term of three (3) years effective April 01, 2017. The appointment is subject to approval of the members.
In accordance with the provisions of Act and the Articles of Association of the Company, Mr. Thomas Albanese (DIN: 06853915), Whole-Time Director & CEO, is retiring by rotation and has offered himself for re-appointment.
Further, on the recommendation of NRC, the Board at its meeting held on March 30, 2017 reappointed Mr. Thomas Albanese as the Company’s Whole-Time Director and CEO for a further period from April 01, 2017 till August 31, 2017.
Brief profiles of Mr. Thomas Albanese, Mr. GR Arun Kumar and Mr. K Venkataramanan along with the disclosures required pursuant to Listing Regulations and the Companies Act, 2013 are given in the Notice of the AGM, forming part of the Annual Report.
Attention of the members is invited to the relevant items in the Notice of the AGM and the Explanatory Statement thereto.
Mr. DD Jalan superannuated as the Whole Time Director and CFO of the Company w.e.f. September 30, 2016.
Ms. Anuradha Dutt resigned from the position of Independent Director w.e.f. close of business hours of March 31, 2017 on account of her other commitments.
The Board places on record its appreciation for the valuable services rendered by Mr. Jalan and Ms. Dutt during their tenure.
All Independent Directors have provided declarations that they meet the criteria of independence as laid out under Section 149(6) of the Act and the Listing Regulations.
The details of training and familiarisation programmes; annual Board Evaluation process; the policy on Director’s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director; and also remuneration for Key Managerial Personnel (KMP) and other employees forms part of Corporate Governance Report.
NUMBER OF BOARD MEETINGS
The Board met nine (9) times during the year. The details of Board meetings are laid out in Corporate Governance Report.
KEY MANAGERIAL PERSONNEL (KMP)
During the year under review, the Company appointed Mr. GR Arun Kumar as CFO w.e.f. October 1, 2016 and Ms. Bhumika Sood, as the Company Secretary of the Company w.e.f. November 22, 2016 and designated them as the KMP under Section 203 of the Act.
Mr. DD Jalan, Whole -Time Director and CFO and Mr. Rajiv Choubey, Company Secretary & Compliance Officer ceased to be in employment of the Company and accordingly relinquished their position of KMPs w.e.f September 30, 2016 and May 31, 2016, respectively.
The following Directors/Executives are KMPs of the Company during FY 2016-17:
Mr. Navin Agarwal, Executive Chairman
Mr. Tarun Jain, Whole-Time Director
Mr. Thomas Albanese, Whole-Time Director & Chief Executive Officer
Mr. GR Arun Kumar, Whole-Time Director & Chief Financial Officer
Ms. Bhumika Sood, Company Secretary & Compliance Officer
The composition of the Audit Committee is in compliance with the provisions of Section 177 of the Act and Regulation 18 of the Listing Regulations. The information in respect of composition, scope, terms of reference, meetings etc. of Audit Committee forms part of the Corporate Governance Report.
The Board has accepted all recommendations made by the Audit Committee during the year.
HUMAN RESOURCES (HR)
Human resources play a significant role in your Company’s growth strategy. Your Company emphasised on talent nurturing, retention and engaging in a constructive relationship with employees with a focus on productivity and efficiency and underlining safe working practices. The significant focus areas during the year comprised the following:
Leadership Development and Talent Management
- Internal Growth Workshops: Internal Growth Workshop is a uniquely designed programme with an objective to provide enhanced and elevated roles to the HIPOs in line with their career aspirations. It is a two way platform to share ideas, vision and synergies aspirations in a structured way. Such workshops enhance communication, inspire employees, and urge them to harness their potential further. So far over 300 new leaders have been identified through this initiative and has benefited them significantly in their career trajectory, which has come ahead of time opportunity. Importantly employees are encouraged to rotate / move across various new roles, locations, businesses once every three years. The average age of the participant was 35 years.
- ‘V Connect’ Initiative: ‘V Connect’ is a programme to anchor all 12,000 professionals globally to engage with the senior leadership team and get personal and professional development insights, ultimately leading to superior performance delivery. This is one of the largest initiatives of its kind carried out across corporates. We are utilising the power of technology using ‘App’ to its optimum to ensure coverage at such a large scale.
- Right Management In Place (RMIP) - Strategic Hiring
In our endeavour to strengthen management teams across business, realigning the organisation structure and bridging the critical gaps in each of the business, we initiated recruitment drive along with the business for various leadership positions including Expats / Specialist Positions. Hiring for these positions was initiated with focus on recruitment from best practices companies / diversity.
- Enhanced Maternity/Paternity/Adoption Leave
A progressive parental leave policy was announced wherein maternity leave was enhanced to 26 weeks. Adoption leave of 12 weeks and paternity leave for 1 week was also announced. The new parental leave policy has been welcomed by our employees as the best-in-class in the industry.
- Performance Scorecard
With an objective to further strengthen, objectivise the performance evaluation process has put in place Performance Scorecard assessment for employees. Vedanta Senior management believe in leading from the front and live up to the highest performance benchmarks. In this regard, over 300 key people in the organisation who are in the top two grades already have a Performance Scorecard created for them. Moving further, similar approach will be followed for developing output based Performance Scorecards for its professionals with clearer goals, measurable targets and defined performance levels.
- Employee Stock Option Scheme (‘ESOS’) 2016
ESOS 2016 aims at rewarding employees with wealth creation opportunities, encouraging high-growth performance and reinforcing employee pride. For the very first time Vedanta Limited options were conceived and scheme was launched after obtaining statutory approvals, including shareholders’ approval. The Company’s 1,116 employees were covered under the ESOS 2016 scheme and the same was well received by them. The Grant under ESOS is a combination of individual contribution, business as well as overall Vedanta Limited’s performance.
- Global Internship Programme (GIP)
GIP was launched in June 2016 to bring on board global professionals to provide their perspective on our businesses and gain exposure by working on live projects under the mentorship of the senior leadership team. Through this programme, we engaged with the Ivy League B-Schools including Harvard Business School, Wharton as well as London Business School.
During the year, your Company has received recognitions at Forums like CII and World HRD Congress in fields of HR excellence and HR Tech. Your Company got facilitation by the Working Mother and AVTAR as well as WILL for progressive Women friendly policies in the area of internal development, growth opportunities, leadership development and enhanced parental leave policies. The Company is committed to provide equal opportunities to all its employees, irrespective of gender, nationality and background. It believes that diversity brings varied perspective, collaborative decision making and ideas to the organisation and collectively can create superior outcomes. The Company is conscious towards improvising the gender diversity up to 33% at board level from existing 13% and 20% at its professional employee population from existing 12% by year 2020.
EMPLOYEE INFORMATION AND RELATED DISCLOSURES
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (‘Rules’), is appended as Annexure B to the Report.
In accordance with the provisions of Section 197(12) of the Act and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are set out in the annexure to this report. In terms of provisions of Section 136 (1) of the Act, this report is being sent to the members without this annexure. Shareholders interested in obtaining a copy of the annexure may write to the Company Secretary.
CORPORATE GOVERNANCE REPORT
The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by the Securities and Exchange Board of India (SEBI). The Company has also implemented several best corporate governance practices as prevalent, globally. The Corporate Governance Report as stipulated under the Listing Regulations forms an integral part of this Report.
The requisite certificate from the Company’s auditors confirming compliance with the conditions of corporate governance is attached to the Corporate Governance Report.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexed hereto as ‘Annexure C’
DETAILS OF LOANS/GUARANTEES/ INVESTMENT MADE BY THE COMPANY
Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised as per the provisions of Section 186 of the Act are provided in the standalone financial statement forming part of the Annual Report.
SUBSIDIARIES/JOINT VENTURES/ASSOCIATE COMPANIES
In terms of provisions of Section 129(3) of the Companies Act, 2013, where the Company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the Company and of all the subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries.
In accordance with the above, the consolidated financial statement of the Company and all its subsidiaries and joint ventures form part of the Annual Report. Further, a statement containing the salient features of the financial statements of our subsidiaries and joint ventures in the prescribed Form AOC-1 is part of the report. The said form is included in the Consolidated Financial Statement.
In accordance with Section 136 of the Companies Act, 2013, the Audited Financial Statements and related information of the subsidiaries, where applicable, will be available for inspection during regular business hours at our registered office. These may also be accessed on the Company’s website www.vedantalimited.com.
As per the Listing Regulations, a policy on material subsidiaries as approved by the Board, may be accessed on the Company’s website: www.vedantalimited.com.
RELATED PARTY TRANSACTIONS
In line with the requirements of the Companies Act, 2013 and Listing Regulations, your Company has formulated a policy on Related Party Transaction (RPT), which is also available on the Company’s website (http://www.vedantalimited. com/investor-relations/corporate-governance.aspx). The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.
The Company presents a detailed landscape of all RPTs to the Audit Committee, specifying the nature, value, and terms and conditions of the transaction. The Company has developed a Related Party Transactions Manual-Standard Operating Procedures to identify and monitor all such transactions.
All contracts/arrangements/transactions entered by the Company during the financial year with related parties were on an arm’s length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Act and Listing Regulations.
During the year, there have been no materially significant related party transactions between the Company and Directors, management, subsidiaries or relatives, as defined under Section 188 of the Act and Regulations 23 the Listing Regulations.
Accordingly, the disclosure required u/s 134(3)(h) of the Act in Form AOC-2 is not applicable to your Company.
MATERIAL CHANGES AFFECTING THE COMPANY
No significant and material orders have been passed by any regulators or courts or tribunals against the Company, impacting the going concern status and its operations in future. However, as informed in the previous report:
1. Iron-Ore Division - Goa Operations
Following allegations of illegal mining and based on Justice M.B. Shah Commission Report, the Hon’ble Supreme Court of India on October 5, 2012 had suspended the Iron-ore mining operations and transportation of material of all miners in Goa (including the Company). Separately, the Government of Goa also banned all mining and transportation of iron ore in Goa, and the Ministry of Environment and Forest (MOEF) suspended Environmental Clearances (ECs) of all mining leases within Goa.
On April 21, 2014, the Hon’ble Supreme Court lifted the ban, subject to certain conditions, limiting the maximum annual excavation to 20 million tonnes, subject to the determination of final capacity by the Expert Committee appointed by the Court; and 10% of the sale proceeds of the iron ore to be appropriated towards a sustainability fund (Goa Mineral Iron Ore Fund). The Supreme Court has held that all mining leases in Goa, including those of the Company, expired in 2007 and, consequently, no mining operations could be carried out until the renewal/execution of mining lease deeds by the Government of Goa.
On August 13, 2014, the High Court of Goa passed a common order directing the State of Goa to renew the mining leases for which stamp duty was collected in accordance with the Goa Mineral Policy (2013), and to decide the other applications for which no stamp duty was collected within three months thereof.
In January 2015, the Goa State Government revoked the order suspending mining operations in Goa and by a subsequent order of March 2015, MOEF revoked the suspension of Environment Clearance (EC). Lease deeds for all working leases of the Company in Goa have been executed and registered. The Company has obtained Consent to Operate under the Air (Prevention of Pollution) Act and Water (Prevention of Pollution) Act from the Goa State Pollution Control Board and mining plan approval from IBM for the said leases, thereby paving way for commencing mining operations of the Company in Goa. The mining operations resumed in phases during the financial year under review.
On September 10, 2014, the Goa Foundation challenged the High Court order directing the renewal of mining by way of a Special Leave Petition (SLP) before the Supreme Court of India, challenging the judgment of the High Court dated August 13, 2014 directing renewal of mining leases. No stay has yet been granted by the Supreme Court. Another set of SLPs on an identical issue were filed by a local activist. Two writ petitions have also been filed before Supreme Court by Goa Foundation and Sudip Tamankar in September 2015 for setting aside the second renewal of iron ore mining leases in Goa made under section 8 (3) of MMDR Act and challenging the revocation of suspension on mining in State of Goa.
2. Aluminium Division - Lanjigarh - Bauxite and Alumina Operations
a. Bauxite Sourcing
The Company has signed a Memorandum of Understanding (MoU) with Odisha Government for the supply of bauxite for the alumina plant at Lanjigarh.
The Company has also entered into a Joint Venture (JV) Agreement with Orissa Mining Corporation (OMC) for supply of bauxite. OMC has, by a separate action, terminated the JV Agreement for which the Company is pursuing the appropriate course of action.
The Company is presently sourcing bauxite from alternate sources including imports. The Company is also looking at bauxite mines which may come up for auction and at other alternatives.
b. Alumina Operations
The Company has received requisite environmental clearances regarding the expansion of its Lanjigarh alumina refinery from 1 MTPA to 6 MTPA with conditions and construction in phases. The consent to establish has been revalidated for another five years.
A challenge has been filed by an individual against MOEF, Odisha Pollution Control Board (OSPCB) and the Company before National Green Tribunal (NGT) disputing the grant of this environmental clearance. No adverse orders have been made by the NGT.
3. Oil & Gas Division
Erstwhile Cairn India Limited (‘Cairn’, now Vedanta Limited or the Company) had received an order from the Income Tax Department for an alleged failure to deduct withholding tax on alleged capital gains arising during the year 2006-07 in the hands of Cairn UK Holdings Limited (CUHL), the Company’s erstwhile parent company, a subsidiary of Cairn Energy Plc. This was in respect of the transaction of CUHL transferring the shares of Cairn India Holdings Limited to erstwhile Cairn India Limited as part of internal group reorganisation in 2006-07 to facilitate the IPO of Cairn India Limited. A demand of approximately Rs.20,495 Crore (comprising tax of approximately Rs.10,248 Crore and interest of approximately Rs.10,247 Crore) is alleged to be payable. The Company has filed a writ petition with the Delhi High Court praying for quashing/ setting aside the aforesaid order and is pursuing all possible options to protect its interest. Further, the Company has also filed an appeal before Commissioner Appeals. The Company’s parent, Vedanta Resources Plc. has filed a notice of claims against GoI under the UK India bilateral investment treaty challenging the tax demand, seeking resolution through international arbitration.
EMPLOYEES STOCK OPTION PLAN
In order to motivate, incentivise and reward employees, your Company has introduced Vedanta Limited Employee Stock Option Scheme 2016 (‘The Scheme’) to provide equity based incentives to the permanent employees of the Company including holding/subsidiary companies.
The Scheme is a conditional share plan for rewarding performance on pre-determined performance criteria and continued employment with the Company. The predetermined performance criteria shall focus on rewarding employees for the Company’s performance vis-a-vis competition and for achievement of internal operational metrics. The Scheme is currently administered through Vedanta Limited ESOS Trust (ESOS Trust), which is authorised by the shareholders to acquire the Company’s shares from secondary market from time to time, for implementation of the Scheme.
The Company’s shareholders by way of postal ballot on December 12, 2016 have approved the Scheme.
During the year under review, 1,116 options were granted to eligible employees including Whole Time Director and KMPs.
Pursuant to the provisions of SEBI (Share Based Employee Benefits), Regulations, 2014, disclosure with respect to the ESOS Scheme of the Company as on March 31, 2017 is annexed as Annexure D to this Report and has also been uploaded on the Company’s website at www.vedantalimited.com.
The stock option scheme is in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 (‘Employee Benefits Regulations’) and there have been no changes to the plan during the financial year.
A certificate from M/s S.R. Batliboi & Co. LLP, Chartered Accountants, Statutory Auditors, with respect to the implementation of the Company’s ESOS schemes, would be placed before the shareholders at the ensuing AGM. A copy of the same will also be available for inspection at the Company’s registered office.
- Statutory Auditors
M/s S.R. Batliboi & Co. LLP, Chartered Accountants (FRN: 301003E) were appointed as Statutory Auditors of your Company at the AGM held on June 29, 2016 for a term of five consecutive years i.e. until the conclusion of the 56th AGM. As per the provisions of Section 139 of the Act, the appointment of Auditors is required to be ratified by members at every AGM. The ratification of appointment of Statutory Auditors for the 2nd year is being sought from the members of the Company at this AGM. Further, M/s S.R. Batliboi & Co. LLP have confirmed their independence and eligibility under the provisions of the Act and Listing Regulations.