Nestle India Ltd
Directors Reports
Dear Members,
Your Directors are pleased to present their report and financial statements for the
year ended 31st December, 2019.
|
(Rs. in Million) |
| Particulars |
2019 |
2018 |
| Sale of products |
122,952.7 |
112,162.3 |
| Add : Other operating revenues |
736.3 |
760.4 |
| Add : Other Income |
2,468.8 |
2,589.2 |
| Total Income |
126,157.8 |
115,511.9 |
| Less : Total Expense |
99,407.9 |
91,222.4 |
| Profit before tax |
26,749.9 |
24,289.5 |
| Less: Tax expense |
7,054.4 |
8,220.2 |
| Profit after tax |
19,695.5 |
16,069.3 |
| Add : Other Comprehensive Income |
(1,547.7) |
(404.1) |
| Total Comprehensive Income |
18,147.8 |
15,665.2 |
| Opening balance in Retained Earnings |
27,688.1 |
25,054.5 |
| Amount available for appropriation |
45,870.2 |
40,821.8 |
| Interim dividends |
|
|
| 2019: Rs. 101.00 per share |
9,738.0 |
|
| 2018: Rs.90.00 per share |
|
8,677.4 |
| Special interim dividend paid out of accumulated profits of previous years (surplus in
the profit & loss account) |
|
|
| 2019: Rs. 180.00 per share |
17,354.8 |
|
| 2018: Nil |
|
|
| Final dividends |
|
|
| 2018: Rs. 25.00 per share |
2,410.4 |
|
| 2017: Rs. 23.00 per share |
|
2,217.6 |
| Less: Dividend distribution tax |
6,059.4 |
2,238.7 |
| Closing balance in Retained Earnings |
10,307.6 |
27,688.1 |
| Key ratios: |
|
|
| Earnings per share (Rs.) |
204.28 |
166.67 |
| Dividend per share (Rs.) |
|
|
| Interim |
281.0* |
90.0 |
| Proposed - Final |
61.0 |
25.0 |
| Additional Information: |
|
|
| Profit from operations |
25,862.5 |
23,508.6 |
* includes special interim dividend of Rs. 180/- per equity share of Rs. 10/- each paid
out of accumulated profits of previous years (surplus in the profit & loss account)
Total Sales and Domestic Sales for the year increased by 9.6% and 10.9% respectively.
Domestic Sales growth is broad based largely driven by volume and product mix.
Export Sales
Other Income has decreased due to lower average liquidities post payment of special
interim dividend on 23rd August, 2019.
Tax Expense (including revaluation of deferred tax assets & liabilities) from 1st
April, 2019 to 31st December, 2019 has been computed at the rates introduced by
the Taxation Laws (Amendment) Ordinance, 2019 dated 20th September, 2019.
Accordingly, Net Profit after Tax and Earnings per share for the year have been positively
influenced by the lower tax rates.
Your Company has created a contingency provision of Rs. 1,163.4 million (Previous year
Rs. 1,242.5 million) for various contingencies resulting mainly from matters, which are
under litigation/related disputes and other uncertainties requiring management judgement.
Your Company has also reversed, utilised/settled contingency provision of Rs. 914.6
million (Previous year Rs. 205.6 million) due to the satisfactory settlement of certain
litigations and settlement of obligations under free replacement warranty for which
provision is no longer required.
Dividends
The Board of Directors have recommended a final dividend of Rs. 61.00 per equity share
amounting to Rs. 5,881.4 million for the year 2019. The total dividend for 2019 aggregates
to Rs. 342.00 per equity share which includes first interim dividend of Rs. 23.00 per
equity share paid on 15th May, 2019; second interim dividend of Rs. 23.00 per
equity share for 2019 out of current year profits and a special interim dividend of Rs.
180/- per equity share out of accumulated profits of previous years (surplus in the profit
& loss account) both paid together on 23rd August, 2019; and the third
interim dividend Rs. 55.00 per equity share paid on 20th December, 2019.
The dividend recommendation is in accordance with the Dividend Distribution Policy of
the Company which is annexed and forms part of the Annual Report and the same is available
on the Company's website and can be accessed at https://www.nestle.in
Material changes affecting the Company
There have been no material changes and commitments affecting the financial position of
the Company between the end of the financial year and date of this report. There has been
no change in the nature of business of the Company.
Amount Transfer to Reserves
Your Directors do not propose to transfer any amount to the reserves.
Exports
In 2019, the exports of your Company to South Asia (Nepal, Bhutan, Bangladesh and Sri
Lanka) registered a double-digit growth primarily driven by categories such as, Milk
Products, Instant Coffee, Instant Noodles and Infant Nutrition. Your Company's brand
continued to have a high level of trust. United Kingdom registered high double-digit
growth. Total exports, however, de-grew by 9.9% as a result of lower coffee exports to
Turkey in 2019. The balance portfolio continued to grow because of a well-diversified mix
of export markets. With the focus on range extension and channel proliferation, brand
MAGGI continued to grow amongst the Indian diaspora. United States and Canada remained the
biggest destination for culinary exports. Your Company is striving to enhance distribution
in key markets and explore new territories. The Instant Tea exports registered another
year of credible growth on the back of strong demand for its premium grades in the markets
of East Asia. Your Company's endeavor in exploring new markets has delivered good results
in the confectionery category with exports to Malaysia and Thailand in 2019.
Contribution to the Exchequer
Your Company over the years has been enabling significant contribution to various
taxes. During the year 2019, the Company through its business, enabled tax collections at
Central and State level close to Rs. 35.8 billion, in aggregate.
Business Development
In 2019, your Company steadfastly continued its nutrition, health and wellness journey
through strong volume and mix-led growth and strengthened its commitment towards a
sustainable future, through its brands, its factories, its employees and its partners by
taking collective action.
Your Company stayed in its path of growth, by investing in cutting-edge science and
innovation and taking decisive steps towards renovation. It has attractive product
portfolio and in 2019, your Company launched several new products. By driving greater
agility and rapidly adapting to the changing preferences of consumers, your Company
brought meaningful differentiation, by improving taste, convenience and nutritional
qualities of its products, that saw an increase in consumer trust.
This commitment for innovation was also seen in the way your Company does business.
Through the cluster-based approach, that is powered by data and technology, your Company
made deeper penetration into newer markets, unleashed growth potential and created a
transparent planning process. This has led to an increased engagement with the consumers.
In 2019, your Company was leading with strong market shares in 7 out of the 8 categories.
Your Company continued to strengthen its business focus through Nestle Business
Excellence, by simplifying processes that reduces administrative cost by increasing the
penetration of its shared services.
Your Company further leveraged e-commerce, through targeted communication, range
selling, consumer base sampling, which led to a growing contribution of e-commerce to
domestic sales.
In 2019, your Company has continued to focus on its traditional trade and modern trade,
to further strengthen its strategic priorities and build a more agile network of product
delivery to its consumers.
Improving the nutritional profile of products is at the very heart of your Company's
business and is linked to United Nations Sustainable Development Goal, 3. In line with its
'Purpose', your Company continued to work towards reducing sodium, sugars and saturated
fats and adding healthful ingredients like whole grain, vegetables and micro-nutrients to
its foods and beverages making them more nutritious. The total micro-nutrient fortified
servings sold in 2019 in India is equivalent to 6.7 billion serves, across several product
lines.
Your Company launched asknestle.in, a website that provides real-time and
personalized advice on nutrition that can be customized for the audience. It aims to make
nutrition education more accessible, so that parents can inculcate better food practices
and make informed decisions about food choices and nutrition. With AskNestle, parents can
access a 'Growth Tracker' that enables them to track how their children are growing. The
service also offers 'Custom Meal Plans' personalized for regional preferences and
generates a daily nutrition score.
As a recognized leader in sustainability, your Company has taken several steps towards
protecting the environment and addressing climate change. By driving new behavior and
expanding waste management programs, specifically in the hill states of India, your
Company, played an instrumental role in shaping a waste free future. In 2019, MAGGI
noodles, NESCAFE and KITKAT became plastic neutral, by managing an equivalent or higher
amount of plastic waste, than that generated through the consumption of the brands.
Committed to manage resources sustainably; your Company reduced its energy use by 49%,
carbon emissions by 58%, water use by 54% and water waste by 59% from 2004 to 2019. Your
Company continued to contribute to local communities and build enduring relationships with
about 4,600 suppliers, 1,700 distributors, 100,000 dairy farmers, 3,500 coffee farmers and
over 1,200 spice farmers.
With traceability, food safety and sustainability at its core and staying true to its
Purpose and Values, your Company reinforced its commitment to the consumer, community and
the planet, by creating value for all its stakeholders and establishing that business
benefits and societal impact are mutually inclusive. Your Company, by incorporating
sustainability into every aspect of its business, has reaffirmed its commitment as
business as a force for good.
Innovating and Renovating Prepared Dishes and Cooking Aids
The 'Prepared Dishes and Cooking Aids' business continued its strong performances
across MAGGI range of products. MAGGI Noodles, in the instant noodles category further
strengthened its leadership position in 2019, through a strong double-digit volume growth.
A disciplined regional intervention consisting of media, on-ground activation led to
penetration growth and distribution ramp-up. MAGGI Noodles continued its focus on
innovating and renovating its portfolio with the launch of MAGGI Nutrilicious Atta Noodles
made with a blend of 20 spices and herbs.
Your Company also launched MAGGI Fusian Noodles, a range of Asian flavours inspired
MAGGI Noodles, available in flavours such as Bangkok Sweet Chilli, Hong Kong Spicy Garlic,
Singaporean Tangy Pepper.
MAGGI expanded its offering in the ready-to-eat segment with the launch of MAGGI Upnna
and MAGGI Poha, providing convenience and taste to its consumers, especially millennials.
The cooking aids received encouraging consumer response for MAGGI Masala-ae-Magic
Seasonings with integrated media campaign, where consumers were encouraged to engage with
the brand and experience the product. The simple, natural ingredients inspire the
consumers to cook delicious, balanced meals. Reflecting your Company's core purpose, the
product, helps provide affordable nutrition for the whole family. Your Company's Sauces
business too expanded its portfolio to cater to the increasing level of experimentation in
accompaniment through the launch of Chilli Garlic Sauce under MAGGI Fusian range.
MAGGI also launched a website maggi.in, that positioned the brand as an 'ally in
everyday cooking' under the platform MAGGI Consumer Connections, engaging closely with the
brand and delivering on variety, convenience and balance to the food.
Building Breakfast Cereals
Your Company's breakfast H9RH cereals business under the NESPLUS brand retailed a range
of nutritious options to the Indian consumer. Each of these products are made with four
grains: wheat, rice, oats and the traditional Indian millet, jowar.
The variants include - Koko, Choco - Burst Fillows, Strawberry-Burst Fillows and Nutty
Honey Granola as well as cereal bars. The products grew in modern trade and e-commerce,
saw tremendous on-ground activation, with plans underway for innovation, renovation and
new launches.
Strengthening of Milk Products and Nutrition Portfolio
The Milk Products and Nutrition business focuses on nurturing a healthier generation,
enabling a healthier future, through scientific and nutritional expertise for individuals
and families at all stages of life.
The Milk Product and Nutrition business delivered strong results despite external
challenges linked to commodity price inflation. Your Company was able to mitigate some of
these challenges, amongst others, by a relentless focus on identifying efficiencies across
the value chain, passing on price increases where necessary, as well as innovation in the
portfolio.
Your Company expanded its presence in the Health Food Drinks category by bringing to
India the world's number 1 cocoa malt beverage MILO. Launched in powder form in select
markets, MILO has gained positive response from consumers and retailers. Your Company also
introduced Nestle a+ Banglar Mishti Doi inspired by the regional delicacy of West Bengal.
Your Company continued to inspire enthusiasts to try their hand at baking desserts by
offering recipe options with their trusted.
In its Healthcare Nutrition Business, marketed under the umbrella of Nestle Health
Science, your Company consolidated its portfolio and delivered growth. This growth was
driven by brand RESOURCE High Protein and RESOURCE Diabetic. Specialised nutrition brand
PEPTAMEN in the critical care segment also enabled an increase in market share. Your
Company also made an entry in Weight Management Category with the launch of OPTIFAST, a
first of its kind scientifically designed meal replacement diet for people with weight
concerns. This is an example of benefits from the continuous access to, amongst other
things, research and development.
Your Company believes breast milk provides the best nutrition for babies, and every
child should be exclusively breastfed for six months, followed by introduction of age
appropriate complementary feeding and breast milk until two years and beyond.
In the Infant Formula category, your Company re-launched LACTOGEN 1 with L. reuteri
(probiotics). In the specialized formula segment, Pre-NAN was relaunched with DHA
(Docosahexaenoic Acid) and ARA (Arachidonic Acid) and for the first time manufactured in
the Samalkha manufacturing factory of the Company.
In the Baby Foods Category, and in keeping with our line with the consumer trend
towards traditional millets becoming the modern super grains, your Company has launched
the first ever 'Ragi' variant under the brand CERELAC. In line with the growing Organic
food trend your Company launched a range of Organic Cereals under the CERELAC and CEREGROW
brands. Since two years, your Company has been providing support to farms where organic
practices are in place. The products are made from 100 percent organic ingredients and
have the 'India Organic' and 'Jaivik Bharat' certification. The CEREGROW Branded organic
cereals launch was supported with communication positioned on 'CEREGROW ka Poshan, Organic
ki Tasalli'.
Growing Coffee and Beverages Portfolio
Year 2019 was an exciting year for the Coffee and Beverages business as your Company
continued to focus on growing Coffee and Beverages market.
NESCAFE led the journey of bringing in new consumers into coffee category through
several initiatives and activations. This resulted in robust brand growth through the year
that was reflected in strong gains in category household penetration for NESCAFE and in
its market share. NESCAFE Classic continued its journey of building strong connections
with consumers. The campaign "Badal Life ki Raftaar" was leveraged to continue
building relevance for coffee amongst the youth. On-ground, activations such as sampling
and college festivals enabled the brand to connect with youth in a relevant and
experiential manner.
NESCAFE SUNRISE moved ahead in its journey of driving a differentiated brand in the
core coffee market in the southern part of India.
Ml NESCAFE continued its, premiumisation journey with ESCAFE Gold and NESCAFE E, a
smartphone-connected Tj M coffee-making mug, which is compatible with products from the
NESCAFE portfolio, by reaching out to consumers seeking premium products across the
country through stores as well as e-commerce.
To provide a delightful cafe-like coffee experience, your Company renovated NESCAFE
Cappuccino range with an indulgent frothy recipe and a premium look.
NESCAFE also launched several packs to leverage the e-commerce channel. These packs
included trendy merchandise like NESCAFE branded portable travel flask, foamer, the iconic
red mug, a special cold coffee mason jar to elevate the coffee experience of the consumers
and build relevance for coffee. The brand entered new spaces of gifting during the
festival of Rakshabandhan with the "NESCAFE Coolest Cold Coffee Kit" and during
Diwali with the "NESCAFE Ultimate Coffee Kit" and the "NESCAFE Gold Coffee
Connoisseur's Kit".
The strong consumer acceptance and category transformation impact of NESCAFE
Ready-to-Drink cold coffee and milk beverage was recognised when it was awarded the
Breakthrough Innovations Awards for India in the Emerging Play category by Nielsen, a
global retail measurement and data analytics company.
Further building on brand NESTEA, your Company launched NESTEA Ready-to-Drink Iced Tea
in tetra-pack format in Peach and Lemon flavours.
More offerings in the Chocolate and Confectionery Portfolio
The Chocolates and Confectionery business delivered double digit growth and market
share gains in 2019. This was aided by a combination of rapid acceleration on the premium
segment and Hr continued momentum in the core mainstream segment with increase
The focus on innovation continued HEal with multiple 'category first' launches across
key brands. KITKAT accelerated its premiumisation journey with the launch of the most
indulgent variant KITKAT DESSERT DELIGHT Rich chocolate fudge. This will enable the brand
to tap new opportunities in the gifting and sharing space.
By leveraging your Company's access to global research and r development
MUNCH set another innovation benchmark in the coated wafer category with the launch of
MUNCH CRISP-POP. MUNCH CRISP-POP combines the exciting taste of caramel popcorn with the
crunch of MUNCH. MILKYBAR MOOSHA Cocoa Crispies builds on to the familiar creamy taste of
MILKYBAR with added crispy cocoa crispies giving a unique combination of creamy and
crispy.
Your Company continued its focus on portionability with packs/formats that helped
consumers make informed choices. Most of the products per serve provide approximately
under 100kcal of energy. The 'light treat' wafer segment witnessed fastest growth in the
portfolio.
With continued investments in visi-coolers and distribution infrastructure, your
Company increased its distribution reach in both urban and rural markets improving access
of its brands to consumers.
Nestle Professional -Out-of-Home business continued to grow steadily in 2019 with a
near double digit growth. This growth was driven by improved performance of products
across key Out of Home channels such as educational institutes, airlines, offices as well
as the food service channels such as hotels and restaurants.
Significant steps were taken by the beverages business to premiumise the portfolio
through the launch of advanced and versatile beverage solutions offering widest range of
beverage menu in the industry based on NESCAFE GOLD. The launch of new NESCAFE Office
corner, with premium hot and cold beverages at affordable prices, was recognized as a
unique proposition in the industry.
Your Company's 'Out of Home' business extended its foods portfolio by launching new
products in the 'Ready to eat' and 'Food Solutions' segment. With the launch of MAGGI Poha
and MAGGI Upma, in an
'on the go' format, your Company added Indian snacking options for the consumers
targeting the transport and education channel.
New products like MAGGI Liquid Seasoning and MAGGI PROFESSIONAL Thai Curry Pastes (100%
Vegetarian Red & Green Curry Pastes) were also launched as food solutions to
strengthen presence in the Pan-Asian Restaurant segment. Your Company also engaged with
200+ budding chefs from various reputed hotel management institutions through events like
Young Culinary Talent, Chef Master Classes and culinary contests. Your Company
strengthened engagement with 3000+ key opinion leaders. Your Company under the umbrella of
ONE (One Nestle Experience) made a new beginning with the setting up of NESCAFE &
MAGGI kiosks in various channels. Your Company, through a franchise business model
operates in approximately 476 Kiosks that are visited by over 14.4 million consumers every
year.
To address the issue of plastic waste, your Company has introduced wooden forks, kotka
paper cups and paper bowls at the kiosks.
Awards and Recognitions
Your Company received awards at various industry platforms in the area of corporate
management, marketing, advertising, digital engagement, packaging, human resource
development and corporate social responsibility. Some awards are listed below:
• Mr. Suresh Narayanan recognized as the Best CEO in the FMCG category by Business
Today.
• Nestle India won "Best Overall Excellence in CSR" at the National CSR
Leadership Awards 2019.
• Three awards won at Nielsen Breakthrough Innovation Awards for NESCAFE
Ready-to-Drink (Emerging Play), MAGGI Masalas of India and KIT KAT Strawberry Duo (both
Short Term Play).
• NESCAFE bagged Effie, silver for its campaign 'Badal Life Ki Raftar'.
• 'AskNestle/NINA' won Gold for Most Innovative Mobile Campaign of the year at
MOBEXX Awards 2019.
• RESOURCE High Protein, won The Global Emerald Award, from the Nestle Health
Science Global Recognition Program.
• Nestle Health Science won Nutrition and
Wellness Awards 2019 by CIMS Medical
• MAGGI won at the 3rd edition of The Advertising Club's MARQUEES
Awards 2019 in the FMCG (Foods) category.
• Nestle India Supply Chain won Leadership Awards 2019 during 13th ELSC
Leadership Conclave in the category of "Customer Intimacy & Service
Excellence" Company of the Year.
• NESCAFE E won Gold at The Great Lifestyle Brands Awards.
• Pantnagar Factory, Ponda Factory and NQAC Lab in the Moga Factory of the Company
were awarded by Confederation of Indian Industries for Excellence in Food Safety and Food
Testing.
• Moga Factory of the Company was awarded The Golden Peacock National Quality
Awards held at Dubai (UAE).
• Moga Factory of the Company received "Golden Peacock Occupational Health
& Safety Award" for the year 2019.
• Samalkha Factory of the Company won the first prize in the 6th CII
Safety competition 2019 for the Northern region.
• Ponda Factory of the Company won the "Gomant Suraksha Puraskar" Award.
• Tahliwal Factory of the Company won Gold Award in the 6th National
Awards for Manufacturing Competitiveness.
Employee Focus
In order to build a sustainable profitable business, your Company invested in
programmes equipped to adopt new skills that can adapt to the fast-changing market place.
Your Company also took significant steps in the area of diversity and inclusivity.
Your Company was recognized as one of the top three FMCG Companies in business schools.
Your Company also launched 'SustaiNE', a first of its kind innovation challenge to
encourage ideas on sustainable packaging solutions for a better tomorrow.
In 2019, your Company made successful lateral hires and strengthened its position as an
'Equal Opportunity Employer'. Your Company also saw a strong representation of women both
as managers and in the field force.
In 2019 Women force constituted 22% of the total field force, 78% of the management
trainees, 54% of the technical trainees, 75% of the sales trainees.
In keeping with its commitment to diversity and inclusivity, your Company organized
'Unconscious Bias' programs for employees, created provision of sanitary pad dispenser and
disposal units in all factories and sales offices and organised sessions on menstrual
health in factories. Your Company enhanced travel benefits for mothers and instituted
creche reimbursement policy all of which contributed towards the creation of an inclusive
environment that led to an increase in representation of women employees.
Sales
Your Company has strengthened its urban distribution and services to channel partners
for all its brands and SKUs. To drive visibility and efficiency, your Company focused on
high quality channel-level service requirements and ensured market coverage to meet the
needs of retailers and partners. In house subject matter experts were trained with global
expertise to strengthen the field sales force. Festivals provided business opportunities
to engage directly with shoppers and consumers through activation at stores.
The Indian rural market created opportunities for robust route to market model. The
project 'Unlocking rural market' helped in building rural footprint by reaching the
customers directly, the usage of various point of sale material improved the visibility at
retail outlets. Participation in local Haat activities helped in engaging rural consumers,
through customized plans. The urban and rural push on direct distribution enabled your
Company in its promise of continuous excellence.
E-Commerce channels were leveraged for high impact product launches, category building
for premium brands through targeted media and communications.
Your Company promised the customer product freshness on the shelves by ensuring quality
in value chain. The entire route to market from distribution center to distributor
warehouse to retailer shelf was monitored and quality in service was improved.
Your Company used technology for efficient and effective operations. It helped in
building the sales enablers like productivity, SKU per call. The geo tagging of retailer
and geo compact salesman market coverage plan, helped reducing the waste in route to
market.
Management Analysis
Review of economic scenario and outlook
India has gained substantially in the World Bank's Ease of Doing Business rankings by
moving up from the 142nd position in 2014 to the 63rd position in
2019, thereby progressing on seven out of the ten parameter. This is despite the fact that
in 2019, private consumption, private investments and exports slowed down. Rural wages,
tightening of lending conditions and rising unemployment contributed to low demand for
goods and services. Exports also remained volatile as a result of global uncertainties
around trade and investments and geopolitical issues. Credit to micro, small and medium
enterprises was affected. Uncertainty on employment impacted consumer, investor and
corporate confidence.
The fall in domestic demand and low international crude oil kept the current account
deficit under control and FDI picked up for a few quarters as India remained an attractive
investment destination.
In response to the slowdown, the Government made policy announcements to boost supply
and demand and the investment climate.
Additionally, the Reserve Bank of India cut its benchmark rates by 0.85% to stimulate
private investment. The government reduced corporate tax rates. Steps were taken towards
bank consolidation, to add robustness to the banking system and improve flow of credit to
private sector.
These included liberalization of FDI norms for select sectors, rollback of surcharge on
foreign portfolio investors, incentives to support several industries, bank consolidation
to increase capital inflows and reinvigorate private investments and hiring for boosting
the economy.
Opportunities and Risks
With multiple product offerings and brands, your Company operates in a dynamic
environment, where the food and beverages industry is transforming rapidly.
With the consumer at the core, it is your Company's effort to meet the changing
preferences of the diverse consumers. There is greater demand for healthier products that
are locally inspired. The emerging millennial consumer is not only technology savvy, but
is more discerning, especially with respect to health and wellness. Our endeavor is to
spot trends, market products suiting consumer needs and to communicate with them regularly
through a media platform of their choice. Your Company has been actively introducing new
products, with a focused social media and digital marketing approach. The Company's access
to global research and development and expertise is invaluable in these endeavors.
With increasing internet penetration and tech savvy consumer, embedding technology in
the organizational processes is important. With sales automation and specialised digital
acceleration, your Company has taken significant steps to provide solutions for its
diverse consumer base. "AskNestle" is one such app-based initiative for child
nutrition needs.
Your Company is impacted by the constant fluctuations in commodity and fuel prices. It
is your Company's endeavor to source the right material, that is of high quality and
constantly keep track of emerging costs to take corrective action at the right time.
Economic slowdown impacts consumer demand. However, your Company has managed to show
steady growth by deploying strategies suited for the times, thus bucking the trend.
Building brand community through innovative marketing strategies are adopted to reach
consumers who also have similar social and cultural preferences. Changing consumer
behavior poses a constant challenge and proactive steps are being taken to maintain brand
loyalty and market share. Your Company has strong focus on consumer safety and health and
has robust supply chain management to ensure proper handing, storage and transportation,
ensuring traceability along the chain as well as ensuring the freshest stocks reach the
consumer in the best conditions.
The technological advancement and IOT (Internet of things) has changed the supply chain
process completely in today's world. This is a boon for the FMCG space since it helps to
prevent situations wherein stocks at retailer are exhausting or a new product needs to be
made available immediately. Your Company ensures process optimization at its core
operations improving growth prospects, removing bottlenecks and ultimately enhancing
bottom line of the Company.
Your Company takes climate change and environmental protection seriously. As mentioned
in other sections of the Board's Report, your Company has undertaken considerable work on
conserving resources like energy, water, and ensured minimized impact on the environment.
With depleting natural resources due to increased consumption, safeguarding the
environment is necessary. Climate change is one of the biggest threats we face as a
society and is also one of the greatest risks to the future of business. To address this
issue, your Company is transforming its business to reduce Green House Gases emissions,
end deforestation, reduce food loss and waste and improve soil health. Your Company is
continuously reducing waste and emissions while simultaneously optimizing on the
production measures.
Your Company also maintains a BCP (Business Continuity Planning) process to prevent and
to recover from any future potential threat or disaster to ensure smooth functioning of
the business. Proper drills and advance planning is undertaken with inputs from all the
key stakeholders associated with it.
Quality and Safety
Quality and Food Safety are highest priority for your Company. The health of consumers
is of paramount importance. To ensure this, your Company has systems and processes in
place that ensures all products undergo stringent quality checks. In line with zero defect
mindset, during 2019, a special focus was given towards upstream raw material vendors for
products such as wheat flour, tomato and chilly paste and sugar, as well as at your
Company's factories ensuring right quality and compliant product.
Your Company developed a comprehensive and systematic programme on machinery safety for
the benefit of the employees to prevent any untoward incident. All the offices and
factories of your Company are certified under Safety and Health Management System that
complies with ISO 45001:2018 & Environment Management System that complies with ISO
14001:2015.
Your Company has also taken considerable measures to promote road safety by conducting
awareness campaigns for the employees as well as third party transport service drivers.
Taking a holistic approach towards employee wellness, your Company introduced several
health initiatives for its employees such as early screening and programs that support
healthier lifestyle choices and also provide health risk assessment.
Environment
The aim of your Company is to develop business while improving its environmental
performance in order to create a more sustainable future. In order to achieve this, your
Company continues to focus on measures for the conservation and optimal utilization of
energy in all the areas of its operations. Factories are encouraged to consistently
improve operational efficiencies, minimize consumption of natural resources and reduce
water usage, energy usage and carbon emissions while maximizing production volumes. From
the period, 2004-2019, for every tonne of production, your Company has reduced the usage
of energy by around 49%, reduced water usage by around 54%, reduced greenhouse gases
generation by around 58% and the generation of waste water by around 59%.
Waste for Disposal: Your Company is continuously working towards reduction in waste
for disposal.In 2019, two more factories converted to zero waste to landfill. Now all
eight factories have proudly achieved the coveted status of "zero waste to
landfill."
Reduction in Green House Gases emissions:
The Nanjangud Factory in the State of Karnataka has entered into long term power
purchase agreements with two solar power developers to supply 24.7 Mio KWH (units) per
annum, which is 71% of the total energy requirement. This initiative has reduced Green
House Gases emissions by 22,500 tonnes per annum in 2019 and also saved costs.
Packaging and Plastic waste management:
Plastics play a key role in preventing food wastage teifci and ensuring the quality and
safety of food products.
However, the leakage of plastic waste into the environment has become a significant
environment !* jM challenge. Your Company is tvlmr m strongly committed to
minimizing the impact that plastic has on the environment and ensuring right disposal or
reuse of packaging. Your Company is determined to look at every option to solve complex
packaging challenges by embracing multiple solutions. The vision of your Company is that
none of its product packaging, including plastics, should end up in landfill or as litter
and that 100% of packaging is reusable or recyclable by 2025.
Collaboration and collective action are key for transforming how packaging is managed
today. Recognizing this, your Company is working with various stakeholders and partners to
shape a waste-free future. Your Company is one of the founder members of the Industry
Consortium WECARE (Waste Efficient Collection and Recycling Efforts) that is represented
by environmentally conscious businesses. Your Company has also fulfilled its Extended
Producers Responsibility (EPR) towards responsibly managing the post-consumer plastic
waste generated by the products. In 2019, your Company extended its EPR projects to 20
states and union territories, such as Goa, Gujarat, Madhya Pradesh, Rajasthan, Tamil Nadu,
Uttar Pradesh, Uttarakhand, West Bengal, Maharashtra, Andhra Pradesh, Delhi, Kerala,
Orissa, Assam, Bihar, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka and
Punjab. It responsibly managed 15,979 MT of post-consumer plastic waste for its end of
life.
Your Company launched, 'Plastic Express' a mobile van, that collects dry plastic waste
from 'MAGGI Points' in Mussoorie and dry waste for its end of life. The year-long project
aims at engaging around 200 'MAGGI Points' in the hill town for collecting and disposing
plastic waste responsibly.
In order to bring about a behavioural change to dispose plastic waste responsibly, your
Company introduced an integrated communications campaign titled '2 Minute Safaai Ke Naam'
(2 minutes for cleanliness) in 2018, that was extended in 2019 to the 'Kumbh Mela'. This
campaign brought together multiple stakeholders to address the issue of proper plastic
waste disposal and also provided consumers with samplings in an used MAGGI Cup, that were
given in exchange for empty MAGGI Cuppa Noodles pack.
Achieving waste segregation at source is key to establish sustainable waste management HiUdaari
systems. Your Company has initiated a project titled "HILLDAARI" in
Mussoorie, Dalhousie, and Nainital that aims at empowering waste workers and also focuses
on working collectively with local stakeholders like urban local bodies, institutions,
residents, households, waste generators, and waste workers to raise awareness about
anti-littering and segregation at source.
Supply Chain
Your Company in 2019 intensified its commitment towards customer and consumer
centrality, operational efficiencies, waste reduction and delivery of fresh products.
By embracing digital transformation in operations, your Company has adopted various
forms of digital tools, such as consumer app to drive engagement with partners leading to
speed of response to customers and transparency of information in the value chain
processes and making product delivery simpler and faster.
In 2019, your Company has introduced web based mobile App that monitors and provides
real time data on product availability and freshness from retail outlets that are
geo-mapped to the network.
Nestle Business Excellence
Your Company continued to strengthen its business through Nestle Business Excellence to
simplify and standardize processes to drive efficiency and provide high quality services
in an integrated and seamless manner. In 2019, your Company, by using technology and data
further eased processes and added speed to how it does business. Your Company invested in
its people to enhance their capabilities. A new Centre of Competence was setup to support
end-to-end activities for Order to Cash - from customer order to invoice payment, Source
to Pay - from sourcing materials and services to paying vendors, Record to Report - from
recording transactions to financial and performance reporting, Hire to Retire - from
attracting talent to enabling employees on their Nestle journey.
The initiative of Nestle Continuous Excellence (NCE) enabled successful transitions
through people: alignment, leadership development and Lean ways of working. Technology,
data and systems were key enablers within each end-to-end activity to deliver speed and
quality of execution. Your Company is constantly working towards transforming end-to-end
processes and leveraging technology to simplify operations and enhance its capabilities to
retain the competitive edge.
Cautionary Statement
Statements in this Report, particularly those which relate to Management Discussion and
Analysis as explained in the Corporate Governance Report, describing the Company's
objectives, projections, estimates and expectations may constitute 'forward looking
statements' within the meaning of applicable laws and regulations. Actual results might
differ materially from those either expressed or implied in the statement depending on the
circumstances.
Directors' Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts for the year ended 31st
December, 2019, the applicable accounting standards have been followed and no material
departures have been made from the same.
b) 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 31st December, 2019 and of the
profits of the Company for that period.
c) they have taken proper and sufficient care 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.
d) they have prepared the annual accounts on a going concern basis.
e) they have laid down internal financial controls to be followed by the Company and
that such internal financial controls are adequate and were operating effectively and
f) they have devised proper systems to ensure compliance with the provisions of all
applicable laws and that such systems were adequate and operating effectively.
Directors and Key Managerial Personnel
Pursuant to the Retirement Policy of the Non-Executive Directors of the Company, Mr.
Ashok Kumar Mahindra, Independent Non-Executive Director of the Company had retired with
effect from 31st March, 2019. The Directors wish to place on record their
appreciation for the contribution made by Mr. Mahindra for over a decade as a
distinguished Independent Non-Executive Director of the Company. During the year, Ms.
Roopa Kudva was appointed, as an independent director of the Company for five consecutive
years with effect from 164 January, 2019 until 31st December, 2023
and Mr. Rajya Vardhan Kanoria was re-appointed as Independent Non-Executive Director for
another term of five years with effect from 13th May, 2019 to 12th
May, 2024. The members approved the aforesaid appointment of Ms. Roopa Kudva and
re-appointment of Mr. Rajya Vardhan Kanoria at the 60th Annual General Meeting
held on 25th April, 2019.
The members of the Company re-appointed Mr. Shobinder Duggal as a whole-time Director,
designated as Executive Director-Finance & Control and Chief Financial Officer, of the
Company from 10th May, 2019 until 31st December, 2019 through postal
ballot. Your Board of Directors at its meeting held on 8th November, 2019 noted
that the term of Mr. Duggal as a Whole-time Director will come to an end on 31st
December, 2019 and on the recommendation of the Nomination and Remuneration Committee,
approved Mr. Duggal's continuation as the Key Managerial Personnel, designated as Chief
Financial Officer, of the Company upto 29th February, 2020. The Directors wish
to place on record their appreciation for the contribution made by
Mr. Duggal during his long association of over a decade and a half as distinguished
whole-time director on the Board of the Company. The term of Mr. Suresh Narayanan, as
Managing Director, which was for a period of five years from 1st August, 2015
is to expire on 31st July, 2020. Mr Suresh Narayanan was also appointed as the
Chairman of the Company with effect from 29th October, 2015 in addition to his
responsibility as the Managing Director of the Company by the Board of Directors. On the
recommendation of Nomination and Remuneration Committee, the Board of Directors has
recommended the re-appointment of Mr. Suresh Narayanan as Managing Director of the Company
for a period of five years from 1st August, 2020 till 31st July,
2025 for the approval of the shareholders in its forthcoming Annual General Meeting.
In terms of the Articles of Association of the Company, on the recommendation of the
Nomination and Remuneration Committee, the Board of Directors, at its Meeting held on 8th
November, 2019, appointed Mr. David Steven McDaniel as an Additional Director and
whole-time Director, designated as "Executive Director - Finance & Control and
Chief Financial Officer" of the Company with effect from 1st March, 2020
for a term of five consecutive years upto 28th February, 2025, subject to
approvals.
Mr. David McDaniel holds office from 1st March, 2020 upto the date of the
forthcoming Annual General Meeting and is eligible for the appointment. Based on the
recommendation of the Nomination and Remuneration Committee, the Board of Directors has
recommended the appointment of Mr. David McDaniel as Whole-time Director designated as
"Executive Director - Finance & Control and CFO" for a term of five years
from 181 March, 2020 till 28th February, 2025 for the approval of
the shareholders in its forthcoming Annual General Meeting. The same shall be subject to
approval of the Central Government, as he is non-resident in India. Mr. Martin Roemkens
shall retire at the forthcoming Annual General Meeting by rotation and being eligible
offers himself for re-appointment. Details of the proposal for appointment/re-appointment
of Directors are mentioned in the Explanatory Statement of the Notice of the 61st
Annual General Meeting of the Company pursuant to Section 102 of the Companies Act, 2013.
Their appointments are appropriate and in the best interest of the Company.
All the Independent Directors of your Company have submitted the declaration confirming
that they meet the criteria of independence as prescribed under the Act and the Listing
Regulations are not disqualified from continuing as Independent Directors.The Board is of
the opinion that the Independent Directors of the Company possess requisite
qualifications, experience and expertise and they hold highest standards of integrity. The
Independent Directors of the Company have confirmed compliance of relevant provisions of
Rule 6 of the Companies (Appointments and Qualifications of Directors) Rules, 2014. The
Nomination and Remuneration Committee had adopted principles for identification of Key
Managerial Personnel, Senior Management including the executive directors which are based
on "The Nestle Management and Leadership Principles" and "Nestle Leadership
Framework". The Appointment and Remuneration Policy of the Company includes criteria
for determining qualifications, positive attributes and independence of a director and
policy relating to the remuneration of Directors, Key Managerial Personnel and other
employees is framed with the object of attracting, retaining and motivating talent which
is required to run the Company successfully. The same is available on the website of the
Company at the link: https://www.nestle.in/investors/policies
The details of familiarization programmes to Independent Directors with the Company,
their roles, rights, responsibilities in the Company, nature of the industry in which the
Company operates, business model of the Company and related matters are available on the
website of the Company at the link: https://www.nestle.in/investors/directorsandofficer
familiarisation-programme
The Company has devised a formal process for annual evaluation of performance of the
Board, its Committees and Individual Directors ("Performance Evaluation") which
include criteria for performance evaluation of non-executive directors and executive
directors as laid down by the Nomination and Remuneration Committee and the Board of
Directors of the Company. It covers the areas relevant to the functioning as Independent
Directors or other directors, member of the Board or Committee of the Board. The
Independent Directors carried out annual performance evaluation of the Chairman and
Executive Directors. The Board carried out annual performance evaluation of its own
performance. The performance of each Committee was evaluated by the Board, based on report
on evaluation received from respective Committees. The Company engaged a leading HR
Consulting Firm for compilation of the report and feedback received from the Board
members, Committee members and directors in the questionnaires circulated and for
identifying key inferences and observations with respect to Performance Evaluation. A
consolidated report was shared with the Chairman of the Board for his review and giving
feedback to each Director.
Corporate Social Responsibility
During the year under review, the Corporate Social Responsibility Committee comprised
of Dr. (Mrs.) Swati A. Piramal (Chairperson),
Ms. Rama Bijapurkar, Independent Non-executive Director and Mr. Suresh Narayanan,
Chairman and Managing Director of the Company. The terms of reference of the Corporate
Social Responsibility Committee is provided in the Corporate Governance Report. Your
Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is
available on the website of the Company at https://www.nestle.in/investors/policies Annual
Report on CSR activities as required under the Companies (Corporate Social Responsibility
Policy) Rules, 2014 has been appended as Annexure 2 and forms part of this Report.
In terms of Section 135 of the Companies Act, 2013 read with Companies (Corporate
Social Responsibility Policy) Rules, 2014 as amended ("CSR Rules") and in
accordance with the CSR Policy, during the year 2019, the Company has spent above two
percent of the average net profits of the Company during the three immediately preceding
financial years. The details are provided in the Annual Report on CSR activities. In
addition to the above, the Company has been implementing societal activities since many
decades under umbrella of Creating Shared Value activities which have not been reckoned
for arriving at the spends as per CSR Rules.
Some key initiatives that your Company has been engaged in are as follows:
NESTLE HEALTHY KIDS Programme: The Nestle
Healthy Kids Programme has been developed with a focus to raise nutrition, health and
wellness awareness among adolescents. The programme contributes towards overall
development of adolescents as well as encourages healthier lifestyle, by arming them with
knowledge that impacts them in a meaningful way. The programme is being conducted since
2009 and is helping raise awareness regarding good nutritional and cooking practices, good
hygiene and promoting physical fitness. The programme is implemented through two modes,
one is in partnership with six regional universities and the second is with NGO Magic Bus
India Foundation. The programme celebrated its 10th year of implementation and
has expanded significantly since its inception, incorporating pertinent elements like
plastic waste management etc. in the existing curriculum as well as including parents and
teachers as direct beneficiaries in the programme.
Till year 2019, over 300,000 adolescents across 23 states have been encouraged to live
healthier lives through Nestle Healthy Kids Programme.
Project Jagriti: As part of the commitment to inspiring people to lead healthier lives
and providing educational programmes, your Company, in partnership with MAMTA Health
Institute for Mother and Child, implemented Project Jagriti. The project focuses on
developing community support for improved health and nutrition outcomes among adolescents,
young couples and caregivers while improving the uptake of public health services. In
2019, your Company moved to a system-led approach with a focus on counseling and
development of front- line workers such as Accredited Social Health Activists (ASHA) and
Anganwadi Workers etc. This approach is useful in populations that are deficient in
knowledge and unaware of their health needs and rights. Till year 2019, the programme has
reached out to 5 million beneficiaries - 1.7 million direct and impacting 3.3 million
beneficiaries indirectly across 8 States/Union Territories.
Project SERVE SAFE FOOD: Recognizing the potential of street food vending as an
important source of livelihood, your Company joined hands with NGO Nidan and National
Association of Street Vendors of India (NASVI), to develop programmes to train street food
vendors on subjects such as health, hygiene, food handling, food safety, personal hygiene,
cart hygiene and garbage disposal. Till 2019, this programme has been implemented across
17 states/Union Territories reaching over to 20,000 street food vendors.
Project Vriddhi: Strengthening your Company's commitment towards building a healthier
society and positively impacting the lives of people in marginalised communities, your
Company in collaboration with S M Sehgal Foundation, launched Project 'Vriddhi', an
initiative towards village adoption. The three-year project is aimed at improving the
livelihoods of 1,500 people in the village of Rohira in Nuh district, Haryana, for
bringing a positive change in the lives of the locals.
The project focuses on improving access to clean drinking water for communities,
promoting water-saving irrigation practices, increasing awareness on nutrition, enhancing
farm productivity and providing healthy learning environment in schools by improving
hygiene and sanitation practices.
Business Responsibility Report
Nestle's approach to business is Creating Shared Value as used by your Company and it
is about the impact of the business and engagement through it. Your Company is mindful of
the needs of the communities and works to make a positive difference and create maximum
value for the society. It has been conducting business in a way that delivers long-term
shareholder value and benefits society.
As stipulated under the Listing Regulations, the Business Responsibility Report
describing the initiatives taken by the Company from an environmental, social and
governance perspective is attached in the format prescribed as Annexure 3 and forms
integral part of the Annual Report.
Statutory Auditors and Auditors' Report
In terms of Section 139 of the Companies Act, 2013, read with the Companies (Audit and
Auditors) Rules, 2014, Members of the Company in 58th Annual General Meeting
held on 11th May, 2017 approved the appointment of M/s. B S R and Co. LLP,
Chartered Accountants (ICAI Registration No-101248W/W-100022), as the Statutory Auditors
of the Company for an initial term of 5 years i.e. from the conclusion of 58th
Annual General Meeting till the conclusion of 63rd Annual General Meeting of
the Company. The Statutory Auditors have confirmed they are not disqualified from
continuing as Auditors of the Company.
The Report given by M/s. B S R and Co. LLP, Chartered Accountants on the financial
statement of the Company for the year 2019 is part of the Annual Report. The Notes on
financial statement referred to in the Auditors' Report are self-explanatory and do not
call for any further comments. The Auditors' Report does not contain any qualification,
reservation, adverse remark or disclaimer. During the year under review, 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
The Company is required to make and maintain cost records for milk powder products as
specified by the Central Government under sub-section (1) of section 148 of the Act.
Accordingly, the Company has been making and maintaining the records as required.
In terms of Section 148 of the Act read with Companies (Cost Records and Audits) Rules,
2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath
Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible, as Cost
Auditors of the Company, to carry out the cost audit of milk powder products manufactured
by the Company falling under the specified Customs Tariff Act Heading in relation to the
financial year ending 31st December, 2020. The Company has received their
written consent that the appointment is in accordance with the applicable provisions of
the Act and rules framed thereunder.The Cost Auditors have confirmed they are not
disqualified to be appointed as the Cost Auditors of the Company for the year ending 31st
December, 2020.
The remuneration of Cost Auditors has been approved by the Board of Directors on the
recommendation of Audit Committee and in terms of the Companies Act, 2013 and Rules
thereunder requisite resolution for ratification of remuneration of the Cost Auditors by
the members has been set out in the Notice of the 61st Annual General Meeting
of your Company.
Secretarial Auditors and Secretarial Standards
The Secretarial Audit was carried out by M/s. S.N. Ananthasubramanian & Co.,
Company Secretaries (PCS Registration No. 1774) for the financial year ended on 31st
December, 2019.
The Report given by the Secretarial Auditors is annexed as Annexure 4 and forms
integral part of this Report. The Secretarial Audit Report is self-explanatory and do not
call for any further comments. The Secretarial Audit Report does not contain any
qualification, reservation, adverse remark or disclaimer. During the year under review,
the Secretarial 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.
In terms of Section 204 of the Companies Act, 2013 read with the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014, the Audit Committee recommended and
the Board of Directors appointed M/s. S.N. Ananthasubramanian & Co., Company
Secretaries (PCS Registration No. 1774) as the Secretarial Auditors of the Company in
relation to the financial year ending 31st December, 2020. The Company has
received their written consent that the appointment is in accordance with the applicable
provisions of the Act and rules framed thereunder. The Secretarial Auditors have confirmed
they are not disqualified to be appointed as the Secretarial Auditors of the Company for
the year ending 31st December, 2020.
During the Financial Year, your Company has complied with applicable Secretarial
Standards i.e. SS-1 and SS-2, relating to "Meetings of the Board of Directors"
and "General Meetings", respectively.
Meetings of the Board
Eight Meetings of the Board of Directors were held during the year. The particulars of
the meetings held and attended by Directors are detailed in the Corporate Governance
Report.
Extract of Annual Return
The extract of annual return in Form MGT 9 as required under Section 92(3) of the
Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules,
2014 is available on the website of the Company at the link:
https://www.nestle.in/investors/stockandfinancial s/annualreturns
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during the
financial year ended 31st December, 2019 are as follows: Purina PetCare India
Private Limited (Fellow Subsidiary): Rs. 150 Million at the interest rate of 6.48 % per
annum for general business purpose (Loan outstanding at the end of the year was Nil). For
details of investments, please refer note no. 9 forming part of financial statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is also
available on Company's website at https://www.nestle.in/investors/policies This policy
deals with the review and approval of related party transactions. The Board of Directors
of the Company has approved the criteria to grant 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 at arm's length. All related party
transactions are placed before the Audit Committee for review and approval.
All related party transactions entered during the financial year 2019 were in ordinary
course of the business and were on an arm's length basis. In terms of the Act, no material
related party transactions were entered during the Financial Year by your Company. 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. Members may refer to
note no. 44 to the financial statement which sets out related party disclosures pursuant
to IND AS-24.
In terms of Regulation 23(4) and other applicable provisions of the Listing
Regulations, the members of the Company at its 60th Annual General Meeting held
on 25th April, 2019 approved the Ordinary Resolution ('Ordinary Resolution'),
inter alia, for continuation of the payment of general licence fees (royalty) by the
Company to Societe des Produits Nestle S.A. ("the Licensor"), being a related
party, at the rate of 4.5% (four and a half percent), net of taxes, of the net sales of
the products sold by the Company as per the terms and conditions of the existing General
Licence Agreements ("GLAs"), notwithstanding that the transaction(s) involving
payments to the Licensor with respect to general licence fees (royalty), during any
financial year including any part thereof, is considered material related party
transaction(s) being in excess of the limits specified under Regulation 23(1A) of the
Listing Regulations at any time. In terms of the Listing Regulations, no related party
voted on the Ordinary Resolution. The Ordinary Resolution is effective from 1st
July, 2019 and approval of members shall be sought every 5 (five) years in compliance with
the applicable laws and regulations.
Risk Management
The Board of Directors had constituted Risk Management Committee (RMC) to identify
elements of risk in different areas of operations and to develop policy for actions
associated to mitigate the risks.
The RMC on timely basis informed members of board of directors about risk assessment
and minimization procedures. In the opinion of the RMC, there are no such risks, which may
threaten the existence of the Company. The details of Risk Management Committee are
included in the Corporate Governance Report.
Public Deposits
Your Company has not accepted any Public Deposits under Chapter V of the Companies Act,
2013.
Significant and Material orders passed by the Regulators /Courts/Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunals
which impacts the going concern status and Company's operations in future.
Complaint filed in National Commission
The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before
the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI
Noodles in the past, your Company has indulged in unfair trade practice, sold defective
goods to the public and sold goods which will be hazardous. Complaint seeks compensation
of Rs. 2,845.5 million and punitive damages of Rs. 3554.1 million. Your Company has
challenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had 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.
Audit Committee
During the year 2019, Mr. Rajya Vardhan Kanoria, Independent Non-Executive Director was
appointed as the Chairman of Audit Committee, effective from 1st April, 2019,
in place of Mr. Ashok Kumar Mahindra, who ceased to be Chairman of the Audit Committee
upon his retirement as a Director of the Company. The Audit Committee was reconstituted
and Ms Roopa Kudva, Independent Non-Executive Director, was appointed as member of the
Audit Committee with effect from 14th February 2019. Dr. Rakesh Mohan,
Independent Non-Executive Director is other member of the Committee. Accordingly, Audit
Committee comprises Independent Non-Executive Directors, namely, Mr. Rajya Vardhan Kanoria
(Chairman), Dr. Rakesh Mohan and Ms. Roopa Kudva.
Powers and role of the Audit Committee are included in Corporate Governance Report. All
the recommendations made by the Audit Committee were accepted by the Board of Directors.
Vigil Mechanism
The Vigil Mechanism of the Company is governed by significant documents "The
Nestle Corporate Business Principles", "The Nestle Management and Leadership
Principles", "Nestle Code of Business Conduct" and "Nestle India Vigil
Mechanism/ Whistle-blower Policy". The documents are available on Company's website
at https://www.nestle.in/investors/policies The said mechanism is available to the
Director(s)/ Employee(s), who can report to the Company Secretary, on a confidential
basis, any practices or actions believed to be inappropriate or illegal under the Nestle
India Code of Business Conduct ("the Code"). The Code/ Policy provides for
adequate safeguards against victimization of director(s)/ employee(s) who avail of the
mechanism and also provides for direct access to the Chairman of the Audit Committee in
exceptional cases. It is affirmed that no person has been denied access to the Audit
Committee. As an additional facility to all the Directors and Employees of the Company,
the Company under the Code provides Integrity Reporting System ("IRS"), an
independent third party operated free phone and web based facility for the directors and
employees of the Company across all locations.
The details of IRS along with FAQs are available to the Directors and Employees on the
Company's intranet portal. Further, the Company has appointed Ombudsman for Infant Code,
under which employees can report Infant Code violations directly to the Ombudsman, with
adequate safeguard to protect the employee reporting. The Company also provides an
independent third party operated free phone and web based facility, "Tell us",
to all internal and external stakeholders with a dedicated communication channel for
reporting potential instances of non-compliance with Nestle Corporate Business Principles.
Details of the link to "Tell Us" are available on www.nestle.in
The Company sensitizes the availability of the above vigil mechanism from time to time
to the directors and employees of the Company.
Information regarding Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of the
Companies (Accounts) Rules, 2014 for the financial year ended 31st December,
2019 in relation to the Conservation of Energy, Technology Absorption and Foreign Exchange
Earnings and Outgo is given in the Annexure 5 forming integral part of this report.
Information regarding employees and related disclosures
Your Company considers people as its biggest assets and 'Believing in People' is at the
heart of its human resource strategy. It has put concerted efforts in talent management
and succession planning practices, strong performance management and learning and training
initiatives to ensure that your Company consistently develops inspiring, strong and
credible leadership. During the year, the focus of your Company was to ensure that young
talent is nurtured and mentored consistently, that rewards and recognition are
commensurate with performance and that employees have the opportunity to develop and grow.
Your Company has established an organization structure that is agile and focused on
delivering business results. With regular communication and sustained efforts it is
ensuring that employees are aligned on common objectives and have the right information on
business evolution. Your Company strongly believes in fostering a culture of trust and
mutual respect in all its employees and seeks to ensure that Nestle values and principles
are understood by all and are the reference point in all people matters.
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 6 to the Report. The information as per Rule
5 of the Rules, forms part of this Report. However, as per second proviso to Section
136(1) of the Act and second proviso of Rule 5 of the Rules, the Report and Financial
Statements are being sent to the Members of the Company excluding the statement of
particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining
a copy of the said statement may write to the Company Secretary at the Registered Office
of the Company.
As per the requirement of The Sexual Harassment of Women at the Workplace (Prevention,
Prohibition and Redressal) Act, 2013 (POSH), your Company has a robust mechanism in place
to redress complaints reported under it. The Company has complied with provisions relating
to the constitution of Internal Complaints Committee under POSH. The Internal Committee
(IC) was composed of internal members and an external member who has extensive experience
in the field. In 2019, seven cases of sexual harassment were reported, which have been
investigated and resolved as per the provisions of the POSH.
During the course of 2019, several initiatives were undertaken to demonstrate the
Company's zero tolerance philosophy against discrimination and sexual harassment, which
included creation of comprehensive and easy to understand training and communication
material which are also made easily accessible. In addition, workshops were also run for
the employees to enhance awareness and knowledge of other biases that may influence
thinking and actions by running the unconscious bias session.
Statement on Investor Education and Protection Fund
Pursuant to the provisions of Section 124 of the Act, Investor Education and Protection
Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF
Rules") read with the relevant circulars and amendments thereto, the amount of
dividend remaining unpaid or unclaimed for a period of seven years from the due date is
required to be transferred to the Investor Education and Protection Fund (IEPF),
constituted by the Central Government. The Company had, accordingly, transferred Rs.
28,83,288, Rs. 33,43,770 and Rs. 35,97,120 being the unpaid and unclaimed dividend amount
pertaining to Final Dividend 2011; First Interim Dividend 2012; and Second Interim
Dividend 2012 on 23rd May, 2019, 13th September, 2019 and 17th
January, 2020, respectively, to the IEPF. Pursuant to the provisions of IEPF Rules, all
shares in respect of which dividend has not been paid or claimed for seven consecutive
years shall be transferred by the Company to the designated Demat Account of the IEPF
Authority ('IEPF Account') within a period of thirty days of such shares becoming due to
be transferred to the IEPF Account. Accordingly, the Company has transferred such equity
shares on which the dividend remained unpaid or unclaimed for seven consecutive years to
the demat account of IEPF Authority, after following the prescribed procedure.
Credit Rating
The Company has been awarded AAA credit rating for its bank credit facilities by
CRISIL.
It is the highest rating and indicates a stable outlook for the Company. The rating
reflects that the Company has serviced its financial obligations on time. As regards the
short term facility provided by the bank, the Company has been awarded the credit rating
of A1+. The rated instrument reflects strong degree of safety and lowest credit risk.
Trade Relations
The Company maintained healthy, cordial and harmonious industrial relations at all
levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees
have enabled the Company to remain at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support from the
distributors, retailers, stockist, suppliers and others associated with the Company as its
trading partners. The Directors wish to place on record their appreciation for the same
and your Company will continue in its endeavor to build and nurture strong links with
trade, based on mutuality, respect and co-operation with each other and consistent with
consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the culture of
professionalism, creativity, integrity and continuous improvement in all functions and
areas as well as the efficient utilization of the Company's resources for sustainable and
profitable growth.
The Directors hereby wish to place on record their appreciation of the efficient and
loyal services rendered by each and every employee, without whose whole-hearted efforts,
the overall satisfactory performance would not have been possible. Your Directors look
forward to the long term future with confidence.
| On behalf of the Board of Directors |
|
| Date : 13th February, 2020 |
Suresh Narayanan |
| Place : Gurugram |
Chairman and Managing Director |