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Company Information

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HSIL Ltd.

Jun 11
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Jun 11
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Market Cap. ( ₹ ) 1475.10 Cr. P/BV 1.20 Book Value ( ₹ ) 190.67
52 Week High/Low ( ₹ ) 248/48 FV/ML 2/1 P/E(X) 16.75
Bookclosure 24/09/2021 TTM EPS ( ₹ ) 13.61 Div Yield (%) 1.75
DIRECTOR'S REPORT
You can view full text of the latest Director's Report for the company.
Year End :2018-03 

Directors Report

Dear Members,

The Directors are pleased to present the Fifty Eighth Annual Report and the Company's audited financial statement for the financial year ended 31 March 2018.

FINANCIAL RESULTS

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

(Rs,in lakh)

Particulars

2017-18

2016-17

Revenue from Operations

2,28,451

2,22,655

Add: Other Income

972

455

Total Income

2,29,423

2,23,109

Profit before tax

10,576

14,965

Less: Tax expenses

3,100

4,664

Profit after tax (i)

7,476

10,301

Other Comprehensive Income (net of tax)

139

254

Total Comprehensive Income

7,615

10,555

Add: balance brought forward (ii)

51,487

44,667

Amount available for appropriation [(i) (ii)]

58,963

54,968

APPROPRIATIONS :

Dividend paid on equity shares

2,892

2,892

Tax on Dividend paid

589

589

Balance carried forward

55,482

51,487

OPERATIONAL REVIEW

Your Company reported consistent performance during FY 2017-18 across key business segments and continued its upward trajectory in new avenues of business, namely Consumer Products. Your company's sales (net of GST, Excise, Service Tax and other Indirect taxes) grew by 8.55% to reach Rs,2,21,785 lakhs in FY 2017-18, compared with Rs,2,04,311 lakhs in FY 2016-17.

Due to challenging business environment on account of demonetization exercise, Implementation of new indirect Goods and Service Tax regime, Hon'ble Supreme Court's order banning liquor vending on national highways affecting packaging products sales during first half of financial year 2017-18, increased expenditure on fostering growth of consumer products division and increased pressure on margins from rise in power and fuel and other expenses, the company's EBITDA declined by 4.00% to '28,210 lakhs in FY 2017-18.

BUILDING PRODUCTS DIVISION (BPD)

The BPD revenue (net of GST, Excise, Service Tax and other Indirect taxes) went up by 5.82 % to touch Rs,1,02,945 lakhs in FY 2017-18, as against Rs,97,283 lakhs in FY 201617. EBIT before unallocable expenditure increased by 1.64%. The division highlights during 2017-18 spanned a series of innovative developments, including:

- Premium bathroom suites brand 'Alchymi' launched in collaboration with Manish Malhotra.

- Opened 'Lacasa' display and concept store at Mumbai, bringing brand 'Hindware' closer to the consumer and promising a completely different experience.

- Increased dealer distribution network by 33% in faucet segment and expanded retail touch points for faucets.

- Introduced twenty new product ranges in sanitaryware and ten in faucets.

- Added 100 brand stores across country to strengthen the brand visibility thereby bringing total number of brand stores to 310 .

- Expanded luxury brand 'Queo' to 30 cities in India and introduced voice activated showering and two new fashion range.

PACKAGING PRODUCTS DIVISION (PPD)

The PPD revenue (net of GST, Excise, Service Tax and other Indirect taxes) increased by 4.87% to '92,020 lakhs in FY 2017-18, as against Rs,87,744 lakhs in FY 2016-17.

EBIT before unallocable expenditure declined by 33.00 %.

The key initiatives undertaken during the year for better operational performance are.

- Commenced production of security caps and closures project in Q4 2017-18.

- Introduced 63 new designs in glass containers during the year.

- Increased share of glass containers manufactured with Narrow Neck Press and Blow (NNPB) technology in overall glass sales. NNPB reduce bottle weight by 10% - 40%.

- Added 6 new products in the PET business.

CONSUMER PRODUCTS DIVISION (CPD)

The CPD revenue grew by 65.00 % to '20,769 lakhs in FY 2017-18, from Rs,12,587 lakhs in FY 2016-17. EBIT level loss before unallocable expenditure decreased by 31.15%. The division reported excellent operational performance at the back of various initiatives which are as under:

- Introduced superior and aesthetically designed variants in existing product categories (43 SKUs in the Kitchen appliances category, 8 SKUs in the Air coolers category besides 7 SKUs of water heaters and 4 SKUs of water purifiers).

- One of the leading player in product category kitchen chimneys on the major Indian ecommerce portals namely Amazon and Flipkart. Significant player in the category of water heaters and air coolers in large store formats like Metro Cash and Carry and Walmart.

- Significant Increase in market share in the categories of kitchen chimneys, water heaters and air coolers, besides making its presence felt in all the important categories of water purifiers.

- Developed 3 unique Patents for the business in past 12 months backed on strong work in the Consumer Business R&D (two for water purifiers and one for air coolers).

- Distribution network expanded to 575 distribution points, 8500 retailers and 350 large format stores like Reliance Digital, Croma, Spencer, Walmart, Metro Cash and Carry.

RETAIL DIVISION

Revenue of Retail division grew by 0.36% to '9,618 lakhs in FY 2017-18, from Rs,9,583 lakhs in FY 2016-17. EBIT level loss before unallocable expenditure decreased by 21%. The division reported improved operational performance at the back of various initiatives:

- Increased presence by adding six new franchisee stores.

- Leveraging e-tailing sites to extend customer reach.

- Presence across the country with 14 large format retail stores with an average size of 8500 sqft.

There is no change in the nature of the businesses during the year 2017-18.

SCHEME OF ARRANGEMENT

During the year under review, the Board of Directors of the Company, in its meeting held on 10 November 2017 had approved a Composite Scheme of Arrangement under section 230 to 232, read with section 66 and other applicable provisions of the Companies Act, 2013 and the provisions of other applicable laws, amongst the Company, Somany Home Innovation Limited, a wholly owned subsidiary of the Company ("Resulting Company 1") and Brilloca Limited, a wholly owned subsidiary of Resulting Company 1 ("Resulting Company 2") and their respective shareholders and creditors ("Scheme"). The Scheme provides for the demerger of, (i) the Consumer Products Distribution and Marketing Undertaking ("CPDM Undertaking") and Retail Undertaking of the Company into Resulting Company 1, and (ii) the Building Products Distribution and Marketing Undertaking ("BPDM Undertaking") of the Company into Resulting Company

2. The Appointed Date for the Scheme is 1 April 2018 or such other date as directed by the Hon'ble Kolkata Bench of the National Company Law Tribunal ("NCLT"). The Scheme is subject to necessary regulation, approval and sanction by Hon'ble NCLT. The Company has received approval from BSE Limited and the National Stock Exchange of India Limited and is in the process of filing the application with Hon'ble NCLT for approval.

No material changes and commitments affecting the financial position of the Company occurred between the end of financial year of the Company to which the financial statement relate and the date of this Report

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has no material subsidiary in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year under review, Somany Home Innovation Limited and Luxxis Heating Solutions Private Limited were incorporated on 28 September 2017 and 26 December 2017 respectively in India as wholly owned subsidiaries of HSIL Limited. Further, Brilloca Limited was incorporated on 2 November 2017 in India as a wholly owned subsidiary of Somany Home Innovation Limited (step down subsidiary of HSIL Limited). During the year under review, KS 615 Limited, wholly owned subsidiary of Haas International B.V has dissolved on 30 January 2018 and has ceased to be a step down subsidiary of HSIL Limited.

During the year, the Board of Directors reviewed the affairs of the subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report.

Further, a statement containing the salient features of the financial statements of our subsidiaries in the prescribed format AOC-1 forms part of the consolidated financial statements and hence not repeated here for the sake of brevity. The statements provide the details of performance, financial positions of each of the subsidiaries.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statement, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are available on Company's website http:// www.hindwarehomes.com. These documents will also be available for inspection at our registered office in Kolkata, India, on any working day between 3:00 p.m. and 5:00 p.m. till the date of the ensuing AGM.

The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link: http://www.hindwarehomes.com/pdf/material-subsidiary-policy-version-ii.pdf

DIVIDEND

Your Directors have recommended a dividend of Rs,4/-(i.e. 200%) per equity share (last year 'Rs,4/- (i.e. 200%) per equity share) on equity shares of RS,2/- each for the financial year ended 31 March 2018, amounting to RS 3486 lakhs (inclusive of Dividend Distribution Tax 'RS594 lakhs). The dividend payout is subject to approval of members at the ensuing Annual General Meeting.

The dividend will be paid to members whose names appear in the Register of Members as on 25 August 2018 and in respect of shares held in dematerialized form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on 24 August 2018.

TRANSFER TO RESERVES

The Board proposes not to transfer any amount out of the profit for the year under review to the general reserve.

DEPOSITS

Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and as such no amount of principal or interest was outstanding as on the Balance Sheet date.

AUDITORS AND AUDITORS' REPORTS Statutory Auditors

At the 57th Annual General Meeting of the Company held on 3 August 2017, the shareholders approved the appointment of M/s. Lodha & Co, Chartered Accountants, as statutory auditors of the Company having Firm's Registration No. 301051E to hold the office till the conclusion of the 62nd Annual General Meeting subject to ratification of the appointment by the shareholders, at every Annual General Meeting. As per the notification issued by Ministry of Corporate Affairs (MCA) dated 7 May 2018 for The Companies (Amendment) Act, 2017 and Companies (Audit and Auditors) Amendment Rules, 2018, the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting, therefore no resolution for such ratification is taken in the Notice of the ensuing AGM.

The Notes on Financial Statement referred to in the Auditors' report are self-explanatory and therefore do not require any further comments.

Secretarial Auditor

The Board had appointed M/s DMK Associates, Company Secretaries, New Delhi, (Ms. Monika Kohli, Practicing Company Secretary CP No.4936) to conduct Secretarial Audit for the financial year 2017-18, pursuant to the provisions of Section 204 of the Companies Act, 2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report in Form MR - 3 for the financial year 2017-18 is enclosed as Annexure A to this Report. The Secretarial Audit Report does not contain any observation or adverse remark.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed in sub section (3)(m) of Section 134 of the Companies Act, 2013, read with Companies (Accounts) Rules, 2014 are enclosed as Annexure B to this Report.

SHARE CAPITAL

During the year under review, the Company did not issue equity shares. The paid-up Equity Share Capital as on 31 March 2018 was '1,445.97 lakhs.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3)(a) of the Companies Act, 2013, the extract of the Annual Return in Form No. MGT - 9 is enclosed as Annexure C to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 (2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented in a separate section forming part of the Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors in terms of Section 134(3)(c) of the Companies Act, 2013 state that:

a) in the preparation of the annual accounts for the year ended 31 March 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, had been followed and there are no material departures from the same;

b) the Directors had selected such accounting policies and applied them consistently and made judgements 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 31 March 2018 and of the profit of the Company for the year ended on that date;

c) the Directors had 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) the Directors had prepared the annual accounts on a 'going concern' basis;

e) the Directors had 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) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

CORPORATE GOVERNANCE

The report on Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. The disclosure in Form AOC-2 is enclosed as Annexure D to this report. During the year, the Company has not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: http://www.hindwarehomes.com/pdf/related-party-transaction-policy-version-ii-new.pdf

Your Directors draw attention of the members to Note 51 to the financial statements which set out related party disclosures.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has a Corporate Social Responsibility Committee in place as per the provisions of Section 135 of the Companies Act, 2013, comprising of Mr. Salil Bhandari, Chairman, Dr. Rajendra Kumar Somany, Mr. Sandip Somany and Mrs. Sumita Somany as other members of the Committee.

The Company's Corporate Social Responsibility Policy (CSR Policy) duly approved by the Board, indicates the activities to be undertaken by the Company to fulfil the expectation of our Stakeholders and to continuously improve our social, environmental and economic performance while ensuring sustainability and operational success of our Company. The Company would also undertake other need based initiatives in compliance with Schedule VII to the Companies Act, 2013.

The guiding principles for all CSR initiatives of the Company are as follows:

- Establishing a guideline for compliance with the provisions of Regulations to dedicate a percentage of Company's profits for social projects;

- Ensuring the implementation of CSR initiatives in letter and spirit through appropriate procedures and reporting; and

- Creating opportunities for employees to participate in socially responsible initiatives.

The CSR Policy may be accessed on the Company's website at the link:

http://www.hindwarehomes.com/pdf/CSR-Policy-

Version-II.pdf

The Annual Report on CSR Activities for the financial year 2017-18 is enclosed as Annexure E to this report.

DISCLOSURE UNDER SECRETARIAL STANDARD

The Directors state that the Company is complying with all the applicable Secretarial Standards on meetings of the Board of Directors.

NUMBER OF BOARD MEETINGS

During the year under review, four Board Meetings were convened and held. For further details, please refer Report on Corporate Governance which is forming part of this Annual Report.

AUDIT COMMITTEE

The Audit Committee comprises Independent Directors namely Mr. V.K. Bhandari (Chairman), Mr. Salil Bhandari, Mr. N.G. Khaitan and Mr. Ashok Jaipuria. For further details, please refer Report on Corporate Governance which is forming part of this Annual Report.

All the recommendations made by the Audit Committee were accepted by the Board.

VIGIL MECHANISM (WHISTLE BLOWER)

The Company has in place a Whistle Blower Policy to establish a vigil mechanism for Directors/Employees and other stakeholders of the Company to report concerns affecting the smooth and efficient running of operations of the Company. This Policy documents the Company's commitment to maintain an open work environment in which employees, consultants and contractors are able to report instances of unethical or undesirable conduct, actual, suspected fraud or violation of the Company's Code of Conduct.

The Vigil Mechanism (Whistle Blower) Policy is available on Company's website at the link: http://www.hindwarehomes.com/pdf/vigil-mechanism-(whistle-blower)-version-ii.pdf

REMUNERATION POLICY

The Company has in place a Remuneration Policy for appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration as per the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Remuneration Policy is available on Company's website at the link: http://www.hindwarehomes.com/ pdf/Nomination-and-Remuneration-Policy-VersionII.pdf

DIVIDEND DISTRIBUTION POLICY

The Company has in place a Dividend Distribution Policy as per Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The policy was adopted to set out the parameters that will be taken into account by the Board in determining the distribution of dividend to its shareholders and /or retaining profit earned by the Company. The Policy is available on Company's website at http://www.hindwarehomes. com/pdf/Dividend-Distribution-Policy.pdf

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Particulars of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 forms part of the notes to the Financial Statements (Please refer Note Nos. 7, 8, 13, 17 and 59).

PARTICULARS OF EMPLOYEES

Information required as per Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure F to this Report.

Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is provided in the Annual Report, which forms part of this Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company at Kolkata, on any working day between 3.00 p.m. to 5.00 p.m. till the date of the ensuing AGM and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

INTERNAL CONTROLS

The internal control systems are commensurate with the size, scale and complexity of the operations of the Company. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization, and ensuring compliance with corporate policies. The Company uses SAP - a well-accepted enterprise resource planning (ERP) system to record data for accounting, consolidation, and management information purposes and connects to different locations for efficient exchange of information. The Company has continued its efforts to align all its processes and controls with best practices.

The Audit Committee of the Board of Directors, comprising of Independent Directors, reviews the effectiveness of the internal control system across the Company including annual plan, significant audit findings, adequacy of internal controls and compliance with accounting policies and regulations.

INTERNAL FINANCIAL CONTROLS

The Company has in place an adequate Internal Financial Controls framework. The Company has documented Risk and Control Matrices (RACM) covering all activities and all controls are tested for design and operating effectiveness as part of its Internal Financial Control reporting framework. The Company has laid down policies and procedures for all critical processes. The financial controls are evaluated for both design and operating effectiveness by an external consulting firm of repute as well as by our in-house internal audit team.

In our view, the Internal Financial Controls are adequate and are in line with best practices applicable to organizations of a similar size, nature and complexity.

RISK MANAGEMENT

The Company has a robust Risk Management framework which identifies and assesses strategic, operational, financial and compliance risks and monitors the effectiveness and efficiency of risk mitigation and control measures. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continual basis.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a Sexual Harassment Policy in compliance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment. The Internal Complaints Committee (ICC) has been set up to redress complaints regarding sexual harassment, if any.

The Directors further state that during the year under review, there were no complaints filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, the shareholders in their meeting held on 3 August 2017 have approved the reappointment of Dr. Rajendra Kumar Somany as Chairman and Managing Director of the Company for a further period of 3 years with effect from 9 January 2018.

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Ms. Sumita Somany, Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offered herself for re-appointment.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

BOARD EVALUATION

The Board and the Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria and framework adopted by the Board. In addition, the performance of Board as a whole and committees were evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria.

In a separate meeting of Independent Directors, performance of Non-Independent Directors, performance of Board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-executive Directors. The evaluation process has been explained in the Corporate Governance Report section of the Annual Report.

None of the Independent Directors are due for retirement and/or re-appointment at the ensuing AGM of the Company. However, the Notice of the ensuing AGM proposes a special resolution for continuation of Mr. V.K. Bhandari as Independent Director on the Board of Directors of the Company in accordance with SEBI circular dated 9 May 2018.

TRAINING OF INDEPENDENT DIRECTORS

The details of programmes conducted for familiarization of Independent Directors with the Company, nature of the industry in which the Company operates, business model of the Company etc. has been uploaded on the Company's website at the web link : http://www. hindwarehomes.com/training_of_directors.aspx #section 2.

For further details, please refer Report on Corporate Governance which is forming part of this Annual Report.

GENERAL

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

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

4. Issue of Employees Stock Option to employees of the Company under any scheme.

5. The Managing Directors/Whole-time Directors of the Company do not receive any remuneration or commission from any of its subsidiaries.

6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future except Hon'ble National Green Tribunal has issued an order dated 14 March 2017 for revocation of consent to operate and direction for closure of our Kaharani Faucets unit situated in the district Alwar in the State of Rajasthan, under Section 25/26 of the Water (Prevention and Control of Pollution) Act, 1974 and Section 21/22 of the Air (Prevention and Control of Pollution) Act, 1981.

Further, the Hon'ble National Green Tribunal vide its order dated 22 May 2017 had directed Rajasthan State Pollution Control Board to allow HSIL Limited to operate its Kaharani faucet manufacturing plant.

ACKNOWLEDGEMENT

Your Directors would like to express their appreciation for assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by all employees of the Company.

For and on behalf of the Board of Directors

Place: Gurugram Dr. Rajendra Kumar Somany

Date: 30 May 2018 Chairman and Managing Director