Nestle India Ltd
Directors Reports
Board's Report - 2021
Dear Members,
Your Directors are pleased to present their report and financial statements for the
year ended 31st December 2021.
|
|
(Rs. in Million) |
| Particulars |
2021 |
2020 |
| Sale of products |
146,337.2 |
132,901.6 |
| Add : Other operating revenues |
756.9 |
598.7 |
| Add : Other Income |
1,201.1 |
1,458.5 |
| Total Income |
148,295.2 |
134,958.8 |
| Less : Total Expense |
117,092.5 |
106,830.9 |
| Profit before exceptional items and tax |
31,202.7 |
28,127.9 |
| Exceptional items |
2,365.0 |
- |
| Profit before tax |
28,837.7 |
28,127.9 |
| Tax expense |
7,389.1 |
7,303.6 |
| Profit after tax |
21,448.6 |
20,824.3 |
| Add : Other Comprehensive Income |
(1,514.1) |
(922.1) |
| Total Comprehensive Income |
19,934.5 |
19,902.2 |
| Opening balance in Retained Earnings |
11,175.2 |
10,173.7 |
| Amount available for appropriation |
31,108.2 |
30,072.7 |
| Interim dividends paid during |
|
|
| 2021: Rs. 135.00 per share |
13,016.1 |
|
| 2020: Rs. 135.00 per share |
|
13,016.1 |
| Final dividends paid during |
|
|
| 2021: Rs. 65.00 per share |
6,267.0 |
|
| 2020: Rs. 61.00 per share |
|
5,881.4 |
| Closing balance in Retained Earnings |
11,825.1 |
11,175.2 |
| Key ratios: |
|
|
| Earnings per share (Rs.) |
222.5 |
216.0 |
| Dividend per share (Rs.) |
|
|
| Interim Dividends |
135.00 |
135 |
| Proposed - Final Dividend |
65.00 |
65.00 |
| Additional Information: |
|
|
| Profit from operations |
32,547.5 |
28,775.4 |
Total Sales and Domestic Sales for the year increased by 10.1% and 10.7% respectively.
Domestic Sales growth is largely driven by volume and mix and is broad based. Export Sales
were lower by 1.2% mainly due to lower coffee exports and change in product mix.
Other Income decreased due to lower average liquidities following transition to
"Future Ready Plan" as explained below, partly offset by higher yields.
Your Company has created a contingency provision of Rs.905.8 million (previous year
Rs.1,088.9 million) for various contingencies resulting mainly from matters, which are
under litigation / related to disputes and other uncertainties requiring management
judgement. Your Company has also reversed, utilized / settled contingency provision of
Rs.749.8 million (previous year Rs.580.2 million) due to the settlement of certain
litigations and settlement of obligations for which provision is no longer required.
Exceptional item comprises the aggregate of past service cost, settlement cost and
incidental expenses incurred for the implementation of the 'Future Ready Plan' effective 1st
December 2021, for certain category of employees. 'Future Ready Plan' is a combination of
amended Defined Benefit Pension Scheme for past period of service and a Defined
Contribution Scheme for future service. For details please refer Note No. 3 of the
Financial Statement attached.
Comparable Profit After Tax without the impact of Exceptional Item (Transition cost of
Pension Plan)
Dividends
The Board of Directors have recommended a final dividend of Rs.65/- per equity share
amounting to Rs.6,267.0 million for the year 2021 for approval of the members at the 63rd
Annual General Meeting of the Company ("63rd AGM"). The total
dividend for 2021 aggregates to Rs.200/- per equity share which includes interim dividend
of Rs.25/- and Rs.110/- per equity share paid on 19th May 2021 and 16th
November 2021, respectively.
The dividend recommendation is in accordance with the Dividend Distribution Policy
("Policy") of the Company. The Policy is available on the website of the Company
at https://www.nestle.in/investors/policies.
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
During 2021 exports of your Company remained stable with an overall drop of 1.2% mainly
due to lower coffee exports and change in product mix.
MAGGI Noodles and Sauces witnessed growth in UK, Canada, Australia and New Zealand,
while EVERYDAY in Nepal and Bhutan faced a challenging year as a result of supply chain
disruptions because of COVID-19.
Strengthening the confectionery export portfolio with the launch of POLO in the Middle
East helped to establish your Company as a key exporter in the category. Your Company
expanded Crunch Wafers in ASEAN markets, such as Indonesia and Philippines.
Your Company's continuous focus on the development of new markets such as Indonesia and
Mauritius, channel expansion with the mainstream thrust in Australia and New Zealand and
launch of range extensions like MAGGI Sauces to Oceania facilitated growth for MAGGI
Noodles and Sauces and KITKAT.
Your Company continues to explore new markets for categories such as prepared dishes
and cooking aids, chocolates and confectionery in the Middle East.
Contribution to the Exchequer
Your Company over the years has been enabling significant contribution to various
taxes. During the year 2021, the Company through its business, enabled tax collections at
Central and State level close to Rs.38.1 billion, in aggregate.
Business Development
As the pandemic raged on, your Company was determined to keep strong as it stood the
test of resilience. It delivered double-digit growth pivoted on volume and mix performance
despite a challenging and highly volatile economic environment. To better penetrate the
market, your Company through the granular cluster-based approach, powered by data and
technology, deepened its engagement into newer towns and villages. Your Company progressed
firmly and resolutely on its RURBAN journey that was accelerated further by using a
healthy mix of customized portfolio and building deep consumer connect. Your Company
delivered strong rural growth performance in addition to sustained growth in smaller town
classes and urban agglomerates.
E-commerce showed strong acceleration. Growth was fueled by new emerging formats such
as quick commerce and click and mortar, leading to lower delivery times and improved
shopper experience. Organized trade witnessed resurgence and good revenue growth, despite
the second wave of the pandemic.
Your Company continued to leverage the strength of its portfolio and aligned its
products with the 'new normal'. Its brands have further strengthened their equity and
forged ahead.
Strengthening its commitment to 'Make in India' through augmentation of manufacturing
facilities, your Company's new state-of-the-art manufacturing factory in Sanand in Gujarat
for the MAGGI portfolio, became fully operational in 2021. Your Company also commissioned
a new KITKAT line in its Ponda factory in Goa in 2021.
Innovation continues to be an engine of growth
Innovation and Renovation pipeline of products continues to be a thrust area, across
categories such as Prepared Dishes and Cooking Aids, Chocolates and Confectionery, Milk
Products and Nutrition. Your Company has launched more than 90 products since 2016 and
another 20 projects are in the pipeline.
Transforming with digital analytics
Digitalization is a growth accelerator for your Company and will continue to be so in
the future. Leveraging the power of data and analytics is your Company business strategy.
It has a multi-intelligent data analytics system that sources internal and external data
to converge insights that triggers swift and decisive business actions.
Diverse and inclusive workforce with respect at the core
Diversity is an integral part of Nestle India, where confluence of new ideas and
thoughts, diverse skills and experiences fuels innovation and growth. Your Company has a
multigenerational workforce, where 72% are millennials.
Equal opportunity, respect and dignity are anchored on the pillars of 'Purpose and
Values' of Nestle India. Women comprised 43% of its new hires in 2021. In the Sanand
factory in Gujarat 70% of the workforce are women.
Sustainability initiatives at the core of 'Business a force for good'
Your Company is committed to environmentally sustainable business practices across its
value chain making the right choices to protect the future by integrating environmental
considerations into its business planning. Preserving the planet is weaved into the
Purpose of your Company - "We unlock the power of food to enhance quality of life for
everyone, today and for generations to come".
Your Company has accelerated the sustainability journey by working across 4 commitments
related to climate, packaging, sourcing and water. Its efforts encompass the entire value
chain, where it actively engages with farmers, suppliers, employees and consumers to
increase awareness about the planet.
Through the NESCAFE Plan, MAGGI Spice Plan and partnering with the dairy farmers, your
Company collaborates with the farmers on environmental sustainability programmes.
All your Company's brands continue to be plastic neutral, which means the quantum of
plastic that is being used in the packaging is compensated by what is collected and
managed.
Amidst critical times like the pandemic, your Company's strong values and purpose
ensured that it never lost sight of the well-being of the society and continued walking
the path of being a 'Force for Good. Programmes such as Project Vriddhi, Project Jagriti,
Nestle Healthy Kids Programme, creating access to clean drinking water and providing
sanitation facilities to girl students are important steps that your Company continues to
take every year.
Prepared Dishes and Cooking Aids Portfolio
The Prepared Dishes and Cooking Aids business offers convenience, taste, and quality to
consumers. It strengthened its place as an ally to consumers by bringing in a dash of
excitement to everyday cooking. In 2021, the continuing momentum and improved availability
helped MAGGI Noodles and MAGGI Masala-ae-Magic achieve double digit growth, while MAGGI
Sauces continued to grow profitably by focusing on premiumisation.
MAGGI Tomato Ketchup was ranked No. 1 by 'Consumer Voice' (A Government of India
Supported Initiative) once again establishing consumer trust in the sauce segment.
Pioneering innovation that caters to diverse consumer choices and distinctive local
taste, your Company launched MAGGI Veggie Masala Noodles with the goodness of vegetables
in the iconic masala taste.
In a zeal to bring in new products, your Company launched MAGGI Special Chicken65
Masala Noodles, a variant inspired by one of the most popular chicken delicacies of
regional cuisine. Packed with robust flavors and masalas, MAGGl Special Chicken65 Masala
Noodles has been carefully crafted by culinary experts, using the choicest selection of
19 herbs and spices from across India.
With an increase in snacking among consumers, your Company launched two new variants of
MAGGI Hot n Sweet Sauce - 'Sriracha' and 'Extra Hot'.
MAGGI Masala-ae-Magic expanded its presence in South India with the launch of a new
variant MAGGI Masala-vin-Magic, a unique spice mix tailormade for South Indian cuisine
that elevates taste, aroma and flavor of everyday meals.
Your Company strengthened consumer trust with an anticounterfeit campaign in 2021,
creating awareness amongst consumers to stay vigilant and purchase the authentic MAGGI
noodles packed with the goodness of iron.
Your Company also launched the QR Code Anti-Counterfeit Solution, which enables
consumers, retailers and authorities to assess the authenticity of MAGGI Masala-ae-Magic
within a minute.
Your Company concluded 'MAGGI Desh ke Liye 2 Minute - Apna Food Business' initiative,
which received 10,000 entries, where winners were supported with funds, equipment and
training to start their own food business.
With the surge in consumers searching how-to-cook everyday meals, MAGGI's website
carrying recipes attracted 1.5 million users. The brand forged strong partnerships with
top home chefs to help consumers simplify everyday cooking and became their ally in the
kitchen.
Accelerating its commitment to sustainability, your Company, through the MAGGI Spice
Plan that sources seven spices from 39 villages of India, continued to partner with
farmers and suppliers, adopted sustainable agricultural practices focusing on soil health,
water usage and biodiversity enhancement. At the same time, your Company stayed committed
to resilient livelihood and farm profitability.
Strengthening Breakfast Cereals
Your Company launched Nestle GOLD Corn and Oat flakes which is a differentiated
proposition in the cereals category. Nestle GOLD Corn and Oat flakes is fortified with
immuno- nutrients such as zinc, iron and selenium. KOKO KRUNCH was renovated with improved
taste and increase in whole grains.
Your Company also launched KOKO
KRUNCH Kookie cereal further strengthening the kids cereal portfolio. KOKO KRUNCH
Kookie cereal has choco chips embedded in the cereal and tastes like a cookie.
E-commerce grew with speed and delivered growth for your Company's breakfast cereals
business. Single serve SKUs drove penetration among consumers.
Milk Products and Nutrition Portfolio
The Milk Product and Nutrition business continued to deliver good performance despite
challenges linked to commodity prices, that were mitigated by cost optimisation and
efficiencies across the value chain. Your Company displayed resilience as it navigated
through the second wave of COVID-19. E-commerce contributed towards driving the
performance of Milk Products and Nutrition category. Your Company leveraged its in-depth
knowledge of nutrition and quality as it continued to adapt to the new normal.
With consumers spending more time at home adopting creative pursuits such as baking and
experimenting with new recipes, MILKMAID increased its engagement through its digital
platform 'milkmaid.in' by providing dessert recipe solutions for baking enthusiasts. Over
300,000 consumers visited the website every month, which increased in-home usage of
MILKMAID and fueled growth.
Your Company's Ready-to-Drink beverage portfolio of NESCAFE and MILO saw accelerated
growth as a result of increase in home consumption that was supported by an increase
*— in distribution that mitigated the impact of declining out-of-home consumption.
Sustainability is embedded in the way your Company does business. Nestle MILO and Royal
Challengers Bangalore joined hands during the Indian Premier League season to bat for the
planet, with the launch of paper straws for the MILO beverage packs. Your Company
responsibly sourced paper straws from renewable sources and certified by the Forest
Stewardship Council (FSC). This transition into paper straws has also been made for
NESCAFE.
Your Company believes that breastmilk 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 continued breastfeeding until two years and
beyond. Your Company's nutrition business is committed to providing high quality,
innovative, science-based nutrition. Your Company continued to focus on scientifically
upgrading its portfolio while expanding the reach of the Toddler range of products.
Your Company's Healthcare Nutrition Business, Nestle Health Science, has a portfolio of
science based medical and consumer healthcare nutrition products. In 2021, your
Company continued to accelerate growth through a multichannel engagement, building its
presence in nutritional science through products such as RESOURCE HIGH PROTEIN, RESOURCE
DIABETIC and OPTIFAST. In order to meet consumer needs, your Company renovated RESOURCE
HIGH PROTEIN with immunonutrients. Your Company's Medical Nutrition portfolio witnessed
robust performance, with its flagship product PEPTAMEN for patients in critical care.
Coffee and Beverages Portfolio
Your Company continued to focus on growing the Coffee and Beverages business by
remaining consistent on the successful strategy of building coffee consumption habit
through the year. NESCAFE registered yet another year of double-digit volume-led growth,
based on significant growth in household penetration and increase in market share.
Your Company continued its thrust on innovation while addressing the different needs of
consumers with the launch ot NESCAFE ALL in 1 - a convenient coffee premix affordably
priced at Rs.10 and NESCAFE Black Roast - an intense cup for strong coffee lovers.
Your Company accelerated its premiumization journey, delivering coffee at its best with
NESCAFE Gold. With innovative product and packaging solutions, NESCAFE Gold continued in
its journey to delight consumers with a cafe like experience at home, resulting in strong
brand growth.
Your Company moved ahead in its journey of driving a differentiated brand in the
southern part of India with the launch of a renovated recipe for NESCAFE SUNRISE offering
superior taste and aroma, in its distinct granulated format. Your Company also expanded
its portfolio with launch of NESCAFE SUNRISE Liquid Decoction which is a 'ready-to- use'
coffee decoction for consumers desiring a filter coffee experience.
Along with brand building initiatives, your Company distributed coffee to the frontline
COVID warriors and extended support during the testing times.
Your Company continued to remain committed to respecting the environment and supporting
the coffee farmers with its sustainability initiatives. Through the NESCAFE Plan, your
Company trained and supported coffee farmers to adopt agricultural practices that improve
farm yield and farmer's income.
Chocolates and Confectionery Portfolio
Despite a challenging year, your Company's Chocolates and Confectionery portfolio
continued its strong performance with healthy growth and market share gains. Your Company
also commissioned a new KITKAT line in its Ponda factory in Goa in 2021.
In times when consumers are looking for "good for me" ingredients in their
food, your Company launched Nestle MUNCH FRUIT 0 NUTS, a unique combination of flavor and
texture, where crunchy almonds combined with the fruity taste of pomegranate are wrapped
around a crunchy wafer center. MUNCH FRUIT O NUTS is a category first innovation,
leveraging your Company's strong R&D capabilities and extensive consumer research
insights on the taste preferences of India that is diverse.
Through MUNCH and its full pack range, your Company continued to grow its footprint in
rural India by associating with festivals of India, that was further augmented through its
association with Disney Marvel, that is popular in towns across the country.
In order to meet the needs of the consumers, your Company launched a limited edition of
KITKAT Kookie & Creme flavor, across all channels. KITKAT Kookie & Creme flavor is
a fusion of the familiar taste of KITKAT with Cookie & Creme flavour.
Nestle Professional - Out-of-Home Business
Your Company's Out-Of-Home (OOH) business is on a recovery path with gradual opening of
hotels, restaurants, offices and malls. There are signs of a return to prepandemic levels
of business in some geographies such as Tier 1 and Tier 2 towns.
In 2021, there was significant portfolio expansion with product launches across
Prepared Dishes and Cooking Aids and Coffee and Beverages portfolio that supported the OOH
business to be future ready. Launch of NESCAFE Roasted Whole Beans, NESCAFE Sunrise Strong
and Seasonings from MAGGI for OOH, are noteworthy innovations.
In 2021, your Company continued to focus on premiumizing the beverage portfolio,
through the scale up of NESCAFE Roasted Whole Bean coffee and bean-to-cup solution. The
coffee solution displayed strong customer acceptance, despite the challenges thrown by the
lockdown in the second wave of the COVID-19 pandemic.
Better ingredients are core areas of strength of your Company. With the aim of
providing consumers with premium products for the OOH operator's menu, your Company
launched NESTEA Instant Green Tea Powder, a 100% pure and natural powder manufactured in
the Choladi factory. NESTEA Instant Green Tea Powder can be used to make both hot and iced
green tea, instantly. NESCAFE Sunrise Strong with a stronger and more aromatic
coffee-chicory blend was introduced in South India.
With the rise of food delivery and the increased need of standardized and operator
friendly solutions, your company continued to invest into differentiated solutions to
address the requirements of the new age food service industry. 2021 saw the inclusion of
easy step solutions to help make popular dishes like biryani and manchurian sauce, that
were introduced in the menu. In addition to products, your Company continued to focus on
service support by providing 135+ recipes to help customers build a strong menu with
minimal steps, minimal pantry usage and easy delivery.
Your Company continued to grow and invest into the kiosk business through
"Entrepreneurship for Youth" which helped create livelihood and job
opportunities for franchisers. Your Company now has 600+ franchise operated kiosks across
channels, generating sustainable business for the entrepreneurs. To further unlock
scalability, new kiosk models like express and trolley plus were also launched year to
encourage more entrepreneurs to participate in this growing business opportunity with
lower investments formats.
Awards and Recognitions
Your Company's performance and commitment has been recognized by leading industry
forums for its work in the areas of corporate management, marketing and quality
• Business Today recognized Mr. Suresh Narayanan as India's Best CEO, FMCG
• CNBC TV18 India Business Leader Awards (IBLA) recognized Nestle India as the
"Outstanding Company of the year"
• Mr. Suresh Narayanan, Chairman and Managing Director, Nestle India, was honored
as the Entrepreneurial CEO at EY Entrepreneur of The Year 2020
• Mr. Suresh Narayanan honoured amongst the Top 101 Male Gender Equality Champions
Globally
• MAGGI featured in Kantar BrandZ India's Most Purposeful FMCG Brand List
• MAGGI and NESCAFE India awarded the most preferred brands of 2021 by Marksmen
Daily and Zee Business
• NESCAFE recognised for its best-in-class marketing effectiveness and advertising
communication and awarded 2 silver metals and 1 bronze metal at the EFFIES.
• Ask Nestle awarded gold at the Brand Equity Media strategy awards
• KITKAT Musical Breaks won gold in ET SPOTT Awards 2021 in the category 'Brand
promotions on audio or music streaming apps'
People Focus
Your Company has always considered safety, security and well-being of people at its
core and continued with virtual engagements, virtual trainings, mental health initiatives
and check-in programmes for its employees.
Your Company rolled-out 'NestAid', an ecosystem of care, that has initiatives for the
security of Nestle employees and their families. Organized under three pillars, the
initiatives provide meaningful and impactful support.
'Plan for the Unforeseen', the financial support pillar addresses the emergency needs
and NesSHIELD- focuses on financial needs and health related expenses in an unfortunate
event that a colleague passes away.
'Care when you need it' the medical support pillar which ensures timely medical help
through tie-ups with reputed hospitals, tele consultations and supply of oxygen
concentrators and other medical facilities.
'Healthy Mind Healthy Life' the wellbeing pillar focuses on employee's mental and
physical wellbeing, especially during the pandemic, through a tie-up with a leading
employee assistance provider for counselling and self-help, nutrition support, sessions
with medical experts and yoga practitioners.
Your Company continued its commitment to the youth via Nesternship, a virtual
internship programme for final year graduates and post-graduates across disciplines. The
programme focused on upskilling 1,000 interns, providing them with a depth of experience
and a wealth of knowledge to thrive in workplaces. Each student was provided a monthly
stipend and interned with an expert from different functions of your Company.
Your Company continued its focus on upskilling their employees through various learning
initiatives such as, Henri Nestle Scholarship: An empowered learning solution that gives
an opportunity to employees to pursue any learning of their choice. The organization
reimbursed Rs.50,000 per participant and had covered over 160 employees with the
expectation that each scholar teaches other employees, covering over 200 employees.
Your Company also introduced 'Ascent' a nine-month blended learning journey, designed
to support employees transitioning to first time people manager roles; Nestle India
Learning Catalogue: A curated repository of over 300 resources to empower employees to
learn at will, on the go, as per choice.
Your Company also started 'NesVidya' a micro-learning performance solution app, with
over 500 users aimed to help employees learn concepts, evaluate progress and compare
knowledge in byte-sized format.
In 2021, your Company further accelerated use of virtual and digital platforms to build
scale and intensity in training sales teams for continuous learning and engagement,
covering around 650 sales employees and 8400 field force of business partners. Through
this model of training of leveraging network of internal subject matter experts,
customized content and global expertise, the sales teams motivated employeed to learn and
improve performance.
Around 150 Nestle volunteers participated in the 'Virtual Employee Volunteering
Programme'. Over 250 sessions were conducted on nutrition, environment, health and hygiene
by volunteers that positively impacting the lives of hundreds of beneficiaries such as
adolescents, women and waste workers.
Sales
Your Company's organized trade witnessed a resurgence and good revenue growth and it
continued on its path of robust and sustained growth in large metros, and also in smaller
towns despite the impact of the second COVID-19 wave
Your Company set out firmly and resolutely on its RURBAN journey by using a healthy mix
of a customized portfolio, direct distribution and enhanced distribution infrastructure,
deployment of resources, regional and localized communication, enhanced visibility,
participation in village haats and building consumer connect. Through Project RURBAN, your
Company reached out to small towns with population less than 100,000 and large villages
with population greater than 2,000, that offer long-term growth opportunities.
E-commerce channel showed strong acceleration and its growth was fuelled by new
emerging formats such as quick commerce and Click & Mortar, leading to lower delivery
times and improved shopper experience. Your Company's effort to ensure last mile access
were aided by hyperlocal - quick commerce channels. E-commerce made your Company's
products accessible at point of purchase, providing differentiated offerings to consumers
through special and innovative product propositions through targeted digital communication
for brands such as MAGGI, NESCAFE, KITKAT, CEREGROW, NANGROW, MILKMAID, RESOURCE HIGH
PROTEIN. Lockdown relaxation after the second wave, paved the way for channel
stabilization and shopper mobility increased across offline channels.
Supply Chain
Your Company developed a resilient supply chain that supported business growth despite
adversities caused by the second wave of COVID-19. Staying agile it continued sourcing raw
materials from over 400 suppliers and over 100,000 farmers, while ensuring the safety of
its partners and customers.
Price outlook for key categories like edible oils, coffee, wheat, fuel remained firm to
bullish while costs of packaging materials continued to increase amid supply constraints,
rising fuel and transportation costs. Input prices are expected to be on bullish trend
both globally and to some extent locally. Fresh milk prices are expected to remain firm
with continued increase in demand and rise in feed costs to farmers. In an environment of
raw and packaging material inflation, the Company continues to keenly look for
opportunities for cost optimization and efficiencies. Your Company is accelerating its
commitment towards sustainability by increasing purchase of sustainable oils, coffee,
cocoa etc
To address short-term disruptions, it augmented co-manufacturing strategy, to enable
speed to market and accelerated the paperless invoicing platform. Your Company shifted to
shorter planning horizon, focusing on priority SKU's and channel-wise planning and
upscaled transport control tower to enhance stock and transit visibility.
Automation and digitalization across the supply chain enhanced efficiency in processes
and speed to market providing transparency to suppliers, farmers, customers and consumers.
A simple, yet innovative example of this was the timely implementation of a 'telecaller
model' to take orders across trade channels. The front-line sales colleagues stood tall to
overcome serious logistical obstacles and ensure availability. The efforts to ensure last
mile access were aided by e-commerce and in particular hyperlocal channels. The 8,000 SMEs
your Company worked with were provided support by training, equipping them with orders and
advance payments.
Quality, safety and compliance continues to remain the backbone of supply chain
operations team. Your Company enhanced quality in distribution that helped deliver fresher
products on shelf and reduce carbon footprint in operations.
In order to ensure sustainable logistics across the value chain, your Company focused
on alternative mode of transportation such as railways/ waterways and optimizing vehicle
fill rate. It introduced 4 waterways in 2021 to strengthen sustainable logistics. Your
Company increased usage of bigger size vehicles from 5.9% in 2019 to 9.8% in 2021,
increased usage of railways from 0% in 2019 to 8.2% in 2021 and increased vehicle payload
utilization from 90.3% in 2019 to 92.5% in 2021.
Management Analysis
Global Economy
The global economy surged to an estimated 5.5% growth in 2021 after contracting 3.4 %
in 2020 (United Nations World Economic Situation and Prospects 2022). The global GDP in
the first quarter was stronger, reflecting continued adaptation of economic activity to
the pandemic. Momentum weakened in the second quarter, weighed down by increasing
infections in many emerging markets and developing economies (IMF World Economic Outlook
2021).
Advanced economies and many middle-income countries attained substantial vaccination
rates, and sizable fiscal support helped cushion some of the adverse economic impacts of
the pandemic. However multidimensional challenges confronted the global economy such as
subdued employment growth and rising debt levels.
Commodity prices soared in 2021 following the broad-based decline in 2020, with prices
of several commodities reaching all-time highs. Global energy prices surged in the second
half of 2021, particularly for natural gas and coal, owing to recovering demand and
constrained supply. Non-energy commodity prices stabilized.
Global inflation increased to 5.2% in 2021, because of persistent supply chain
bottlenecks and rising freight costs across the globe impacting global production and
trade, pushing up prices of essential goods. Food prices shot up by 22% in 2021, reaching
their highest levels in a decade, with sharp increases in vegetable oils, cereals and
dairy prices (FAO, 2021).
The surge in Covid infections in 2021 sapped consumer demand, but to a much more
limited degree than the earlier waves (World Bank Report 2022), though emergence of new
variants could further impair market confidence and derail economic recoveries.
The pace of global economic recovery is expected to be slow in the near term as
recurring pandemic waves disrupt economic activity. The recovery is also at risk from more
persistent supply disruptions, inflationary pressures, financial stress and
climate-related issues. As the world confronts the pandemic, climate emergency its
economic impact is also gaining sharper focus.
Indian Economy
The recovery that has been underway in the Indian economy with the ebbing of the second
wave of the pandemic encountered headwinds from a rapid surge in infections in a third
wave marked by the rapid transmissibility of the Omicron variant.
Accelerated rates of vaccination and substantially reduced mobility restrictions have
improved consumer confidence (Deloitte Insights). Vaccination is important for opening of
the economy, and India delivered 157 crore doses that covered 91 crore people with at
least one dose and 66 crore with both doses (Economic Survey 2021-2022).
India's economy rebounded in the July-September quarter of FY 2021-22. GDP grew at 8.4%
year on year (YoY) in Q2 FY2021-22, growth was driven by strong exports, because of global
economic recovery, and domestic private investment as businesses ramped up production to
meet festive demand (Deloitte Insights, 2022). In September 2021 rural consumption in the
FMCG sector increased 58.2% YoY, twice as high as the increase in urban consumption of
27.7% (IBEF, 2021).
India's Consumer Price Index inflation stood at 5.6% YoY in December 2021. RBI's
consumer confidence survey on both the present situation and future expectations suggests
sustained uptick in consumer sentiment. Private consumption is poised to see stronger
recovery with rapid coverage in vaccination and faster normalisation of economic activity.
India has taken an important step by committing to reaching net-zero emissions by 2070
and reducing the carbon intensity of the economy by 45 % by 2030 (PIB, November 2021)
Opportunities and Risks
With the environment, economy, technology and society undergoing radical shifts, their
impacts continue to challenge businesses and create risks and tensions, and opportunities
for change and renewal.
Risks
Supply chain challenges
The worldwide supply chain continues to be affected by challenges relating to the
COVID-19 pandemic, including delays and disruption. Organizations need to reimagine and
manage their supply chains differently to ensure business continuity and growth for the
future and provide new solutions for customers to access products and services.
Digital vulnerabilities
There has been a growing dependency on digital systems which has been intensified
during COVID19, with increased usage of digital tools and digital payments, adoption of
platforms and devices that allow sensitive data to be shared with third parties - cloud
service providers, data aggregators, application programming interfaces and other
technology-related intermediaries. Additionally, there has been an increase in
cybersecurity threats such as malware and ransomware attacks, misinformation and frauds
creating cyber risks for the business.
Climate change continues
The economic crisis created by the COVID-19 pandemic could further delay efforts to
tackle climate change. Complete climate inaction could lead to losses projected at 18% of
global GDP, with different impacts across regions (Swiss Re Institute). Consequences may
be irreversible for the environment, humankind, and economic activity
Opportunities
The Indian food processing industry has tremendous growth potential. The COVID-19
pandemic led to increased acceptance for processed food (KPMG 2021). Rural areas and Tier
2 and 3 cities are expected to continue driving the demand for processed food.
Investing in Innovation
Food companies need to continue to leverage their in-depth knowledge of food habits,
nutrition, quality and safety in order to innovate and renovate, and adapt to this new
normal. They must respond to new demands, reset defining relationships with consumers and
reconsider their product portfolio in the post-COVID era to make products healthier, and
allow consumers to make informed choices.
Buttressing E-commerce to fuel growth
E-commerce had an increasing impact on the FMCG industry globally during the pandemic
as consumers increased their online shopping. As COVID-19 changed consumer habits, FMCG
firms saw a surge in the contribution of e-commerce to their overall sales during Covid
waves, and stabilization at higher levels as waves receded.
Enhancing digital first with a human touch
Consumers have become more digitally active. According to McKinsey, the COVID-19
pandemic has fundamentally changed the pace of business, and the companies with superior
technology capabilities had significant advantage. To meet new demands, companies are
making digital, and technology investments, across the business model. To enhance digital
experience of the future and enable it to blend with the physical experience, businesses
will have to focus on making consumer experience more authentic, more human. This would
mean bringing elements of tactile experience (touch, see, feel, smell, taste) as well as
making digital interactions more authentic by including multilingual capabilities for
wider customer reach and acceptance.
Accelerating sustainability and committing to planet
Addressing climate change will require a multi-stakeholder approach to collaborate and
monitor progress, laying the foundation for a better world. This includes regenerative
agriculture practices, a transition to 100% renewable electricity, as well as
reformulating products to make them more sustainable. There is a need for accelerating
actions towards reducing greenhouse gas emissions, creating more recyclable or reusable
packaging products.
Quality and Safety
Your Company across all its factories introduced life-saving rules. Safety is a
priority for your Company and it has been taken into account right from design stage to
ensuring world class equipment, to ensure a safe workplace. Best in class ring-lock
scaffolding has been deployed which has not only ensured quick turnaround time but also
taken the safety of civil construction several levels higher. Across all operating sites,
"Line of risk" training has been deployed to increase people awareness to
prevent any body parts in line of any energy, which can cause harm in any way.
Environment Sustainability
Reduction in Energy water usage, wastewater and direct Green House Gas Emissions
Your Company has sustainability as part of its DNA. The focus continued on improving
operational efficiencies by reducing consumption of natural resources and reduction in
energy and GHG emissions.
From 2006 to 2021, for every ton of production, your Company reduced the usage of
energy by around 43%, water usage by around 52%, generation of wastewater by around 67%
and specific direct GHG emissions by 57%.
Investing in Renewable Energy
Your Company's key renewable energy projects contributed to GHG savings. This was
implemented through the higher purchase of solar power for the Choladi factory and
Nanjangud factory and replacement of fossil fuel with clean fuel for steam generation at
the Bicholim factory.
Packaging and Plastic Waste Management
Your Company will be annually eliminating 30 million plastic straws. These paper straws
are responsibly sourced from renewable sources and certified by the Forest Stewardship
Council (FSC). This transition has also been incorporated for the packs of NESCAFE range
of cold coffees.
EPR (Extended Producer Responsibility) Initiative
Your Company engaged with various waste agencies, for end- to-end management of plastic
waste. In 2021, your Company achieved EPR of 23,600 MT tonnes through plastic waste
management.
Nestle a+ brand collaborated with Tetra Pak to launch Cartons to Classroom, an
initiative to increase awareness about recycling in India by converting used beverage
cartons to create classroom furniture for schools for less-privileged children.
Sustainable Logistics
Your Company is one of the pioneers to transport consumer goods through railways and
has initiated 4 inland waterways for strengthening sustainable logistics.
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 2021, 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 2021 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
Mr. Matthias Christoph Lohner (DIN: 08934420) Executive Director of the Company,
retires by rotation at the 63rd AGM, and being eligible, has offered himself
for re-appointment. A resolution seeking approval of the members for his re-appointment,
forms part of the Notice of the 63rd AGM. As per the terms of his appointment,
his re-appointment at the 63rd AGM as a director retiring by rotation would not
constitute break in his appointment as a Whole-time Director, designated as
"Executive Director - Technical".
Based on the recommendation of the Nomination and Remuneration Committee, the Board of
Directors of Company, has recommended appointment of Ms. Anjali Bansal as an Independent
Non-Executive Director of the Company for a consecutive term of five years from 1 st
May 2022, to the members for their approval by way of a special resolution at the 63rd
AGM. Ms. Anjali Bansal fulfils the criteria provided in the Nomination and Remuneration
Policy of the Company including her expertise, experience, proficiency and integrity.
Brief resume, nature of expertise in specific functional areas, disclosure of
relationships between directors inter-se, details of directorship held in other
companies, membership of committees of the Board along with listed entities from which she
resigned in the past three years, shareholding in the Company held by the directors
proposed to be appointed/ re-appointed at the 63rd AGM, is provided in the
Notice of the 63rd AGM.
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 and 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 policy of the Company on appointment and remuneration includes
criteria for determining qualifications, positive attributes and independence of a
director. The policy relating to the remuneration of directors, key managerial personnel,
senior management 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 also
available on the website of the Company at https://www.nestle.in/investors/policies.
An annual evaluation has been made by the Board of its own performance and that of its
Committees and individual directors and the details of manner of performance evaluation of
Directors, Board and its Committees are available in the Corporate Governance Report which
forms an integral part of the Annual Report.
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 https://www.nestle.in/investors/directorsandofficers/familiarisation-
programme.
Corporate Social Responsibility ("CSR")
As on 31st December 2021, the CSR Committee comprised of Dr. Swati A.
Piramal (Chairperson), Ms. Rama Bijapurkar, Independent Non- Executive Director, Mr.
Suresh Narayanan, Chairman and Managing Director and Mr. David Steven McDaniel, Executive
Director - Finance & Control and CFO of the Company, as members. The terms of
reference of the CSR Committee are provided in the Corporate Governance Report.
Your Company has also formulated a 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, as amended ("CSR Rules") is annexed as Annexure 2 and forms an integral
part of this Report.
In terms of Section 135 of the Companies Act, 2013 read with CSR Rules and in
accordance with the CSR Policy and the Annual Action Plan, your Company has during the
year 2021 spent over two percent of the average net profits of your Company during the
three preceding financial years. Your Company provided relief efforts to the communities
impacted by COVID-19 in collaboration with credible NGOs across various states. Your
Company focused its relief efforts towards feeding programmes for less privileged
sections, distributing essential groceries to the needy, and supporting the purchase of
medical equipment and PPEs. The details are provided in the Annual Report on CSR
activities. In addition to the above, your Company has been implementing societal
activities since many decades under the umbrella of Creating Shared Value which have not
been reckoned for arriving at the spends as per CSR Rules.
Project Vriddhi
As part of your Company's vision of strengthening community-led rural development for
positively impacting the lives of people, Nestle India in collaboration with SM Sehgal
Foundation launched the second phase of Project Vriddhi, reaching out to 1,300
beneficiaries. In the second phase, the initiative expanded to the villages of Naharpur
and Gabanspur in Punhana block. The three-year old project was launched in 2019 in the
village of Rohira in Nuh district and has touched the lives of 1,500 beneficiaries till
date.
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.
Nestle Healthy Kids Programme
The Nestle Healthy Kids Programme started over a decade back continued to scale up with
University partners and NGO partner, Magic Bus India Foundation year after year. In 2021,
your Company expanded the programme to Ladakh for reaching out to 650 adolescents. The
programme has also expanded in terms of the curriculum, incorporating plastic waste
management in the existing curriculum, as well as, including parents and teachers as
direct beneficiaries.
During year, 188,700 beneficiaries were reached with 50,546 new enrollments. Till date
over 445,000 adolescents across 23 States/UTs have been encouraged to live healthier lives
through this programme. To further equip beneficiaries about implications of COVID-19 and
its precautionary measures, your Company in collaboration with its NGO partner held
virtual training sessions for the beneficiaries.
Project Jagriti
Project Jagriti continued to focus on creating an enabling environment for the best
health outcomes, involving the health care system and stakeholders from the community.
Your Company had launched this project in partnership with Mamta Health Institute for
Mother and Child as part of its commitment to inspire people to lead healthier lives.
As a result of COVID-19, beneficiaries of Project Jagriti were trained virtually about
the preventive measures of COVID-19. In 2021, 1.9 million beneficiaries (0.5 direct and
1.4 million indirect) were reached.
Till 2021, the programme has reached out to 8.4 million beneficiaries (2.7 direct and
5.7 indirect) across 8 States/ UTs, strengthening the continuum of care.
Project Serve Safe Food
Your Company launched Project 'Serve Safe Food' in 2016 with National Association of
Street Vendors of India (NASVI), to provide training to the street food vendors and enable
them to voluntarily adopt the hygienic practices that improve the food quality. The
behaviour-change that this initiative has brought has benefitted 25,900 street food
vendors across 19 States/UTs till 2021.
As a result of COVID-19, street food vendors were anxious about impact of the pandemic
on their livelihoods. Along with its NGO partner, Nidan your Company organized training
sessions on food safety, hygiene, COVID-19 precautionary measures and digital payments.
Your Company distributed over 36,900 grocery kits across various locations to provide
relief to the street vendors whose livelihoods had been severely impacted by COVID-19.
Plastic Waste Management Awareness
Plastics play a key role in delivering a safe food supply from farm to fork and also
helps in preventing food wastage. However, plastic waste has become a significant
environment challenge. Your Company is creating awareness about antilittering and waste
segregation at source which is a key to establish sustainable waste management systems.
Your Company has worked towards creating an integrated plastic waste management model
through its project titled "HILLDAARI" in Mussoorie, Dalhousie, Nainital, Ponda,
Munnar and Mahabaleshwar 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.
Given the pandemic situation, as a part of Hilldaari, your Company along with its
partners organized virtual training for waste workers in Mussoorie, Nainital,
Mahabaleshwar, Ponda and Dalhousie to help them adapt to the changes in the new normal,
equipping them with safer working conditions. They were provided with PPE kits and safety
kits and trained how to use it. Training was also provided how to collect waste with
minimum contact, ensure proper sanitation and safety before meeting other people at their
respective homes. News ways of collecting and disposing waste were introduced, such as
establishing 4-part segregation (dry waste, wet waste, domestic bio-medical waste and
hazardous waste) for collection and proper disposal of waste. Waste workers were trained
to use smartphones and digital monitoring apps required for monitoring the collection and
segregation of waste. The waste workers were also trained in availing relevant government
schemes.
Business Responsibility Report
Creating Shared Value is fundamental to how your Company does business. Your Company
believes that it can only be successful in the long term by creating value both for its
shareholders and for society. 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 annexed as Annexure 3 and forms an integral part of the Annual
Report.
Statutory Auditors and Auditors' Report
As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and
Auditors) Rules, 2014, the term of M/s. B S R and Co. LLP, Chartered Accountants (ICAI
Registration No.: 101248W/W-100022) ("M/s. BSR"), as the Statutory Auditors of
the Company, expires at the conclusion of 63rd AGM of the Company.
The Report given by M/s. BSR on the financial statement of the Company for the year
2021 is part of the Annual Report. The Notes on financial statement referred to in the
Auditor's Report are self-explanatory and do not call for any further comments. The
Auditor's 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.
The Board of Directors of the Company at their meeting held on 11th November
2021, on the recommendation of the Audit Committee, have made its recommendation for
appointment of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants (ICAI Registration
No.: 301003E/E300005) ("M/s. SRB") as the Statutory Auditors of the Company, by
the members at the 63rd AGM of the Company for a term of five consecutive
years. Accordingly, an ordinary resolution, proposing appointment of M/s. SRB, as the
Statutory Auditors of the Company for a term of five consecutive years i.e. from the
conclusion of 63rd AGM till the conclusion of 68th AGM of the
Company pursuant to Section 139 of the Act, forms part of the Notice of the 63rd
AGM of the Company. The Company has received their written consent and a certificate that
they satisfy the criteria provided under Section 141 of the Act and that the appointment,
if made, shall be in accordance with the applicable provisions of the Act and rules framed
thereunder.
M/s. SRB, is a firm of Chartered Accountants registered with the Institute of Chartered
Accountants of India. M/s. SRB was established in the year 1949 and is a limited Liability
Partnership Firm ("LLP") incorporated in India. It has its registered office at
22, Camac Street, Kolkata apart from 7 other branch offices in various cities in India.
M/s. SRB has a valid Peer Review certificate and is part of S.R. Batliboi & Affiliates
network of audit firms. It is primarily engaged in providing audit and assurance services
to its clients.
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 0402 in
relation to the financial year ending 31st December 2022. 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 that
they are not disqualified to be appointed as the Cost Auditors of the Company for the year
ending 31st December 2022.
The remuneration of Cost Auditors has been approved by the Board of Directors on the
recommendation of Audit Committee and in terms of the Act 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 63rd AGM 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 31st
December 2021. The Report given by the Secretarial Auditors is annexed as Annexure 4 and
forms an integral part of this Report. The Secretarial Audit Report is self-explanatory
and does 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.
During the 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.
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 (Registration No.: 1774) as the Secretarial Auditors of the Company in
relation to the financial year ending 31st December 2022.
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 that they are not disqualified to be appointed as the Secretarial
Auditors of the Company for the year ending 31st December 2022.
Meetings of the Board
Seven Meetings of the Board of Directors of the Company were held during the year 2021.
The particulars of the meetings held and attendance by Directors are detailed in the
Corporate Governance Report, which is annexed as Annexure 1 and forms an integral part of
this Report.
Annual Return
In terms of Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies
(Management and Administration) Rules, 2014, the Annual Return of the Company is available
on the website of the Company at
https://www.nestle.in/investors/stockandfinancials/annualreturns.
Details of Loans, Guarantee and Investments
Details of loans, guarantee and investments are given in Note No. 6, 7, 11, 15 &
17, which forms part of the Financial Statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is also
available on the website of the Company 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.
All related party transactions are placed before the Audit Committee for review and
approval. Prior omnibus approval is obtained for related party transactions on a quarterly
basis for transactions which are of repetitive nature and/or entered in the ordinary
course of business and are at arm's length basis.
All related party transactions entered during the year were in ordinary course of the
business and at arm's length basis. No material related party transactions, i.e.
transactions exceeding 10% of the annual consolidated turnover, as per the last audited
financial statement, were entered during the year by your Company. Accordingly, the
disclosure of related party transactions as required under Section 134(3) (h) of the
Companies Act, 2013, in Form AOC-2 is not applicable. Members may refer to Note No. 45 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 the 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
was effective from 1st July 2019 and approval of members shall be sought every
five years in compliance with the applicable laws and regulations.
Risk Management
During the year, Mr. P. R. Ramesh and Ms. Roopa Kudva, Independent Non-Executive
Directors, were appointed as members of the Risk Management Committee ("RMC")
with effect from 20th April 2021.
Mr. Matthias Christoph Lohner, Executive Director-Technical, ceased to be the member of
the RMC on 20th April 2021.
As on 31st December 2021, the RMC comprised of Mr. Suresh Narayanan
(Chairman), Mr. P. R. Ramesh (Member), Ms. Roopa Kudva (Member) and Mr. David Steven
McDaniel (Member).
The RMC on timely basis informed the Board of Directors about risk assessment and
minimization procedures. The RMC has, inter-alia, formulated a detailed Risk Management
Policy, as prescribed under the Listing Regulations. In the opinion of the RMC, there are
no such risks, which may threaten the existence of the Company.
The terms of reference of the RMC are provided in the Corporate Governance Report,
which forms an integral part of the Annual Report.
Scheme of Arrangement
The Board of Directors, in their meeting held on 28th July 2021, had
approved the Scheme of Arrangement between the Company and its Members under Section 230
of the Act, as amended, read with other applicable provisions of the Act and rules made
thereunder (the "Scheme"), which envisages transfer of the entire balance of
Rs.8,374.3 Million standing to the credit of the General Reserves to Retained Earnings.
The Scheme, under the relevant Section(s) of the Act, is subject to the approval of the
shareholders and such other class of persons as directed by the Hon'ble National Company
Law Tribunal, Delhi Bench ("NCLT"), sanction of the Hon'ble NCLT and such other
approvals as may be prescribed. Your Company had received a 'No Observation Letter' dated
16th December 2021 from BSE Limited with 'no adverse observation'. The Company
is in process of filing of an application with the NCLT, in due course for the sanction of
the Scheme.
Upon the Scheme becoming effective the entire amount of Rs.8,374.3 Million standing to
the credit of the General Reserves of the Company shall be reclassified and credited to
the 'Retained Earnings' of the Company and constitute accumulated profits of the Company
for the previous financial years, arrived at after providing for depreciation in
accordance with the provisions of the Act and remaining undistributed in the manner
provided in the Act and other applicable laws. The amount so transferred, pursuant to the
Scheme, shall be available for utilisation by the Company for payout to the Members in
accordance with the terms of the Scheme. The details of the Scheme and other related
documents are available on the website of the Company at https: // www.nestle.in
/investors/stockandfinancials /scheme- arrangement.
Complaint filed in National Consumer Dispute Redressal 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.3,554.1 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, there was no change in the composition of Audit Committee.
Accordingly, as on 31st December 2021, the Audit Committee comprised of
Independent Non-Executive Directors, Mr. P. R. Ramesh (Chairman), Mr. Rajya Vardhan
Kanoria (Member) and Ms. Roopa Kudva (Member). Powers and role of the Audit Committee are
included in Corporate Governance Report, which forms an integral part of the Annual
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 India Code of Business Conduct" and "Nestle India
Vigil Mechanism/Whistle-blower Policy". The documents are available on the website of
the Company at https://www.nestle.in/investors/policies. 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.
The Company provides an independent third party operated free phone and web-based
Platform, namely, "Speak up", to all internal and external stakeholders
including directors and employees with a dedicated communication channel for reporting
potential instances of non-compliance with Nestle Corporate Business Principles or for
reporting, on a confidential basis, any practices or actions believed to be inappropriate
or illegal under the Nestle India Code of Business Conduct. Details of the link to
"Speak up" is available on the website of the Company at https://www.nestle.com/aboutus/businessprinciples/report-
your-concerns.
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 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
2021, in relation to the Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings and Outgo is annexed as Annexure 5 and forms an 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 annexed as Annexure 6 and forms an integral part of this Report. 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 or at the email address: investor@in.nestle.com.
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 Committee
under POSH. The Internal Committee (IC) comprises of internal members and external member
who has extensive experience in the field. In 2021, one case of sexual harassment was
reported, which was investigated and resolved as per the provisions of the POSH. During
the course of 2021, 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, online 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.4,365,900/- and Rs.5,114,640/-, being the unpaid and unclaimed dividend
amount pertaining to Final dividend 2013 & Interim Dividend 2014; and Second Interim
2014, respectively, during the year 2021, 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 rating reflects strong degree of safety and lowest credit risk.
General
During the year, there were no transaction requiring disclosure or reporting in respect
of matters relating to: (a) details relating to deposits covered under Chapter V of the
Act; (b) issue of equity shares with differential rights as to dividend, voting or
otherwise; (c) issue of shares (including sweat equity shares) to employees of the Company
under any scheme; (d) raising of funds through preferential allotment or qualified
institutions placement; (e) significant or material order passed by the Regulators or
Courts or Tribunals which impact the going concern status and Company's operations in
future; (f) pendency of any proceeding under the Insolvency and Bankruptcy Code, 2016; and
(g) instance of one-time settlement with any bank or financial institution.
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 : 17th February 2022 |
Suresh Narayanan |
| Place : Gurugram |
Chairman and Managing Director |
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