| COMPANY'S PERFORMANCE
During the year under review, Cairn India delivered total revenue of
Rs, 10,634 crore (including other income). This was lower on account of
Significant decline in crude oil prices, with gross operated production
at 74.6 million barrels of oil equivalent for the fiscal. Together with
its JV partners, Cairn contributed about 27% to the domestic crude
production target of Government for financial year 2015-16, thus
helping strengthen the energy security of the country. During the year,
the Company executed multiple projects in Rajasthan block including one
of the world's largest polymer food EOR program at Mangala. Cairn
continues to be one of the low cost producers in the world resulting in
EBITDA margin of 41% and strong cash fow from operations of Rs, 4,134
crore for the year.
Since resumption of exploration in March 2013, Cairn India has
established 1.7 billion boe of hydrocarbon in place by delivering a
rapid exploration and appraisal drilling program.
CONSOLIDATED FINANCIAL STATEMENTS
In compliance with provisions of Section 129 (3) of the Companies Act,
2013 read with Companies Accounts) Rules, 2014, the Company has
prepared Consolidated Financial Statements as per the Accounting
Standards on Consolidated Financial Statements issued by the Institute
of Chartered Accountants of India. The Audited Consolidated Financial
Statements along with the Auditors' Report thereon forms part of this
Annual Report. Further, a statement containing salient features of the
financial statements of the subsidiary companies is disclosed
separately and forms part of this Annual Report.
FINAL DIVIDEND
Your Directors are pleased to recommend a dividend amounting to Rs, 3
per equity share of face value of Rs, 10 each for the year ended 31
FINANCIAL HIGHLIGHTS (in Rs, crore)
Standalone Consolidated*
Particulars For the financial year ended For the financial
year ended
31 March, 2016 31 March,
2015 31 March,
2016 31 March,
2015
Total income 5,653 8,855 10,634 16,455
Total
Expenditure 4,479 5,005 8,395 8,713
Profit
before tax
and excep
tional items 1,174 3,850 2,239 7,742
Exceptional
item 281 2,256 11,674 2,633
Profit before tax 893 1,594 (9,435) 5,109
Taxes 40 274 (3) 629
Profit/ (loss)
for the year 854 1,320 (9,432) 4,480
* Cairn India Limited with its subsidiaries
March, 2016, subject to approval of shareholders at the forthcoming
annual general meeting of the Company.
The final dividend, if approved by the shareholders at the ensuing
annual general meeting, shall be paid to those members/beneficial
owners whose names appear on the register of members/depository records
as at the closing hours of business on Monday, 11 July, 2016.
TRANSFER TO RESERVES
During the year, your Company has transferred Rs, 14.9 crore (net of
tax) to general reserve on account of expiring unexercised stock
options.
MERGER/ SCHEME OF ARRANGEMENT
During the year under review, the Board of Directors of the Company at
its meeting held on 14 June, 2015, has approved a Scheme of Arrangement
in terms of Sections 391-394 read with Sections 100-103 of Companies
Act, 1956 and Section 52 of Companies Act, 2013 involving merger of
Cairn India Limited with Vedanta Limited. The said scheme is
conditional upon approval of the respective shareholders & creditors,
concerned Hon'ble High Courts and other regulatory and statutory
approvals as applicable.
BOARD OF DIRECTORS, ITS COMMITTEES AND MEETINGS THEREOF
The Company has a professional Board with right mix of knowledge,
skills and expertise with an optimum combination of executive, non-
executive and independent Directors including one woman Director. The
Board provides strategic guidance and direction to the Company in
achieving its business objectives and protecting the interest of the
stakeholders. The Board is also supported by five Committees viz. Audit
Committee, Nomination & Remuneration Committee, CSR Committee,
Stakeholders' Relationship Committee and Risk Management Committee of
Directors.
One meeting of the Board of Directors is held in each quarter.
Additional meetings of the Board/ Committees are convened as may be
necessary for proper management of the business operations of the
Company. Separate meeting of independent Directors is also held at
least once in a year to review the performance of non-independent
Directors, the Board as a whole and the Chairman.
The annual calendar of meetings of the Board/Committees is usually
final ised well before the beginning of the year after seeking
concurrence of all the Directors. In case of inability of any of the
Directors to attend the meeting in person, the Directors endeavor to
participate in the meeting through video conferencing or other audio
visual means. In addition, if required, the Board/ Committees also
approve resolutions by way of circulation between two successive
meetings.
During the year ended 31 March, 2016, the Board of Directors met five
times viz. on 23 April, 2015, 14 June, 2015,
21 July, 2015, 21 October, 2015 and
22 January, 2016. The maximum gap between any two meetings was not more
than one hundred and twenty days.
A detailed update on the Board & its Committees, composition thereof,
number of meetings held during financial year 2015-16 and attendance of
the Directors at such meeting is provided in the Report on Corporate
Governance.
APPOINTMENT AND DECLARATION OF INDEPENDENT DIRECTORS
The Board of the Company comprises eight Directors, out of which four
Directors are independent.
All independent Directors of the Company have declared and confirmed
that they meet with the criteria of independence, as prescribed under
Section 149(6) of the Companies Act, 2013 and Regulation 16(b) of the
Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
During the financial year under review, no new independent Director was
appointed on the Board by the Company.
DIRECTORS'/ KEY MANAGERIAL PERSONNEL (KMP) APPOINTMENT OR RESIGNATION
Pursuant to the provisions of Section 203 of the Companies Act, 2013,
Mr. Mayank Ashar - Managing Director & Chief Executive Officer, Mr.
Sudhir Mathur - Chief Financial Officer, Ms. Neerja Sharma - Director
Assurance & Communication and Company Secretary are the KMPs of the
Company.
In accordance with Section 152 of the Companies Act, 2013 and Articles
of Association of the Company, Ms. Priya Agarwal (DIN 05162177), shall
retire by rotation as Director at the ensuing annual general meeting
and being eligible, offers herself for re- appointment. A brief profile
of Ms. Agarwal has been provided in the Report on Corporate Governance
and in the notice of the annual general meeting.
During the year under review, there was no change in the position of
Directors/ KMPs of the Company.
AUDIT COMMITTEE
The Company has a duly constituted Audit Committee in line with the
provisions of the Companies Act, 2013 and Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations,
2015.
As on 31 March, 2016, the Committee comprised five non-executive
Directors viz. Mr. Aman Mehta (Chairman), Mr. Naresh Chandra, Mr. Tarun
Jain, Dr. Omkar Goswami and Mr. Edward T. Story. Except for Mr. Tarun
Jain, all other Committee
members are independent. All members of the Committee are financially
literate and have accounting or related financial management expertise.
Detailed information pertaining to Audit Committee has been provided in
the Report on Corporate Governance.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company is committed to conduct its business in a socially
responsible, ethical and environmental friendly manner and to
continuously work towards improving quality of life of the communities
in its operational areas.
The Company has a duly constituted CSR Committee, which is responsible
for fulfilling the CSR objectives of the Company. As on 31 March, 2016,
the Committee comprised three Directors viz. Mr. Naresh Chandra, Mr.
Aman Mehta and Mr. Tarun Jain. Mr. Naresh Chandra, Chairman of the
Committee is an independent Director.
CSR Policy
The Company has in place a CSR policy which lays down its philosophy
and approach towards CSR commitment. The CSR activities of the Company
are implemented in accordance with the core values viz. protecting
stakeholder interests, proactive engagement with the local communities
and striving towards inclusive development.
The CSR activities are focused on the following five broad themes with
goals to improve overall socio- economic indicators of Company's area
of operation: n Promoting healthcare, sanitation and making safe
drinking water available;
n Employment enhancement through training and vocational skill
development;
n Income enhancement through farm based and other livelihood
opportunities; n Promoting education and sports; and n Ensuring
sustainable environment.
The annual report on CSR containing particulars specified in Companies
(CSR Policy) Rules, 2014 including an update on the CSR initiatives
taken by the Company during the year is given in Annexure I and is also
provided in the management discussion & analysis section of this
report.
The CSR policy of the Company is enclosed as Annexure II to this report
and is also placed on the website of the Company viz.
www.cairnindia.com
POLICY ON DIRECTORS' APPOINTMENT & REMUNERATION
The Company endeavors to have an appropriate mix of executive, non-
executive and independent Directors, so as to have independence on the
Board and separate its function of governance from that of management.
The selections and appointments on the Board of the Company are done on
the recommendation of the Nomination & Remuneration Committee. The
appointments are based on meritocracy and the candidates are considered
against objective criteria, having due regard to the benefits of
diversity on the Board.
In considering potential candidates for appointment to the Board, the
Nomination & Remuneration Committee, amongst others, considers the
parameters of highest level of personal and professional ethics,
standing, integrity, values and character, report on credentials of the
candidates for the executive positions, appreciation of the Company's
vision, mission, values and loyalty to the interests of the Company and
its stakeholders, prominence in business, institutions or professions,
financial literacy and such other competencies and skills as may be
considered necessary.
While evaluating the candidature of an independent Director, in
addition to above, the Committee abide by the criteria for determining
independence as stipulated under Companies Act 2013 and Securities and
Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015.
In case of re-appointment of independent Directors, the Board shall
take into consideration the results of the performance evaluation of
the Directors and their engagement level.
The Company's remuneration policy for Directors, KMPs and other
employees represents the overarching approach of the Company and is
directed towards rewarding performance based on review of achievements
periodically.
The copy of the policy is attached as Annexure- III to this report.
PERFORMANCE EVALUATION OF BOARD, COMMITTEES & INDIVIDUAL DIRECTORS
A formal evaluation of the performance of the Board, it's Committees,
the Chairman and the individual Directors was carried out for the year
2015-16. Led by the Nomination & Remuneration Committee, the evaluation
was done using individual questionnaires covering amongst others
composition of Board, conduct as per company values & beliefs,
contribution towards development of the strategy & business plan, risk
management, receipt of regular inputs and information, codes & policies
for strengthening governance, functioning, performance & structure of
Board Committees, skill set, knowledge & expertise of Directors,
preparation & contribution at Board meetings, leadership etc.
As part of the evaluation process, the performance of non-independent
Directors, the Chairman and the Board was done by the independent
Directors. The performance evaluation of the respective Committees and
that of independent and non-independent Directors was done by the Board
excluding the Director being evaluated. The Directors expressed
satisfaction with the evaluation process.
EMPLOYEE STOCK OPTION SCHEMES
Your Company has in place share incentive schemes viz. Cairn India
Performance Option Plan (CIPOP) and Cairn India Employee Stock Option
Plan (CIESOP) pursuant to which selected employees and executive
Directors of the Company and its subsidiaries may be granted stock
options. The said schemes are in compliance with applicable
Regulations.
On exercise of the options so granted, the paid-up equity share capital
of the Company will increase in terms of the stock option plans
mentioned above. No stock options were however granted to the employees
of the Company and its subsidiaries under CIPOP & CIESOP schemes during
the financial year 2015-16.
The details of stock options granted by the Company in previous years
are set out in Annexure IV to this Report in compliance with Regulation
14 of the Securities and Exchange Board of India (Share Based Employee
Benefits) Regulations, 2014 and Rule 12(9) of Companies (Share Capital
and Debentures) Rules, 2014. Necessary disclosure is also available on
the Company's website viz. https://www. cairnindia.com/investors
CHANGES IN CAPITAL STRUCTURE
During the financial year under review, 9,729 equity shares of Rs, 10
each were allotted on exercise of employee stock options by the
employees of the Company. Consequently, the issued and paid up capital
of the Company as on 31 March, 2016 was Rs, 18,748,624,810 divided into
1,874,862,481 equity shares of Rs, 10 each.
The Company has not issued any equity shares with differential rights,
sweat equity shares or bonus shares. The Company has only one class of
equity shares with face value of Rs, 10 each, ranking pari-passu.
LOANS AND INVESTMENTS BY THE COMPANY
Details of loans and investments by the Company to other body corporate
or persons are given in notes to the financial statements.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report on the operations of the
Company as required under the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015 has
been given separately and forms part of this report.
RISK MANAGEMENT
The Board of Directors is overall responsible for identifying,
evaluating and managing all Significant risks faced by the Company. The
Risk Management Policy approved by the Board acts as an overarching
statement of intent and establishes the guiding principles by which key
risks are managed across the organization.
The Board monitors and reviews the implementation of various aspects of
the Risk Management policy through a duly constituted Risk Management
Committee (RMC). The RMC assists the Board in its oversight of the
Company's management of key risks, including strategic and operational
risks, as well as the guidelines, policies and processes for monitoring
and mitigating such risks under the aegis of the overall Business Risk
Management Framework. Further, the Company has a dedicated risk
assurance team to facilitate risk reporting and updates, risk policy
compliances and provide overall guidance and support to business risk
owners.
The Company follows well- established and detailed risk assessment and
minimization procedures, which are periodically reviewed by the Board.
The Company's Business Risk Management Framework helps in identifying
risks and opportunities that may have a bearing on the organization's
objectives, assessing them in terms of likelihood and magnitude of
impact and determining a response strategy.
The following risks are considered to have a potential bearing on the
performance of the Company: n Unfavorable changes in Production Sharing
Contract ("PSC") terms or failure to extend the PSC for Rajasthan block
after the expiry of PSC in May, 2020 could have a material adverse
impact on Company's operations and financial condition.
n The performance of the Company has been and is expected to continue
to be substantially dependent on the reserves and production of the
Rajasthan block and any interruption in the exploration, development,
production operations at the existing oil and gas fields for any reason
(including force majeure conditions) could have a material effect on
the results of our operations and financial condition.
n Inability/substantial delay in reserves replacement along with
natural decline in the producing fields could lead to decline in
company's overall production in future, which could materially and
adversely affect results of operations and financial condition and
therefore, sustenance of Company's operations in the longer term.
n International prices for oil and gas are volatile and such volatility
could have a Significant effect on Company's revenue and profits. In
case there are substantial and/ or extended declines in international
crude oil prices, it may have an adverse effect on Company's business,
results of operations and financial condition.
n The Company operates under regulatory uncertainties driven by
political developments by the central, state, local laws and
regulations such as changes in taxes, royalties and other amounts
payable to various governments or their agencies. A tax demand of
approximately Rs, 20,495 crore (comprising tax of approximately Rs,
10,248 crore and interest of approximately Rs, 10,247 crore) has been
made in relation to retrospective tax legislation for alleged failure
to deduct withholding tax on alleged capital gains in the hands of
erstwhile parent, Cairn UK Holdings Limited. The Company's parent,
Vedanta Resources Plc. has filed a notice of claims against GoI under
the UK-India bilateral investment treaty challenging the tax demand,
seeking resolution through international arbitration. The Company has
filed a Writ Petition with the Hon'ble Delhi High Court praying for
quashing/ setting aside the order passed by the Tax Authorities.
Further, the Company has also filed an appeal before Commissioner
Appeals. Although considered unlikely, if enforced, such tax demand
would have a material adverse effect on the business and financial
condition of the Company.
INTERNAL FINANCIAL CONTROLS AND ITS ADEQUACY
As per the provisions of Section 134(5)(e) of the Companies Act, 2013,
the Directors have an overall responsibility for ensuring that the
Company has implemented robust systems/ framework of internal financial
controls to provide them with reasonable assurance regarding the
adequacy and operating effectiveness of controls with regards to
reporting, operational and compliance risks. To enable the Directors
to meet these responsibilities, the Board has devised systems/
frameworks which are operating within the Company. In line with best
practice, the Board regularly reviews the internal control system to
ensure that it remains effective and ft for purpose. Where weaknesses
are identifed as a result of the reviews, new procedures are put in
place to strengthen controls and these are in turn reviewed at regular
intervals.
The systems/ frameworks include proper delegation of authority,
policies and procedures, effective IT systems aligned to business
requirements, internal audit framework, ethics framework, risk
management framework and adequate segregation of duties to ensure an
acceptable level of risk. Your Company has a documented Standard
Operating Procedures (SOPs) for procurement, project/ expansion
management capex, human resources, sales and marketing, finance,
treasury, compliance and (HSE) Health, Safety and Environment.
Your Company's management has established and maintained internal
financial controls based on the internal control over financial
reporting criteria established in the integrated framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission
(2013 Framework) (the COSO criteria), which considers the essential
components of internal control stated in the Guidance Note on Audit of
Internal Financial Controls over Financial Reporting issued by the
Institute of Chartered Accountants of India. These responsibilities
include the design, implementation and maintenance of adequate internal
financial controls that were operating effectively for ensuring the
orderly and efficient conduct of its business, including adherence to
the 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, as required under the Companies Act, 2013.
Based on information provided, nothing has come to the attention of
Directors to indicate that any material breakdown in the function of
these controls, procedures or systems occurred during the year under
review. There have been no Significant changes in our internal
financial controls during the year that have materially affected, or
are reasonably likely to materially affect, our internal financial
controls.
There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their
control objectives. Further, in the design and evaluation of our
disclosure controls and procedures, our management was necessarily
required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
The Company has a Chief Internal Auditor with a dedicated internal
audit team which is commensurate with the size, nature & complexity of
operations of the Company. Internal audit reports functionally to Audit
Committee of Board which reviews and approves risk based annual
internal audit plan. Audit Committee periodically reviews the
performance of internal audit function.
The Company has a detailed business planning framework to define
targets and metrics for its operations and an extensive review
mechanism enabled performance monitoring for ensuring strategic
corrective actions for achievement of business targets. The Audit
Committee reviews adherence to internal control systems and internal
audit reports. Further, the Board annually reviews the effectiveness
of the Company's internal control system.
VIGIL MECHANISM
The Company has in place a whistleblower policy, to support the Code of
Business Ethics. 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 or suspected fraud or any violation of Company's Code
of Business Ethics at a Significantly senior level without fear of
intimidation or retaliation. The policy enables reporting of any such
complaint and is supported by an independent review process managed by
the Ethics Committee.
The Ethics committee comprises of four members including the Company
Secretary, Chief Internal Auditor, Chief Financial Officer and a senior
functional head. The committee is authorized by the Board of Directors
of the Company for the purpose of receiving all complaints under the
policy and in ensuring appropriate action. The concern can be reported
by sending an e-mail message at the dedicated address viz.
ethicscounsellors@cairnindia. com. Individuals can also raise their
concerns directly to the CEO or the chairman of the Audit Committee of
the Company.
Any allegations that fall within the scope of the concerns identified
are investigated and dealt with appropriately. All reported complaints
are reviewed and investigated by the Ethics Committee, and periodically
reported to the Audit Committee. Further, during the year, no
individual was denied access to the Audit Committee for reporting
concerns, if any.
Details of the vigil mechanism are available at the website of the
Company viz. www.cairnindia.com
SUBSIDIARY COMPANIES
During the financial year under review, in continuation of the efforts
to realign the group structure and consolidate the multi layered
structure, Cairn Exploration (No. 6) Limited was dissolved effective 5
January, 2016. Subsequent to close of financial year Cairn Exploration
(No. 7) Limited was dissolved effective 19 April, 2016.
The Company now has 12 subsidiaries including indirect subsidiaries.
All these companies are incorporated outside India and are 100%
beneficially owned by Cairn India Limited. The Company regularly
monitors the performance of such companies.
The Company shall make available the annual accounts of the subsidiary
companies to any member of the Company who may be interested in
obtaining the same. The annual accounts of the subsidiary companies
will also be kept open for inspection at the registered office of the
Company and respective subsidiary companies. Further, the annual
accounts of the subsidiaries are also available on the website of the
Company viz. www.cairnindia. com. The consolidated financial
statements presented by the Company include the financial results of
its subsidiary companies.
REPORT ON PERFORMANCE & FINANCIAL POSITION OF SUBSIDIARIES
Following are the highlights on performance and financial position of
your Company's subsidiaries:
n Cairn India Holdings Limited: The company is incorporated in Jersey
and its principal business is holding investments. The company did not
have any operations during the year, apart from its shareholding in
various subsidiary companies and other investments. During the year
ended 31 March, 2016, the company made a profit of Rs, 2,419.58 crore.
n Cairn Energy Hydrocarbons Limited: The company is incorporated in
Scotland and its principal business is exploration and production of
oil and gas. The company holds interest in the producing block
RJ-ON-90/1 in India. During the year ended 31 March, 2016, the company
made a profit of Rs, 26.29 crore. Average gross production from the
Rajasthan block for the year ended 31 March, 2016 was 169,609 boepd and
the company's working interest production was 59,363 boepd.
n Cairn Energy Holdings Limited: The company is incorporated in
Scotland and its principal business is holding investments. The
company did not have any operations during the year. During the year
ended 31 March, 2016, the company made a profit of Rs, 0.62 crore. The
management intends to liquidate the company in near future and the
liquidation process has been initiated.
n Cairn Exploration No. (2) Limited: The company is incorporated in
Scotland and its principal business is exploration and production of
oil and gas. The company did not have any operations during the year
2015- 16. During the year ended 31 March, 2016, the company made a
profit of Rs, 0.18 crore.
- Cairn Exploration No. (7) Limited:
The company is incorporated in Scotland and its principal business is
exploration and production of oil and gas. The company did not have any
operations during the year 2015-16. During the year ended 31 March,
2016, the company incurred a loss of Rs, 0.05 crore. r*
The company has been dissolved effective 19 April, 2016.
- Cairn Energy Gujarat Block 1 Limited: The company is incorporated in
Scotland and principal business is exploration and production of oil
and gas. The company did not have any operations during the year 2015-
16. During the year ended 31 March 2016, the company made a profit of
Rs, 0.11 crore.
- Cairn Energy Discovery Limited:
The company is incorporated in Scotland and its principal business is
exploration and production of oil and gas. The company did not have any
operations during the year 2015-16. During the year ended 31 March
2016, the company incurred a loss of Rs, 0.10 crore.
- Cairn Energy Australia Pty Limited: The company is incorporated in
Australia and its principal business is holding investments. The
company did not have any operations during the year, apart from its
investment in subsidiary company. During, the year ended 31 March,
2016, the company incurred a loss of Rs, 0.31 crore.
n Cairn Energy India Pty Limited: The company is incorporated in
Australia and its principal business is exploration and production of
oil and gas. The company did not have any operations during the year
2015. The operating profit/loss after income tax expense of the company
is nil.
n Cairn South Africa Proprietary Limited: The company holds a 60%
participating interest in the exploration right in Block-1, Orange
Basin offshore South Africa. The work programme commitments for the
first phase have been completed. Detailed interpretation of the 3D and
2D seismic data for outboard and inboard areas was carried out.
Petroleum Agency SA (PASA) has granted interim hiatus to the 2nd phase
renewal pending clarification on fiscal stability. During the year
ended 31 March 2016, the company incurred a loss of Rs, 21.44 crore.
n CIG Mauritius Holding Private Limited: The company is incorporated in
Mauritius and its principal business is holding investments. During the
year ended 31 March 2016, the company incurred a loss of Rs, 264.42
crore which was mainly on account of impairment of its investment in
its subsidiary company, CIG Mauritius Private Limited.
n CIG Mauritius Private Limited: The company is incorporated in
Mauritius and its principal business is holding investments. The
company did not have any operations during the year 2015- 16, apart
from its investment in subsidiary company. During the year ended 31
March 2016, the company incurred a loss of Rs, 264.39 crore which was
mainly on account of impairment of its loan given to its subsidiary
company, Cairn Lanka Private Limited.
n Cairn Lanka Private Limited: The company is incorporated in Sri Lanka
and its principal business is exploration and production of oil and
gas. The company held a 100% participating interest in the exploration
area of block SL- 2007-01-001 in Sri Lanka. During the year ended 31
March, 2016, the company incurred a loss of Rs, 14.16 crore. On 15
October 2015, at the expiry of second phase of extension of the company
has relinquished the said block.
CORPORATE GOVERNANCE
Your Company strives to ensure that best corporate governance practices
are identified, adopted and consistently followed. Your Company
believes that good governance is the basis for sustainable growth of
the business and for enhancement of stakeholder value.
A detailed report on corporate governance forms an integral part of
Annual Report and is set out as separate section therein. The
certificate of S. R. Batliboi & Co. LLP, chartered accountants, the
statutory auditors of the Company certifying compliance with the
conditions of corporate governance as stipulated in the Securities and
Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 is annexed with the Report on Corporate
Governance.
RELATED PARTY TRANSACTIONS
The Company has adequate procedures for purpose of identification and
monitoring of related party transactions. All transactions entered into
with related parties during the financial year were on arm's length
basis. All related party transactions are periodically placed before
the Audit Committee and the Board for review and approval, as
appropriate. For details on related party transactions, members may
refer to the notes to the standalone financial statement.
The Company's policy for related party transactions regulates the
transactions between the Company and its related parties. The said
policy is available on the Company's website viz. www.cairnindia.com
There were no materially Significant related party transactions made by
the Company with promoters, Directors, key managerial personnel or
other designated persons which may have a potential confect with the
interest of the Company at large. Details of such transactions are
given in the Annexure V to this report.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013
and the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, M/s Sanjay Grover & Associates, a form of
company secretaries in practice, was appointed to conduct the
Secretarial Audit of the Company for the financial year 2015-16.
The Secretarial Audit Report is annexed to this report as Annexure VI.
The Secretarial Auditors' report is self-explanatory and therefore does
not require further comments and explanation.
AUDITORS & AUDITORS' REPORT
S. R. Batliboi & Co. LLP, chartered accountants, statutory auditors of
the Company, hold office till the conclusion of the ensuing annual
general meeting. Further, they have confirmed that they are not
disqualified for re-appointment as auditors of the Company under the
Companies Act, 2013, the Chartered Accountants Act, 1949 and the rules
or regulations made there under.
The Audit Committee at its meeting held on 22 April, 2016 has
recommended the re-appointment of S. R. Batliboi & Co. LLP as statutory
auditors of the Company. Your Directors also recommend their
reappointment from the conclusion of this annual general meeting till
the conclusion of the next annual general meeting of the Company.
Auditors' report is self-explanatory and therefore does not require
further comments and explanation.
COST AUDITORS
In terms of the Section 148 of the Companies Act, 2013 read with
Companies (Cost Records and Audit) Rules, 2014, the Company is required
to maintain cost accounting records and get them audited every year.
The Board appointed M/s. Shome & Banerjee, cost accountants, as cost
auditors of the Company for the financial year 2016-17 at a fee of Rs,
885,000 (Rupees eight lacs eighty five thousand only) plus applicable
taxes and out of pocket expenses subject to the ratification of the
said fees by the shareholders at the ensuing annual general meeting.
The cost audit report would be filed with the Central Government within
prescribed timelines.
DEPOSITS
The Company has not invited any deposits from the public under Section
73 of the Companies Act, 2013.
HUMAN RESOURCES
Company's industrial relations continued to be harmonious during the
period under review.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 197(12) of the Companies
Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, the names and other particulars of
employees are set out in the annexure to this report. In terms of the
provisions of Section 136(1) of the Companies Act, 2013, the Board's
Report is being sent to the shareholders without this annexure.
Shareholders interested in obtaining a copy of the annexure may write
to the Company Secretary.
MATERIAL AND SIGNIFICANT ORDERS PASSED BY REGULATORS & COURTS
No Significant and material orders have been passed by any regulators
or courts or tribunals against the Company impacting the going concern
status and Company's operations in future.
However, as informed in the previous report, the Company had received
an order from the Income Tax Department for an alleged failure to
deduct withholding tax on alleged capital gains arising during the year
2006-07 in the hands of Cairn UK Holdings Limited (CUHL), Company's
erstwhile parent company, a subsidiary of Cairn Energy Plc. This was in
respect of the transaction of CUHL transferring the shares of Cairn
India Holdings Limited to Cairn India Limited as part of internal group
reorganization in 2006-07 to facilitate the IPO of Cairn India Limited.
A demand of approximately Rs, 20,495 crore (comprising tax of
approximately Rs, 10,248 crore and interest of approximately Rs, 10,247
crore) is alleged to be payable. The Company has filed a Writ Petition
with the Hon'ble Delhi High Court praying for quashing/ setting aside
the aforesaid order and is pursuing all possible options to protect its
interest. Further, the Company has also filed an appeal before
Commissioner Appeals. The Company's parent, Vedanta Resources Plc. has
filed a notice of claims against GoI under the UK- India bilateral
investment treaty challenging the tax demand, seeking resolution
through international arbitration.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Information on conservation of energy, technology absorption and
foreign exchange earnings and outgo is given in Annexure VII to this
report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, the Directors
confirm that:
a. in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;
b. appropriate accounting policies have been selected and applied
consistently and have 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 31 March, 2016 and of the profit of the Company
for the year ended 31 March, 2016;
c. proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 2013 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
d. the annual accounts have been prepared on a going concern basis;
e. internal financial controls have been laid down to be followed by
the Company and such internal financial controls are adequate and were
operating effectively;
f. proper systems have been devised to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
REMUNERATION
Disclosure pursuant to Section 197(12) of Companies Act, 2013 and Rule
5 of Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014 is provided below:
i) the ratio of the remuneration of each Director to the median
remuneration of the employees of the Company for the year 2015-16
Directors Nature of Directorship Ratio
Mr. Navin Agarwal Chairman & Non-executive
Director 0.2:1
Mr. Tarun Jain Non-executive Director 0.4:1
Ms. Priya Agarwal Non-executive Director 0.1:1
Mr. Aman Mehta Non-executive independent
Director 4:1
Mr. Naresh Chandra Non-executive independent
Director 4:1
Dr. Omkar Goswami Non-executive independent
Director 4:1
Mr. Edward T. Story Non-executive independent
Director 4:1
Mr. Mayank Ashar Managing Director & Chief
Executive Officer 74:1
ii) the percentage increase in remuneration of each Director, Chief
Financial Officer, Chief Executive Officer, Company Secretary in the
financial year:
The remuneration of non-executive Directors comprises of sitting fees
at the rate of Rs, 50,000 for each Board/ Committee meetings attended
by them along-with profit linked commission payable annually. During
the year 2015-16, there was no change in the said remuneration.
Further, there is no change in the remuneration paid to Mr. Mayank
Ashar, Managing Director & Chief Executive Officer other than the
performance bonus of Rs, 2.41 crore paid during the year 2015-16.
The percentage increase in the remuneration of Mr. Sudhir Mathur, Chief
Financial Officer is 6.7%. The remuneration of Ms. Neerja Sharma,
Director Assurance & Communication and Company Secretary increased by
21.8% due to change in bonus entitlement as per Company policy.
iii) the percentage increase in the median remuneration of employees in
the financial year: 10.4%
iv) the number of permanent employees on the rolls of Company: 1,490
(One thousand four hundred and ninety), as on 31 March, 2016.
v) the explanation on the relationship between average increase in
remuneration and Company performance:
The average increase in remuneration of the employees was 10.4%. The
increase in remuneration is closely linked to and driven by achievement
of annual corporate goals and overall business, financial and
operational performance of the Company.
vi) comparison of the remuneration of the key managerial personnel
against the performance of the Company:
During the year, the gross operated production was 74.6 million barrels
of oil equivalent. Together with its JV partners, Cairn contributed
about 27% to the domestic crude production target of Government for
financial year 2015-16 and thus helping strengthen the energy security
of the country. Cairn continues to be one of the low cost producers in
the world resulting in EBITDA margin of 41% and strong cash fow from
operations of Rs, 4,134 crore for the year. The remuneration of Key
Managerial Personnel (KMP) amongst others is closely linked to and
driven by achievement of annual corporate goals and overall business,
financial and operational performance of the Company. The average
increase in the remuneration of KMP's was 12.1% over the previous year.
vii) variations in the market capitalization of the Company, price
earnings ratio as at the closing date of the current financial year and
previous financial year and percentage increase over decrease in the
market quotations of the shares of the Company in comparison to the
rate at which the Company came out with the last public offer:
The Company had allotted shares under its IPO in December, 2006 at the
price of Rs, 160 per equity share. The market quotations/price of the
shares of the Company as at 31 March, 2016 on NSE compared to the IPO
price was lower by 3.8%.
Particulars As at 31 March, 2016 As at 31
March, 2015 Variation (%)
Closing Share
Price on NSE (Rs,) 153.85 213.85 (28.1)
Market
Capitalization
(Rs, crore) 28,845* 40,094* (28.1)
P/E Ratio** 13.45 6.14 119
(Consolidated)
*Total number of shares as on 31 March, 2016 and 31 March, 2015 are
1,874,862,481 and 1,874,852,752 respectively. ** P/E ratio is
calculated using basic earnings per share excluding exceptional items.
viii) average percentile increase already made in the salaries of
employees other than the managerial personnel in the last financial
year and its comparison with the percentile increase in the managerial
remuneration and justification thereof and point out if there are any
exceptional circumstances for increase in the managerial remuneration:
The average increase in the remuneration of employees was 10.4%. There
is no change in the remuneration paid to Mr. Mayank Ashar, Managing
Director & Chief Executive Officer other than the performance bonus of
Rs, 2.41 crore paid during the year.
ix) comparison of the each remuneration of the Key Managerial Personnel
against the performance of the Company:
The increase in the remuneration of Mr. Sudhir Mathur, Chief Financial
Officer and Ms. Neerja Sharma, Director - Assurance & Communication and
Company Secretary is 6.7% and 21.8% respectively. The comparison of the
remuneration against the performance of the Company is detailed in
clause (vi) above. Further, there is no change in the remuneration paid
to Mr. Mayank Ashar, Managing Director & Chief Executive Officer other
than the performance bonus of Rs, 2.41 crore paid during the year
2015-16.
x) the key parameters for any variable component of remuneration
availed by the Directors:
The variable component of remuneration of the executive Director
comprises of annual performance bonus which is linked to achievement of
corporate KPIs & individual goals and the long term incentives in the
form of stock or cash options/award. The non-executive Directors of the
Company are entitled to annual commission linked to the performance and
profit of the Company.
xi) the ratio of the remuneration of the highest paid Director to that
of the employees who are not Directors but receive remuneration in
excess of the highest paid Director during the year: Not applicable.
xii) Affrmation that the remuneration is as per the Remuneration Policy
of the Company: The remuneration is as per the Remuneration Policy of
the Company.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report for the financial year 2015-16 forms
part of the annual report.
KEY AWARDS AND RECOGNITIONS
Cairn India has been winning accolades for its unique innovations and
contributions to the stakeholders & society. Such recognitions are a
testimony to the growth, emphasis on being a safe operator and
commitment towards delivering value to our people, investors and
stakeholders.
During the year, your Company received the following awards:
n Golden Peacock Award for Risk Management 2015
n CII-ITC Sustainability Award 2015 for Excellence in CSR
n Best Anganwadi Center Award for three Anganwadi Centers at S' Yanam
n Gold (first prize) in the large scale category at the 5th FICCI
Safety Systems Excellence Awards for Manufacturing in respect of
Mangala field. Further, Bhagyam, Aishwariya and Pipeline Operations,
have won the certificate of appreciation for good practices at the said
awards of FICCI n EHS excellence award by CII, Southern Region, 2014
for Ravva location
n Director General of Mines & Safety award for longest incident free
period category in respect of Ravva location n Oil Industry Safety
Award for best gas processing plant category in respect of Ravva
location n Award for best minor port -2015 by Government of Andhra
Pradesh n Highest Tax payer award from Central Excise Department,
Jaipur in respect of Rajasthan block for payment of Cess
and National Calamity and Contingency Duty
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
(PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Company has always believed in providing a safe and harassment
free workplace for every individual working in Cairn India's premises
through various interventions and practices. The Company always
endeavors to create and provide an environment that is free from
discrimination and harassment including sexual harassment.
The Company has in place a robust policy on prevention of sexual
harassment at workplace. The policy aims at prevention of harassment of
employees as well as contractors and lays down the guidelines for
identification, reporting and prevention of sexual harassment. There is
an Internal Complaints Committee (ICC) which is responsible for
redressal of complaints related to sexual harassment and follows the
guidelines provided in the policy. ICC has its presence at corporate
office as well as at site locations.
During the year ended 31 March, 2016, the ICC received four complaints
pertaining to sexual harassment. Detailed investigations were carried
out and appropriate action was taken by the ICC.
RELEVANT EXTRACT OF THE ANNUAL RETURN
Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act,
2013 read with Rule 12 of the Companies (Management and Administration)
Rules, 2014, relevant extract of annual return for the financial year
2015-16 is given in Annexure VIII to this report.
MATERIAL CHANGES & COMMITMENTS
No material changes and commitments, affecting the financial position
of the Company have occurred after the end of the financial year
2015-16 and till the date of this report.
APPRECIATION
Your Directors wish to place on record their sincere appreciation to
employees at all levels for their hard work, dedication and commitment
towards Company's operations and performance. Your Directors also wish
to place on record their gratitude for the valuable assistance and
co-operation extended to the Company by the Central Government, State
Governments, joint venture partners, banks, institutions, investors and
customers.
For and on behalf of the
Board of Directors
Navin Agarwal
(DIN No.-00006303)
Chairman
Place: Gurgaon
Date: 22 April, 2016
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