Report on Corporate Governance

  2. Statutory Reports
  3. Report on Corporate Governance

AUDIT COMMITTEE

The Audit Committee functions according to its Charter that defines its composition, authority, responsibility and reporting functions in accordance with Section 177 of the Act, Regulation 18(3) read with Part C of Schedule II of the SEBI Listing Regulations and US regulations applicable to the Company and is reviewed from time to time. Whilst, the full Charter is available on the Company's website, given below is a gist of the responsibilities of the Audit Committee:

  1. Reviewing with the management, quarterly/annual financial statements before submission to the Board, focusing primarily on:
    • Overseeing the Company's financial reporting process and the disclosure of its financial information, including earnings, press release, to ensure that the financial statements are correct, sufficient and credible;
    • Review Reports on the Management Discussion and Analysis of financial condition, results of Operations and the Directors' Responsibility Statement;
    • Compliance with accounting standards and changes in accounting policies and practices as well as reasons thereof;
    • Major accounting entries involving estimates based on exercise of judgment by Management;
    • Draft Audit Report, qualifications, if any and significant adjustments arising out of audit;
    • Analysis of the effects of alternative GAAP methods on the financial statements;
    • Compliance with listing and other legal requirements concerning financial statements;
    • Scrutinise inter corporate loans and investments; and
    • Disclosures made under the CEO and CFO certification and related party transactions to the Board and Shareholders.
  2. Reviewing with the management, external auditor and internal auditor, adequacy of internal control systems and recommending improvements to the management.
  3. Review Management letters/Letters of internal control weakness issued by the statutory auditors.
  4. Reviewing, with the management, the statement of uses/application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document/prospectus/ notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, statement of deviations both quarterly and annual, if any, and making appropriate recommendations to the Board to take up steps in this matter.
  5. Recommending the appointment/removal of the statutory auditor, cost auditor, fixing audit fees, name of Audit firm and approving non-audit/consulting services provided by the statutory auditors' firms to the Company and its subsidiaries; evaluating auditors' performance, qualifications, experience, independence and pending proceedings relating to professional misconduct, if any. It shall also ensure that the cost auditors are independent, have arm's length relationship and are also not otherwise disqualified at the time of their appointment or during their tenure.
  6. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the chief internal auditor, coverage and frequency of internal audit, appointment, removal, performance and terms of remuneration of the chief internal auditor.
  7. Discussing with the internal auditor and senior management, significant internal audit findings and follow-up thereon.
  8. Reviewing the findings of any internal investigation by the internal auditor into matters involving suspected fraud or irregularity or a failure of internal control systems of a material nature and report the matter to the Board.
  9. Discussing with the statutory auditor before the audit commences, the nature and scope of audit, as well as conduct post-audit discussions to ascertain any area of concern.
  10. Reviewing the Company's financial controls and risk management systems.
  11. Establish and review the functioning of the Vigil Mechanism under the Whistle-Blower policy of the Company.
  12. Reviewing the financial statements and investments made by subsidiary companies and subsidiary oversight relating to areas such as adequacy of the internal audit structure and function of the subsidiaries, their status of audit plan and its execution, key internal audit observations, risk management and the control environment.
  13. Look into the reasons for any substantial defaults in payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividend) and creditors, if any.
  14. Reviewing the effectiveness of the system for monitoring compliance with laws and regulations.
  15. Approving the appointment of CFO after assessing the qualification, experience and background etc. of the candidate.
  16. Engage a registered valuer in case valuations are required in respect of any property, stocks, shares, debentures, securities, goodwill, undertaking or assets, liabilities or net worth of the Company.
  17. Review and suitably reply to the report(s) forwarded by the auditors on the matters where auditors have sufficient reason to believe that an offence involving fraud, is being or has been committed against the Company by officers or employees of the Company.
  18. Review the system of storage, retrieval, display or printout of books of accounts maintained in electronic mode during the required period under law.
  19. Approve all or any subsequent modification of transactions with related parties.
  20. To approve policies in relation to the implementation of the Tata Code of Conduct for Prevention of Insider Trading and Code of Corporate Disclosure Practices ('Code') and to supervise implementation of the Code.
  21. To note and take on record the status reports, detailing the dealings by Designated Persons in Securities of the Company, as submitted by the Compliance Officer on a quarterly basis and to provide directions on any penal action to be initiated, in case of any violation of the Code, by any person.

During the year, the Committee reviewed key audit findings covering operational, financial and compliance areas. It also reviewed the internal control system in subsidiary companies, status on compliance of its obligations under the Charter and confirmed that it fulfilled its duties and responsibilities. The Committee, through self-assessment, annually evaluates its performance. The Chairman of the Audit Committee briefs the Board members about significant discussions at Audit Committee meetings.

The Committee comprises of 4 Independent Directors, all of whom are financially literate and have relevant finance and/or audit exposure. Mr Munjee is the Financial Expert. The quorum of the Committee is two members or one-third of its members, whichever is higher. The Chairman of the Audit Committee also attended the last Annual General Meeting of the Company. During the period under review, 10 Audit Committee meetings were held on April 4, 2016, May 27, 2016, July 8, 2016, August 11, 2016, August 24, 2016, October 4, 2016, November 11, 2016, January 12-13, 2017, February 13, 2017 and March 30, 2017. The maximum gap between any two meetings was less than 120 days. Each Audit Committee meeting which considers financial results is preceded by a meeting of the Audit Committee members along with the Auditors only.

The composition of the Audit Committee and attendance at its meetings is as follows:

The Committee meetings are held at the Company's Corporate Headquarters or at its plant locations and are attended by the CEO & Managing Director, Executive Directors, CFO, Company Secretary, Chief Internal Auditor, Statutory Auditors and Cost Auditors on need based basis. The Business and Operation Heads are invited to the meetings, as and when required. The Company Secretary acts as the Secretary of the Audit Committee, as well as all the other Committees of the Company. The Chief Internal Auditor reports directly to the Audit Committee to ensure independence of the Internal Audit function.

The Committee relies on the expertise and knowledge of the management, the internal auditors and the Statutory Auditor, in carrying out its oversight responsibilities. It also uses external expertise, if required. The management is responsible for the preparation, presentation and integrity of the Company's financial statements including consolidated statements, accounting and financial reporting principles. The management is also responsible for internal control over financial reporting and all procedures are designed to ensure compliance with accounting standards, applicable laws and regulations as well as for objectively reviewing and evaluating the adequacy, effectiveness and quality of the Company's system of internal controls.

Deloitte Haskins & Sells LLP, Mumbai (ICAI Firm Registration No.117366W/W – 100018), the Company's Statutory Auditor, is responsible for performing an independent audit of the Financial Statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in India.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee (NRC) of the Company functions according to its Charter, that defines its objective, composition, eeting requirements, authority and power, responsibilities, reporting and evaluation functions in accordance with Section 178 of the Act and SEBI Listing Regulations, which are reviewed from time to time. The broad terms of reference of the NRC are as follows:

  • Recommend to the Board the set up and composition of the Board and its Committees including the "formulation of the criteria for determining qualifications, positive attributes and independence of a director". The Committee periodically reviews the composition of the Board with the objective of achieving an optimum balance of size, skills, independence, knowledge, age, gender and experience.
  • Devise a policy on Board diversity.
  • Recommend to the Board the appointment or reappointment of Directors, including Independent Directors, on the basis of Report on performance evaluation of Independent Directors.
  • Support the board in matters related to set-up, review and refresh of the Committees.
  • Recommend to the Board on voting on resolutions for appointment and remuneration of Directors on the Boards of its material subsidiary companies and provide guidelines for remuneration of Directors on material subsidiaries.
  • Identify and recommend to the Board appointment of Key Managerial Personnel ("KMP" as defined by the Act) and executive team members of the Company (as defined by this Committee). The Committee shall consult the Audit Committee before recommending the appointment of the CFO.
  • Carry out evaluation of every Director's performance and support the Board, its Committees and individual Directors, including "formulation of criteria for evaluation of Independent Directors and the Board".
  • Oversee the performance review process for the KMP and executive team of the Company with a view that there is an appropriate cascading of goals and targets across the Company and on an annual basis, recommend to the Board the remuneration payable to the Directors, KMP and executive team of the Company.
  • Recommend the Remuneration Policy for Directors, KMP, executive team and other employees.
  • Review matters related to voluntary retirement and early separation schemes for the Company.
  • Oversee familiarization programmes for Directors.
  • Oversee HR philosophy, HR and people strategy and efficacy of HR practices including those for leadership development, rewards and recognition, talent management and succession planning (specifically for the Board, KMP and executive team).
  • Performing such other duties and responsibilities as may be consistent with the provisions of the Committee Charter.

The Committee presently comprises of 3 Independent Directors and 1 Non-Executive Director. During the year under review, four meetings of the Committee were held on May 30, 2016, August 12, 2016, November 14, 2016 and March 30, 2017. The Board also inducted Mr O P Bhatt, Inependent Director as a Member of the NRC with effect from May 16, 2017. The decisions are taken by the Committee, at meetings or by passing circular resolutions. The composition of the Nomination and Remuneration Committee and attendance at its meeting is as follows:.

Remuneration Policy

The Company has in place a Remuneration Policy for Directors, KMP and other employees, in accordance with the provisions of the Act and the SEBI Listing Regulations. For details on Remuneration Policy for Directors, KMP and other employees, kindly refer to Annexure 4 of the Board's Report.