ANNEXURE 7
Secretarial Audit Report for the Financial Year ended 31st March, 2017
[Pursuant to Section 204 (1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)]
To,
The Members,
Tata Motors Limited
We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Tata MotorsLimited (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.
Based on our verification of the Company’s books, papers, minute books, forms and returns filed and other records maintained by the Company, the information provided by the Company, its officers, agents and authorised representatives during the conduct of secretarial audit, the explanations and clarifications given to us and the representations made by the Management, we hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2018, generally complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:
We have examined the books, papers, minute books, forms and returns filed and other records made available to us and maintained by the Company for the financial year ended on 31st March, 2018 according to the provisions of:
- The Companies Act, 2013 (the Act) and the rules made thereunder;
- The Securities Contract (Regulation) Act, 1956 ('SCRA')and the rules made thereunder;
- The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;
- Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;
- The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act')
- The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
- The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;
- The Securities and Exchange Board of India (Issue ofCapital and Disclosure Requirements) Regulations, 2009 and amendments from time to time;
- The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014;(Not applicable to the Company during the audit period)
- The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
- The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (Not applicable to the Company during the audit period)
- The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (Not applicable to the Company during the audit period) and
- The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998; (Not applicable to the Company during the audit period)
- Other laws applicable specifically to the Company namely:
- The Motor Vehicle Act, 1988 and the Rules made thereunder.
We have also examined compliance with the applicable clauses of the following:
- Secretarial Standards issued by The Institute of Company Secretaries of India with respect to board and general meetings.
- The Listing Agreements entered into by the Company with BSE Limited and National Stock Exchange of India Limited read with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, standards etc. mentioned above.
- The Securities and Exchange Board of India have vide Order dated March 6, 2018 issued directions for the Company to conduct an internal inquiry within 3 months into the leakage of information relating to its financial results for the quarter ended December 2015, take appropriate actions against those responsible and to submit its report within 7 days thereafter.
- The Company has paid a penalty of Rs. 5.60 lakhs each levied by the BSE Limited and National Stock Exchange of India Limited in respect of delay in filing of listing application for 266 Ordinary Share and 80 ‘A’ Ordinary Shares allotted out of shares held in abeyance on settlement of an interse dispute amongst the shareholders.
We further report that:
The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors subject to what is stated above. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
Adequate notice was given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance for meetings other than those held at shorter notice for which necessary consents have been sought at the meeting, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
Majority decision is carried through while the dissenting members’ views are captured and recorded as part of the Minutes of the Meetings.
We further report that there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.
We further report that during the audit period the Company had following events which had bearing on the Company’s affairs in pursuance of the above referred laws, rules, regulations, guidelines, standards etc.
- The Company held NCLT convened meeting of the Shareholders on November 15, 2017 for merger of TML Drivelines Limited, its wholly-owned subsidiary with the Company.
- The decision of the Supreme Court vide order dated 29-03-2017 which was to ban sale of BS3 vehicles with effect from April 1, 2017 impacted the automobile industry including the Company, mainly in the context of the BS3 inventory lying unsold as on that date.
- Issue of 266 Ordinary shares and 80 ‘A’ Ordinary shares earlier kept in abeyance.
- The Company redeemed unsecured Non-Convertible Debentures aggregating Rs. 250 crores during the year has complied with the applicable laws.
- The Company made Private placement of Non-Convertible Debentures aggregating Rs. 1500 crores and complied with the applicable provisions of laws.
For Parikh & Associates
Company Secretaries
P. N. Parikh
(Partner)
FCS No: 327 CP No: 1228
Place: Mumbai
Date: May 23, 2018
This Report is to be read with our letter of even date which is annexed as Annexure A and Forms an integral part of this report.
'Annexure A'
To,
The Members
Tata Motors Limited
Our report of even date is to be read along with this letter.
- Maintenance of secretarial record is the responsibility of the management of the Company. Our responsibility is to express an opinion on these secretarial records based on our audit.
- We have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. We believe that the process and practices, we followed provide a reasonable basis for our opinion.
- We have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.
- Where ever required, we have obtained the Management Representation about the Compliance of laws, rules and regulations and happening of events etc.
- The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the verification of procedure on test basis
- The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.
For Parikh & Associates
Company Secretaries
P. N. Parikh
(Partner)
FCS No: 327 CP No: 1228
Place: Mumbai
Date: May 23, 2018
ANNEXURE 8
Dividend Distribution Policy
[Pursuant to Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015]
Preamble
The Securities Exchange Board of India (SEBI) vide its notification dated July 08, 2016 has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR”), by inserting Regulation 43A, making it mandatory for the top 500 listed Companies based on the market capitalization (calculated as on March 31 of every financial year) to formulate a Dividend Distribution Policy, which will be disclosed in their annual report and on their website.
Tata Motors Limited being one of the top 500 listed companies as per the criteria mentioned above, has framed a Dividend Distribution Policy (“Policy”). This policy has been adopted by the Board of Directors of the Company at its meeting held on May 23, 2017, being the effective date of this Policy.
- Scope and Objective
This Policy seeks to lay down a broad framework for the distribution of dividend by the Company whilst appropriately balancing the need of the Company to retain resources for the Company’s growth & sustainability. Through this policy, the Company also endeavors to maintain fairness and consistency while considering distributing dividend to the shareholders.
The Policy sets out the circumstances and different factors for consideration by the Board at the time of taking a decision on distribution or retention of profits, in the interest of providing transparency to the shareholders.
The Policy is not an alternative to the decision of the Board for recommending dividend, which is made every year after taking into consideration all the relevant circumstances enumerated hereunder or other factors as may be considered relevant by the Board.
The Policy is being recommended for adoption by the Board of Directors of all the Companies in the Tata Motors Group ie. by all its subsidiaries and to the extent possible, the joint ventures after discussions with its partners
Statutory Requirements
This policy on dividend distribution shall be in accordance with the provisions of the Companies Act, 2013, read with applicable rules framed thereunder, as may be in force for the time being (“Act”), SEBI ( Listing Obligations and Disclosure Requirements) Regulations, 2015, (“SEBI LODR”), such other applicable provisions of law.
Definitions
“Act” shall mean the Companies Act, 2013 including the Companies (Declaration and Payment of Dividend) Rules, 2014, as amended from time to time.
“Applicable Laws” shall mean the Companies Act, 2013 and Rules made thereunder, the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 together with the circulars issued thereunder; as amended from time to time and such other act, rules or regulations which deals with the distribution of dividend.
“Board” or “Board of Directors” shall mean Board of Directors of the Company.
“Company” shall mean “Tata Motors Limited” or “TML”.
“Dividend” includes any interim dividend as defined under the Companies Act, 2013.
“Free Reserves” shall means such reserves which, as per the latest audited balance sheet of a Company, are available for distribution as dividend:
Provided that -
any amount representing unrealized gains, notional gains or revaluation of assets, whether shown as reserves or otherwise, or
any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value,
shall not be treated as free reserves.”
“SEBI LODR” shall mean Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 together with the circulars issued thereunder; as amended from time to time.
“Policy” or “this Policy” shall mean the Dividend Distribution Policy.
Statutory Provisions Relating to Distribution Of Dividend
In accordance with the provisions of the Act, dividend shall be declared or paid only:
Out of distributable profits of current year or previous financial years:
Current financial year’s profit after tax of standalone financial statement as per applicable Accounting Standards:
after providing for depreciation in accordance with Applicable laws and regulations; and
after transferring to reserves such amount as may be prescribed or as may be otherwise considered appropriate by the Board at its discretion; OR
- Profits for any previous financial year(s):
- after providing for depreciation in accordance with Applicable Laws and regulations; and
- remaining undistributed; OR
- A combination of (i) & (ii) above;
Out of free reserves – in the event of inadequacy/ absence of profits
In the event of inadequacy or absence of profits in any year, Company may declare dividend out of free reserves, subject to fulfilment of conditions specified under the Act, as amended from time to time.
Company may, in certain cases, declare dividend using a combination of A and B above.
Parameters to be considered while Recommending/Declaring Dividend
The Board while determining quantum of the dividend payout to the shareholders, will consider following internal and external factors:
Internal Factors:
- Profits earned and available for distribution during the financial year
- Accumulated reserves, including retained earnings
- Mandatory transfer of Profits earned to specific reserves, such as Debenture Redemption Reserve, etc.
- Past dividend trends – rate of dividend, EPS and payout ratio, etc.
- Future Capital Expenditure requirement of the Company
- Earning Stability
- Growth plans, both organic and inorganic
- Capital restructuring, Debt reduction, Capitalisation of shares
- Crystallization of contingent liabilities of the Company
- Profit earned under the Consolidated Financial Statement
- Cash Flows
- Current and projected Cash Balance and Company’s working capital requirements.
- Covenants in loan agreements, Debt servicing obligations and Debt maturity profile.
- Economic environment, both domestic and global
- Unfavorable market conditions
- Changes in Government policies and regulatory provisions
- Cost of raising funds from alternate sources
- Inflation rates
- Sense of shareholders’ expectations
- Cost of external financing
External Factors:
Circumstances under which the shareholders of the Company may or may not expect Dividend
The decision regarding dividend payout is a crucial decision as it determines the amount of profit to be distributed among shareholders and amount of profit to be retained in business. Hence, the shareholders of the Company may expect dividend only if the Company is having surplus funds after providing for all the expenses, depreciation, etc., and after complying with the statutory requirements under the Applicable Laws.
The shareholders of the Company may not expect dividend in the following circumstances, subject to the discretion of the Board of Directors:
- the Company has inadequacy of profits or incurs losses for the Financial Year;
- the Company undertakes /proposes to undertake a significant expansion project requiring higher allocation of capital;
- the Company undertakes /proposes to undertake any acquisitions or joint arrangements requiring significant allocation of capital.
- the Company has significantly higher working capital requirement affecting free cash flow.
- the Company proposes to utilize surplus cash for buyback of securities;
- the Company is prohibited to recommend/declare dividend by any regulatory body.
The Board may also not recommend a dividend on considering any compelling factors/parameters mentioned in point 6 above.
Quantum:
The dividend history of the Company over the past 10 years is as follows:
Considering the aforementioned dividend payment track record of the Company, the Company shall endeavor to maintain a total dividend pay-out ratio in the range of 25% to 40% of the annual standalone profits after tax (PAT) of the Company. Under the applicable provisions of the Act, the Company’s ability to declare and pay dividends is based on the standalone Financial Statements only. In future should the regulations be amended permitting the Company to pay dividend based on its Consolidated Profits, the Board would consider such a payout ratio on its Consolidated Profits. Till such time, the Company will endeavor to have a policy on dividend distribution with a similar payout ratio across its subsidiaries and to the extent possible, in its joint ventures after discussions with its partners.
Manner and timelines:
The Company may declare dividends for a year, usually payable for a financial year at the time when the Board considers and recommends the Annual Financial Statements, which is called final dividend. The Board of Directors shall have the power to recommend final dividend to the shareholders for their approval in the Annual General Meeting of the Company.
The Board of Directors shall also have the absolute power to declare interim dividend during the financial year, between two Annual General Meetings as and when they consider it fit.
The payment of dividend shall be based on the respective rights attached to each class of shares as per their terms of issue.
The Company has two classes of shares- the Ordinary shares and ‘A’ Ordinary shares. The holders of “A” Ordinary shares shall as per the terms of its issue be entitled to receive dividend for each financial year at five percentage points more than the aggregate rate of dividend on Ordinary shares for that financial year.
Policy Review and Amendments
The Policy will be reviewed periodically by the Board. Any changes in the policy will be communicated to the shareholders, alongwith the rationale for carrying out said changes in timely manner.
Disclosures
The Policy shall be disclosed in the Annual report and on the website of the Company i.e. at http://investor.tatamotors.com/ pdf/dividend-distribution-policy.pdf.
The Policy does not constitute a commitment regarding the future dividends of the Company, but only represents a general guidance regarding dividend policy. The statement of the Policy does not in any way restrict the right of the Board to use its discretion in the recommendation of the Dividend to be distributed in the year and the Board reserves the right to depart from the policy as and when circumstances so warrant.
Given the aforementioned uncertainties, prospective or present investors are cautioned not to place undue reliance on any of the forward- looking statements in the Policy.
On behalf of the Board of Directors
N CHANDRASEKARAN
Chairman
(DIN: 00121863)
Mumbai,
May 23, 2018