KDDL Limited

DIRECTORS' REPORT
Dear Members,
th
Your Directors present this 38 Annual Report together with the Audited Accounts of the Company for the
financial year ended 31st March, 2018.
OPERATIONS AND PROSPECTS
Financial Results (Standalone and Consolidated)
The summary of opera ng results for the year 2017-18 and appropria on of divisible profits is given below:
Amount in Rs millions
Standalone Consolidated
Par culars
2017-18 2016-17 2017-18 2016-17
Total Income 1520.4 1333.3 5084.9 4629.9
Profit before interest, deprecia on and excep onal item 322.3 243.3 494.3 294.5
Less: Finance Cost 48.3 55.2 120.3 143.1
Gross Profit 274.0 188.1 374.0 151.4
Less: Deprecia on and amor sa on 74.0 72.5 121.3 116.1
Profit before Share of Profit of an associate 200.0 115.6 252.7 35.3
Share of Profit of an associate -0.3 0.5
Profit Before tax 200.0 115.6 252.4 35.8
Less: Tax Expense 59.3 40.4 70.7 17.2
Net Profit / (Loss) for the Year 140.7 75.2 181.7 18.6
Other Comprehensive Income / (Loss) (OCI) -3.0 -0.3 1.9 -6.1
Total Comprehensive Income / (Loss) for the period 137.7 74.9 183.6 12.5
Add: Profit brought forward from previous year 171.3 116.1 -18.8 -4.0
Profit available for appropria on 312.0 191.3 162.9 14.6
Transfer to Minority reserve 0 16.3 -5.6
Proposed Dividend 16.3 0 16.3 0.0
Corporate Dividend Tax 3.3 0 3.3 0.0
Transfer to General Reserve 40 20 40.0 20.0
Dividend on Cumula ve Preference Shares (Net of Excess Provision) 0 -52.2 19.0
Total Appropria on 59.6 20 23.7 33.4
Surplus carried forward to Balance Sheet 252.4 171.3 139.2 -18.8

PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved consolidated sales revenue of Rs. 5084 million against Rs.
4630 million in the previous year, registering a healthy growth of 9.8%. Profit before tax improved from Rs. 35.8
million to Rs. 252.4 million.
Sales revenue from manufacturing opera ons on standalone basis grew by 14% to Rs. 1520 Million from Rs. 1333
Million in the previous year. The company earned net profit a er tax of Rs. 140.7 million against Rs. 75.2 million in
the previous year.
Sales revenue in ETHOS, the retail business of the Company improved from Rs. 3270 million in the previous year
to Rs. 3578 million, registering a growth of 9.4%. Retail business segment reported profit before tax of Rs. 52
million against the loss before tax of Rs 84.5 million in previous year.

7
KDDL Limited
Manufacturing Business Segments
The main revenue of the manufacturing business is from watch components segment. The Swiss watch market,
the main des na on for our exports, which was declining con nuously for last 2 years, recovered during the year
and witnessed a growth of 2.7% compared to previous year. On the other hand, the domes c watch market has
con nued to grow.
Due to improved market condi ons revenue of the company from watch components improved by 12.5%; major
growth of 29% was contributed by the domes c market whereas exports revenue improved by 4.6%. The other
major segment of revenue is from the precision engineering business, wherein the company registered a healthy
growth of 31% over the previous year. The revenue growth from domes c and exports market was 39% and 16%
respec vely. The revenue from ornamental packaging business of the company witnessed a growth of 8.8%.
As we con nue to move up the value chain in the watch component manufacture. We are implemen ng mul ple
ini a ves to enhance capabili es to manufacture more complex products and improved produc vity. We
con nue to focus on manufacturing excellence with the goals of world class delivery compliance, quality and me
to market (TAT).
The revenue from the precision engineering business of the Company is expected to maintain a healthy growth as
we con nue to expand our capabili es and capacity. Your company has established its reputa on as a quality
supplier with the ability to meet sophis cated customer needs. By focusing on the vital levers of opera onal
performance while adding key technical capabili es and show-casing our capabili es at leading interna onal
trade exhibi ons and on digital pla orms, we are confident of healthy growth and returns in the ensuing periods.
The expansion project for the precision engineering business was delayed due to heavy rains in Bangalore but
now the progress is as per revised schedule. We have already commenced par al opera ons and the new facility
will be fully func onal by the second half of FY 2019. As a part of the expansion, we are shi ing and consolida ng
our exis ng precision engineering manufacturing facili es also at the new loca on. The Company con nues to
believe that this business segment will be a major source of growth in the future.

Retail Business Segments:

FY17-18 began on a challenging note for the luxury watch retail business. The a er effects of many regulatory
changes con nued to have an impact on the performance of the business in the first half of the year. These
regulatory changes included the introduc on of PAN requirement for transac ons above Rs. 2 lakhs, requirement
for collec ng TCS for all transac on in cash above Rs. 3 lakhs, demone sa on in November 2016 and the
subsequent banning of all cash transac ons above Rs. 2 lakhs with effect from 1 April 2017. The ini al
uncertain es of the implementa on of the GST regime also had a less than salutary impact of the business.
The business showed an impressive turnaround in the second half of the year. This came close on the heels of the
changes in the GST rates on watches from 28% to 18%, consequent to which there was a reduc on in the prices of
watches. This fuelled demand in an already robust fes ve and wedding season. The fact that the uptrend of
demand con nued even a er the season period is a tes mony to the fundamental strategic changes to the
business model that have been brought over the past 2 years.
The Company's Swiss subsidiary, Pylania SA in Switzerland reports financial performance as per the expected
levels and its financial performance is con nuously improving for last 5 years, made possible by calibrated efforts
for revenue enhancement and curtailing overheads. The recently implemented “Swiss Made” regula ons and
guidelines in Switzerland is also providing new opportuni es for the watch component business of the Company

8
KDDL Limited
through Pylania.
During the year, the 100% subsidiary company, Satva Jewellery and Design Limited (SJDL) merger with the parent
company is in progress and the merger of this company will provide support for greater efficiency in opera ons
and be er u liza on of resources and assets of SJDL.

DEPOSITS
The details of deposits covered under Chapter V of the Companies Act, 2013 (the act) is given hereunder:
1. Deposits Accepted/ renewed during the year : Rs 4,07,03,000
2. Deposits outstanding at the end of the year : Rs. 11,29,44,000
3. Deposits remained unpaid or unclaimed as at the end of the year : Nil
4. Whether there has been any default in repayment of deposits
or payment of interest thereon during the year and if so, number : NIL
of such cases and the total amount involved
5. The details of deposits which are not in compliance : NIL
with the requirements of Chapter

CHANGES IN SHARE CAPITAL

During the Financial Year ended on 31st March, 2018, the paid up equity share capital of the Company has
increased from Rs. 10,83,95,860 to Rs. 10,95,27,920 pursuant to the issue and allotment of 1,13,206 equity
shares at a price of Rs 265/- per share (including a premium of Rs. 255/- per share) by way of preferen al
allotment to promoters, by way of conversion of Equity Share warrants into Equity post subscrip on of full
amount as authorized by the shareholders by way of Special Resolu on passed at Extra Ordinary General Mee ng
held on 8th November 2016.
Further, the Company has neither issued any shares with differen al vo ng rights nor any Sweat equity shares.

SUBSIDIARY COMPANY
During the period under review, Cadrafin Sari, an associate company was incorporated in Switzerland in which
Kamla Interna onal Holding SA, a wholly owned subsidiary company holds 22% ownership. A separate statement
containing salient features of the financial statements of Company’s subsidiaries in prescribed format AOC-I is
annexed as Annexure 1 to this report.

LISTING OF SHARES
The equity shares of the Company are listed at Na onal Stock Exchange of India (NSE) and Bombay Stock
Exchange (BSE). The Company has paid the Annual Lis ng Fees to NSE and BSE for the financial year 2018-19.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company's Management in accordance with the
requirements of Accoun ng Standard 21 issued by the Ins tute of Chartered Accountants of India (ICAI) and as
per the provisions of the Companies Act, 2013 (the act).

9
KDDL Limited
As per the provisions of Sec on 136 of the act, the Company has placed separate audited accounts of its
subsidiaries on its website www.kddl.com and a copy of the same will be provided to the shareholders at their
requests.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return, in Form MGT -9 for the Financial Year 2017-18 is enclosed with this report as
Annexure 2.

NUMBER OF BOARD & COMMITTEE MEETINGS

The details of board and commi ee mee ngs held during the financial ended 31 March, 2018 are set out in the
Corporate Governance Report which forms a part of this report. The intervening gap between the mee ngs was
within the period prescribed under the Act, Secretarial Standard-I and the Lis ng Regula ons.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Sec on 134 (3) (c) read with Sec on 134(5) of the act and the Securi es
Exchange Board of India (Lis ng Obliga ons and Disclosure Requirements) Regula ons, 2015 (Lis ng Obliga ons)
the Board confirm and report that:-
(a) in the prepara on of the annual accounts, the applicable accoun ng standards had been followed along
with proper explana on rela ng to material departures;
(b) the directors had selected such accoun ng policies and applied them consistently and made judgments
and es mates that are reasonable and prudent so as to give a true and fair view of the state of affairs of
the company as at 31 March, 2018 and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accoun ng records in
accordance with the provisions of the Companies Act,2013 for safeguarding the assets of the company
and for preven ng and detec ng fraud and other irregulari es;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by the company and that such
internal financial controls are adequate and were opera ng effec vely.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws
and that such systems were adequate and opera ng effec vely.

NOMINATION & REMUNERATION POLICY

The Board of Directors has framed a policy which lays down a framework in rela on to remunera on of Directors,
Key Managerial Personnel and Senior Management Personnel of the Company. This policy also lays down criteria
for selec on and appointment of Board Members. The detail of this policy is explained in the Report on Corporate
Governance which forms part of this report.
APPOINTMENT OF INDEPENDENT AUDITOR
M/s BSR & Co. LLP, Chartered Accountants, (Registra on No.101248W/W-100022) were appointed as Statutory
Auditors of the Company at the 37 Annual General Mee ng (AGM) held on 11 August, 2017 for a term of two

10
KDDL Limited
years to hold office from the conclusion of the 37 AGM ll the conclusion the 39 AGM. The requirement of
placing the ma er rela ng to the ra fica on of above appointment at every AGM has been omi ed by the
Companies (Amendment) Act, 2017 w.e.f. 7 May, 2018.
Informa on referred in Auditors’ Report are self-explanatory and don’t call for any further comments.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Sec on 204 of the act and rules made there under, the Company appointed M/s A.
Arora & Co., a firm of Company Secretaries (C.P. No 993) to undertake the Secretarial Audit of the Company. The
Secretarial Audit Report in prescribed format MR.-3 given by aforesaid Secretarial Auditors is annexed to this
Board Report as Annexure 3 and forms an integral part. The report doesn’t contain any reserva on, qualifica on
or adverse mark.

PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186

The details of Loans, Guarantees and Securi es, and Investments covered under Sec on 186 of the act are given
in the financial statement of the company during the period under review.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The par culars of contracts or arrangements with related par es referred to in Sec on 188(1) of the act for the
Financial Year 2017-18 in the prescribed Form AOC 2 has been enclosed with the report as Annexure 4.
BOARD’S COMMITTEES
The Board of Directors of the Company cons tuted the following Commi ees :
a) Audit Commi ee
b) Nomina on & Remunera on Commi ee
c) Corporate Social Responsibility (CSR) Commi ee
d) Stakeholders Rela onship Commi ee
The Commi ees composi on, charters and mee ng held during the year and a endance thereat, are given in the
Report of Corporate Governance forming part of this Annual Report.

AMOUNTS TRANSFERRED TO RESERVES

The Board of Directors of the Company has decided to transfer Rs. 40 million to its General Reserves.

DIVIDEND
Your Directors have recommended a dividend of 25% i.e. Rs. 2.5 per equity share of face value of Rs. 10 each. The
dividend shall be paid a er the approval of the shareholders at the ensuing Annual General Mee ng.
The total financial outgo of the dividend to be paid to shareholders will be Rs. 33.01 million (inclusive of Corporate
Dividend Tax).
The dividend payout for the year under review has been formulated in accordance with the Company's policy to

11
KDDL Limited
pay sustainable dividend linked to long term growth objec ves of the Company.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
In terms of Sec on 125 of the act, the company has duly transferred the Unclaimed Dividend up to the financial
years 2007-08 to the Investor Educa on and Protec on Fund established by the Central Government . As no
dividend was declared during the financial year 2008-09 and 2009-10, hence no amount was required to be
transferred to the said fund during the year.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments in the business opera ons of the Company from the financial
st
year ended 31 March, 2018 to the date of signing of the Director's Report.

RISK MANAGEMENT POLICY

The risk management framework defines the risk management approach of the Company and includes periodic
review of such risks and also documenta on, mi ga ng controls and repor ng mechanism of such risks.
Some of the risks that the Company is exposed to are:
Risks of Specific Nature
The Company as a part of normal business monitoring review and development plans, iden fies the specific risks
for each business segment and develops necessary ac on plan to minimise the impact of same on business
performance. Based on the present opera ons and areas of interest for the company, following specific nature
risks are iden fied:
· Risks due to decline in overall demand for watches and over dependence on watch segment;
· Risks pertaining to over dependence on few customers;
· Foreign Exchange Risks;
· Risk related to availability of Skilled manpower;
· Risks related to compliance and statutory requirements
Risk Strategy
The Company recognizes that risk is an integral and unavoidable component of business and is commi ed to
managing the risk in a proac ve and effec ve manner. The Company believes that the Risk cannot be eliminated
but it can be be er managed by
· Transferred to another party, who is willing to take risk, say by buying an insurance policy or entering into
a forward contract in case of business involving use of Foreign exchange;
· Reduced, by adop ng good internal controls;
· Avoided, by not entering into risky businesses;
· Retained, to either avoid the cost of trying to reduce risk or in an cipa on of higher profits by taking on
more risk, and;
· Shared, by following a middle path between retaining and transferring risk.

12
KDDL Limited
Risk Management Framework
The Company adopts systema c approach to mi gate risks associated with accomplishment of objec ves,
opera ons, revenues and compliance with the regula ons. The Company believes that this would ensure
mi ga ng steps proac vely and help to achieve the risk management effec vely.
The Company has cons tuted a Risk Management Commi ee of Chief Execu ve Officer, Chief Opera ng Officer,
Chief Financial Officer, Chief Marke ng Officer and Business Heads as its regular members and other senior
func onal heads on invita on basis. The Commi ee is commi ed to review periodically the various risks
associated with the Company and report the same to the Board.
Focus of the Company is on the three key elements, viz., Risk Assessment / Iden fica on, Risk Management and
Risk Monitoring.
· Poten al Risks are iden fied and analyzed, considering likelihood and its impact, as a basis for
determining how they should be managed.
· Risk Assessment consists of a detailed study of threats and vulnerability and resultant exposure to
various risks. Based on the assessment and iden fica on of the risks, the commi ee decided the
proac ve steps for managing and monitoring these risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company is commi ed to discharge its social responsibility as a good corporate ci zen. As part of its social
responsibility, the Company has contributed to KDDL-Ethos founda on and the projects are undertaken by the
trust formed for this purpose. These projects have been undertaken in compliance with the provision of the
Sec on 135 of the act read with Schedule VII and rules made there under and in accordance with Company's CSR
Policy. The Annual Report on CSR ac vi es required under the Companies (Corporate Social Responsibility Policy)
Rules, 2014 is set out as Annexure 5 forming part of this report.

MECHANISM FOR EVALUATION OF BOARD

Pursuant to the provisions of the Companies Act, 2013 and the Lis ng Regula ons, a structured procedure was
adopted a er taking into considera on the various aspects of the Board's func oning, composi on of the Board
and its various Commi ees, execu on and performance of specific du es, obliga ons and governance.
The performance evalua on of the Board, Commi ees there of and Independent Directors was completed on
me. The performance evalua on of the Board as a whole, Chairman and the Non-Independent Directors was
carried out by the Independent Directors at their mee ng.

DIRECTORS
There was no change in the composi on of Board of Directors during the year. Mr. Sanjeev Kumar Masown,
Whole me Director who re res by rota on at ensuing Annual General Mee ng of the Company and being
eligible, offers himself for re-appointment.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no significant and material orders passed by the Regulators and Courts that would impact the going
concern status of the Company and its future opera ons.

13
KDDL Limited
STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE
FINANCIAL STATEMENTS
A strong internal control culture is an important focus and thrust area in the Company. The Company has
comprehensive internal systems, controls and policies for all the major processes to ensure the reliability of
financial repor ng, mely feedback on achievement of opera onal and strategic goals, compliance with policies,
procedures, laws, and regula ons, safeguarding of assets and economical and efficient use of resources.
The formalized systems of control facilitate effec ve compliance as per the Lis ng Regula ons. The company also
has well documented Standard Opera ng Procedures (SOPs) for various processes which are periodically
reviewed for changes warranted due to business needs.
The Internal Auditors of the company con nuously monitor the efficacy of internal controls/ compliance with
SOPs with the objec ve of providing to the Audit Commi ee and the Board of Directors, an independent,
objec ve and reasonable assurance on the adequacy and effec veness of the organiza on's risk management,
control and governance processes.
The scope and authority of the Internal Audit ac vity are well defined in the Internal Audit scope and guidelines,
approved by the Audit Commi ee. Internal Auditors develop a risk based annual audit plan with inputs from
major stake holders, and the major focus areas as per previous audit reports.
All significant audit observa ons are reviewed periodically and follow-up ac ons thereon are reported to the
Audit Commi ee. The Audit Commi ee also meet the Company's Statutory Auditors and Internal Auditors to
ascertain their views on the financial statements, including the financial repor ng system, compliance to
accoun ng policies and procedures, the adequacy and effec veness of the internal controls and systems
followed by the Company.
The top and senior management of the Company also assesses opportuni es for improvement in business
processes, systems and controls, provides recommenda ons, designed to add value to the organiza on and
follows up on the implementa on of correc ve ac ons and improvements in business processes.
The senior management of the Company meets periodically to assess the performance of the each business
segment and key func ons of the Company and areas for improvement of performance / controls are iden fied
and reviewed on con nuous basis.

DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS

The disclosure pertaining to Employee Stock Op on Plan of the Company is enclosed as a Annexure-6

DECLARATION BY INDEPENDENT DIRECTOR

All Independent Directors of the Company have given declara ons that they meet the criteria of independence as
laid down under Sec on 149(6) of the act and the regula ons 16 (1) (b) of the Lis ng Regula ons.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND

OUTGO
The informa on required under sec on 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts)
Rules, 2014 rela ng to “Conserva on of Energy, Technology Absorp on and Foreign Exchange Earnings and
Outgo” is given in the Annexure - 7 forming an integral part of this Report.

14
KDDL Limited
CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business of the Company

MANAGERIAL REMUNERATION
Sta s cal Disclosures pursuant to Rule 5 of Companies (Appointment and Remunera on of Managerial
Personnel) Rules, 2014, is enclosed with this report as Annexure --8.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors of the Company has adopted Whistle Blower Policy effec ve from 2ⁿ February, 2015. The
Whistle Blower Policy aims for conduc ng the affairs in a fair and transparent manner by adop ng highest
standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company
are covered under the Whistle Blower Policy.
A mechanism has been established for employees to report concerns about unethical behavior, actual or
suspected fraud or viola on of Code of Conduct and Ethics. It also provides for adequate safeguards against the
vic miza on of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit
Commi ee in excep onal cases. The Whistle Blower Policy of the Company is available at the link
h p://www.kddl.com/pdf/2015/KDDL_Whistle_Blower_Policy.pdf.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION,

PROHIBITION & REDRESSAL) ACT, 2013
The Company had about 271 women employees, both permanent as well as contractual in various fields within
the factory premises and offices. The Company has in place an policy in line with the requirement of the Sexual
Harassment of Women at Workplace (Preven on, Prohibi on & Redressal) Act, 2013. There was no complaint
received from any employee during the financial year 2017-18 and hence no complaint is outstanding as on 31
March, 2018.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Lis ng Regula ons is annexed to this
report as Annexure - 9.

CORPORATE GOVERNANCE
The Company has complied with all the requirements of Corporate Governance as s pulated in Lis ng
st
Regula ons during the year ended on 31 March, 2018 as per Report on Corporate Governance annexed as
Annexure -10 and a Cer ficate from the Prac cing Company Secretary to this effect for the year ended on 31st
March, 2018 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 34(2) of Lis ng Regula ons, the Cash Flow Statement for the
financial year ended on 31st March, 2018 forms an integral part of the Financial Statements.

PERSONNEL
Your Directors place on record their apprecia on for the significant contribu on made by all the employees, who
through their competence, hard work, solidarity and co-opera on, have enabled the Company to perform be er.

15
KDDL Limited
TRADE RELATIONS
The Board wishes to place on record its apprecia on for the support and co-opera on that the Company received
from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as
partners in its progress and has happily shared with them rewards of growth. It will be Company's endeavor to
build and nurture strong links based on mutuality, respect and co-opera on with each other and consistent with
customer interest.

ACKNOWLEDGMENTS
Your Directors take this opportunity to thank all the investors, clients, vendors, banks, regulatory and government
authori es, for their con nued support.

Date : 14 May, 2018 For and on behalf of the Board of Directors

Place : Gurugram, Haryana

Yashovardhan Saboo
Chairman & Managing Director
DIN : 00012158

16