TBZ Promises To ‘Deliver Value’ Even As Promoters’ Salaries Spike 

Tribhovandas Bhimji Zaveri Ltd. will pay its promoter Shrikant Zaveri a basic salary of Rs 7.26 crore and his two daughters and co-promoters Binaisha Zaveri and Raashi Zaveri, Rs 3.73 crore annually in the two-year period starting Jan. 1, 2019.

Cumulatively, the total amount stands at Rs 14.7 crore per annum, according to the jewellery maker's annual report. The special resolutions were passed with the requisite majority in the annual general meeting held on July 31. The three promoters are also entitled to commission and increment of 20 percent from April 1, 2019.

That's over two-thirds of its Rs 21.3 crore net profit reported by the company in the last financial year, as first highlighted on the investment blog, Alpha Ideas. The three promoters took home Rs 2.4 crore each in the last financial year.

In an emailed response to BloombergQuint, TBZ said Rs 14.7 crore per annum is not being paid currently and will be payable only on generation of sufficient profits as per requirement of Section 197 read with Schedule V of the Companies Act, 2013.

In the ongoing financial year, the directors (promoters) are being paid Rs 20 lakh a month each which is the minimum remuneration as per Schedule V of the Companies Act, 2013, TBZ said in its response to BloombergQuint. The same remuneration was paid for the FY18, and hence, there is no increase in any of the director's remuneration, it said.

A Challenging Year

The substantial hike in salaries come against the backdrop of a challenging period for the jewellery industry. There has been a declining demand in key exports markets like Hong Kong, UAE and the U.S., which has adversely impacted the business, the jewellery maker said in its latest annual report, adding that rising interest rates did not make matters any easier.

Recent defaults by major jewellery chains in India and increase in the salience of frauds are likely to result in higher oversight on working capital as highlighted in the ‘threats' section which could lead to some liquidity crunch, the report added.

Being a highly capital intensive business, higher interests is expected to erode margins and loans from banks taken for conversion will result in longer conversion time. Loss of jobs in the industry has become a grim reality, the company presentation said.

The company will report earnings for the first quarter of this financial year on Monday, August 13.

Little Scope For Shareholder Activism

The promoters currently hold over 74 percent in the company, as per the latest exchange filings, while institutional shareholders, who typically question such high remunerations hold little over 1.6 percent stake in the company.

"Unfortunately, minority shareholders can do little when promoters use shareholder funds for personal enrichment through inappropriately high compensation", said Amit Mantri fund manager at 2Point2 Capital.

As per the annual report 2017-18, the company had Rs 477 crore in shareholder's equity, an increase of nearly 5 percent from the year earlier. Its cash and bank balances stood at Rs 37 crore as on March 31, 2018. The annual report showed borrowings worth Rs 569 crore under current liabilities but the same under non-current liabilities was negligible.

“Delivering Value”?

The management suggests on remaining asset light while carefully expanding store count and building franchisee strength, according to the annual report. The focus will also be on cost optimisation.

Shrikant Zaveri, who is also the company's chairman and managing director said: "at the heart of our business model is delivering value – to our shareholders as well as stakeholders."

Hence the total Directors (Promoter) remuneration of Rs 14.72 crore (Rs 7.26 crore for Shrikant Zaveri and Rs 3.73 crore each for Raashi Zaveri and Binaisha Zaveri) is not being paid currently (as misquoted in your article) and will be payable only on generation of sufficient profits as per requirement of Section 197 read with Schedule V of the Companies Act, 2013.

(Updates an earlier version with TBZ statement)