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Directors Report of Akzo Nobel India Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present their report for the year ended 31 March 2015.

All references to 'the Act' in this report refer to the Companies Act, 2013 unless stated otherwise.

Business Environment

GDP for the financial year 2014-15 is expected to grow over 7% on the 2011-12 base. The estimate is led by strong growth in service sector, followed by industry and agriculture. IIP data, which reflects the manufacturing industry's performance, registered a growth of 2.7% during 2014-15, compared to 0.1% in 2013-14.

From a macro-economic perspective, RBI had recognised the downward trend in inflation and announced a rate cut in April 2015 on top of liquidity enhancement measures taken during 2014-15. INR remained fairly stable through most part of the year but has shown some weakness in recent months.

The Union Budget for 2015-16 indicates the Government's committment to support infrastructure sector and offer a stable and predictable tax regime. It has also taken positive steps to implement Goods and Service Tax (GST), to replace several state and central tax laws on indirect taxation.

Taken together, the above factors point to a favourable business environment for your Company to progress its growth plans with cautious optimism.

Finance and Accounts

Revenue for the year at Rs 25,270 million is 5% ahead of previous year, with contribution from all segments. EBITDA from business operations at 2,614 million grew 36% over the previous year; after considering Exceptional Income and tax, the profit after tax for the year at Rs 1,863 million showed a growth of 24%, compared to previous year's Rs 1,502 million, mainly on account of improved business performance.

The highlights of the performance during the year are: (Rs million)

2014-15 2013-14

Revenue from operations 25,270 24,179

Operating profit (EBITDA) 2,614 1,919

Depreciation (526) (437)

Other Income net of Finance costs 635 552

Exceptional item - income 27

Profit before tax 2,750 2,034

Tax (887) (532)

Profit after tax 1,863 1,502

Surplus brought forward from previous year 1,763 5,015

Total available for appropriation 3,626 6,517

Appropriations

Transfer to general reserve (190) (660)

Proposed dividend (933) (699)

Proposed special dividend - (2,800)

Tax on proposed dividend (187) (595)

Balance carried to Balance Sheet 2,316 1,763

Dividend

Keeping in view the current year's performance, the Board is pleased to recommend a dividend of Rs 20 per share for the financial year 2014-15 (previous year Rs 15 per share special dividend of Rs 60 per share, to commemorate the 60th year of the Company).

Public Deposits

Your Company has not accepted any public deposits during the year, and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

Corporate Governance

A report on Corporate Governance, along with a certificate from a practicing Company Secretary confirming compliance with the conditions of corporate governance, is attached as Annexure I to this report.

Your Company is also participating in an initiative 'Women on Corporate Boards' by mentoring and grooming suitable woman candidates to familiarise themselves with the operation and process of Corporate Boards. Under this programme, the Board has selected Ms Shalini Hinduja to participate in the board/committee meetings under the mentorship of the Chairman.

Responsible Care / Corporate Social Responsibility

Your Company recognises that its business activities have direct and indirect impact on the environment in which it operates and is firmly committed to conduct its business in a socially and environmentally responsible way for the benefit of

all its stake-holders viz. shareholders, consumers, employees, and the community at large. Towards this objective, various programmes were conducted to create safety awareness and reinforce the Company's vision of Zero injury.

During the year, your Company implemented several CSR initiatives on its own with employee volunteers, as well as in partnership with external agencies. Such activities covered the areas of health, education and development of the society's underprivileged sections and environment protection. A report on the CSR activities and initiatives undertaken by the Company during the year is attached as Annexure II.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Your Company continues to use its research and development base to bring new products with improved performance features and products for special applications. Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 134 of the Act, are given in Annexure III to this report.

Information Technology

During the year, multiple businesses of your Company across the country have been brought under a common Global ERP platform at the respective business unit level to facilitate implementation of global processes. It has helped the Company to achieve synergy on the use of assets and resources.

To automate and streamline critical processes, the Company has gone live with Global Master Data solution for its raw materials code creation and validation process. This system will be able to help the Company integrate its master data across all its businesses and countries, which will in turn ensure a single source of master data, thereby providing full visibility of materials sourced from vendors across business units.

To facilitate collaboration with the Company's suppliers, an interface has been setup, connecting the Company's SAP system with the supplier's ERP systems. This interface helps in automating the operational transactions between the Company and the supplier. This process has been initiated with some of the Company's biggest vendors, covering majority of the category spend. Plans are underway to extend it further to cover all major vendors.

Human Resources

Your Company had cordial relations with employees across all locations during the year. Your Company's Human Resources agenda for the year was focused on strengthening four key areas:

- building a robust and diverse talent pipeline,

- enhancing individual and organisational capabilities for future readiness,

- driving greater employee engagement; and

- capability building at the grass root level.

The Company has seen a significant improvement in the engagement score (which indicates the level of engagement, and hence commitment to the Company's goals and values) of its employees through sustained communication and development programmes. The total number of employees on the rolls of the Company as at 31 March 2015 was 1,792 (previous year 1,854).

Information as per section 197 of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report. However, as permitted under the provisions of section 137 of the Act, the Report and Accounts are being sent to the members excluding the statement containing the said information. Any member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy.

In accordance with Section 178 and other applicable provisions of the Act, the Board has formulated the Nomination and Remuneration Policy of the Company by suitably defining the terms of reference of the Nomination and Remuneration Committee. More details in this regard have been outlined in the Corporate Governance report annexed to this report (Annexure I).

The following further disclosures are made in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

(i) Ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2014-15:

Name Status Ratio

Mr Nihal Kaviratne CBE Non-Executive 16

Mr Jayakumar Krishnaswamy Managing Director 22.7

Mr Himanshu Agarwal Wholetime Director 18.9

Mr R Gopalakrishnan Non-Executive 1.8

Mr Amit Jain Non-Executive -

Mr Raj S Kapur Non-Executive 19

Dr Sanjiv Misra Non-Executive 17

Ms Kimsuka Narasimhan Non-Executive 0.2

Mr Arvind Uppal Non-Executive 1.7

(ii) Details of percentage increase in the remuneration of each Director and Company Secretary in the financial year 2014-15:

Name Status Percentage increase

Mr Nihal Kaviratne CBE Non-Executive 14% increase in Commission

Mr Jayakumar Krishnaswamy Managing Director 5% of Annual Base salary with effect from 15 January 2015

Mr Himanshu Agarwal Wholetime Director 5% of Annual Base salary, prorated from the date of joining the Company (Actual: 3% with effect from 1 April 2014)

Mr R Gopalakrishnan Non-Executive 14% increase in Commission

Mr Amit Jain Non-Executive Nil

Mr Raj S Kapur Non-Executive 14% increase in Commission

Dr Sanjiv Misra Non-Executive 14% increase in Commission

Ms Kimsuka Narasimhan Non-Executive Joined the Board on 30 January 2015 hence, not applicable

Mr Arvind Uppal Non-Executive 14% increase in Commission

Mr R Guha Company Secretary 8% of Annual Base salary with effect from 1 April 2014

Description Remarks

(iii) The percentage increase in the median remuneration of employees in the financial year : 9.1%

iv) The number of permanent employees on the rolls of the Company 1,792 as on 31 March 2015

(v) The explanation on the relationship between average increase in remuneration and the Company performance Company PAT, after considering the salary increases referred to above, improved by 24% in 2014-15, compared to previous year. Increase in remuneration levels take into account relevant market factors.

(vi) Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company Company PAT, after considering the salary increases referred to above, improved by 24% in 2014-15, compared to previous year. Increase in remuneration levels of KMPs is lower than the percentage increase at the median remuneration of the employees.

(vii) Variations in the market capitalisation of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year

The Company's market capitalisation increased by 55% to Rs 65.5 billion on 31 March 2015 from Rs 42.1 billion on 31 March 2014.

PE ratio was 35.2 times as on 31 March 2015, an increase of 25% compared to 31 March 2014 (28 times).

Increase or Decrease in the market quotations of the shares of the Company in comparison with the last public offer

The market quote (NSE) of the Company's share was Rs 1,405 as on 31 March 2015 and the last public offer was made at a price of Rs 10 in 1967. An amount of Rs 1,000 invested in the said public offer would be worth Rs 1.85 lakh as on March 31, 2015 which translates to a Compounded Annual Growth Rate of 12%, taking into account the bonus shares issued and dividends paid during the period.

(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

Average percentage increase in Base salary of non-managerial personnel is 10.3%

This is comparable with the increase in the managerial remuneration.

(ix) Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company

Company PAT improved by 24% in 2014-15, compared to the previous year. Remuneration changes for each KMP is explained above

(x) The key parameters for any variable component of remuneration availed by the Director

- Business profitability

- Business cash generation

- Sustainability parameters

- Specific personal goals

(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 - there is no employee drawing remuneration higher than the highest paid Director.

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(xii) It is hereby affirmed that the remuneration paid to directors and managerial personnel referred to above is as per the remuneration policy of the Company.

Notes:

1. The aforesaid details are calculated on the basis of remuneration for the financial year 2014-15.

2. Remuneration to Directors includes sitting fees paid to them for the financial year 2014-15.

3. Median remuneration of the Company for all its employees is Rs. 501,435 for the financial year 2014-15.

4. Commission to the Non-Executive Directors was increased commensurate with the increase in the responsibility, considering their involvement in strategy and changes in the regulatory environment.

5. Remuneration to Directors is within the overall limits approved by the shareholders.

6. Ratios have been compared with reference to the Annual Base Salary as applicable.

Internal Control Systems/Risk Management

Your Company has an effective risk management framework, which helps the Board to monitor the state of controls in key business processes. Your Company also has well-established procedures for internal controls, commensurate with its size and operations. The organisation is appropriately staffed with qualified and experienced personnel for implementing and monitoring the internal control environment. The internal audit function reports to the Audit Committee.

Vigil Mechanism

Your Company has a Vigil Mechanism in place as required under section 177 of the Act and the Listing Agreement. More details in this regard have been outlined in the Corporate governance report annexed to this report (Annexure I).

Policy Against Sexual Harassment

Your Company has formulated a policy for prevention and deterrence of acts of sexual harassment. The Policy also defines the procedures for the resolution and settlement of complaints, if any. Internal Complaints Committees have been constituted in accordance with the requirements under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which ensures implementation and compliance with the law, as well as the policy at every unit. There were no cases/ complaints reported in this regard during 2014-15. A copy of the policy against sexual harassment is posted on the Company's website at https://www.akzonobel.com/in/corporate_governance/ policies.

Related Party Transactions

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties, which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Your Directors draw attention of the members to Note 5.16 to the financial statements which sets out related party disclosures.

Loans, Guarantees & Investments

There are no loans given or guarantees issued that are covered under Section 186 of the Act read with the Rules made thereunder. Details of investments made under the said section are covered in Notes 3.9 and 3.12 of the financial statements.

Extracts of the Annual Return

As required under section 134(3)(a) of the Act, read with the Companies (Management and Administration) Rules, 2014, an extract of the Annual return in the prescribed form is attached as Annexure IV.

Directors & Key Managerial Personnel

Mr Robert Molenaar, Director, resigned from the Board with effect from 9 September 2014. Mr Arabinda Ghosh was appointed as a Director with effect from 28 May 2015 in the casual vacancy caused by the resignation of Mr Robert Molenaar.

Ms Renu Karnad resigned from the Board with effect from 9 September 2014 to comply with certain regulatory restrictions. Ms Kimsuka Narasimhan was appointed as a Director with effect from 30 January 2015 in the casual vacancy caused by Ms Renu Karnad's resignation.

Appointment of Mr R Gopalakrishnan and Mr Arvind Uppal as Independent Directors for a term of five years with effect from 12 August 2014, Ms Renu Karnad for the period from 12 August 2014 to 8 September 2014 and Ms Kimsuka Narasimhan for a term of five years with effect from 30 January 2015 are subject to approval by the shareholders at the forthcoming Annual General Meeting.

Mr Amit Jain will be retiring by rotation at the forthcoming Annual General Meeting and is eligible for re-appointment.

Your board wishes to place on record its deep appreciation of the contributions of Mr Robert Molenaar and Ms Renu Karnad during their respective tenures.

Declaration by Independent Directors

Your Company has received necessary declarations from each Independent Director under section 149(7) of the Act that he/ she meets the criteria of independence, laid down in section 149(6) of the Act and clause 49 of the Listing Agreement.

Auditors

Statutory Auditors

M/s B S R & Associates LLP will retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting, and being eligible have offered themselves for reappointment. The Auditors' Report for the financial year 2014-15, does not contain any qualification, reservation or adverse remark.

Cost Auditors

The Board has appointed M/s Chandra Wadhwa & Associates as the Cost Auditors for conducting Cost Audit for the financial year 2014-15. Their report for the previous year ended 31 March 2014, was filed with MCA within the stipulated time.

Secretarial Auditors

In terms of section 204 of the Act, the Board has appointed M/s A K Labh & Co, Kolkata to conduct a Secretarial Audit for 2014-15. Their report is attached as Annexure V

Directors' Responsibility Statement

As required under section 134(5) of the Act, the Board states that:

(a) i n the preparation of the annual accounts, the applicable accounting standards had been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit and loss of the Company for that period;

(c) the Directors had taken pro

per and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down proper internal financial controls to be followed by the Company and that

such internal financial controls are adequate and were operating effectively; and

(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

General

Your Directors state that no disclosure or reporting is required

in respect of the following items, as there were no transactions

on these items during the year under review:

1. The Company has issued only one class of equity shares with equal rights.

2. The Company has not issued any shares during the year, under ESOPs or Sweat Equity or otherwise.

3. The Company does not have any subsidiary; hence, the question of the Managing Director or Wholetime Directors of the Company receiving any remuneration or commission from any of its subsidiaries does not arise. 4

4. No significant or material orders were passed by the Regulators or Courts or Tribunals, which could impact the going concern status and the Company's operations in future.

Cautionary Statement

Some of the statements in this report, describing your Company's objectives and expectations expressed in good faith, may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ materially from those, in the event of changes in the assumptions/ market conditions.

Acknowledgement

Your Directors wish to convey their gratitude and appreciation to all the employees of the Company for their valuable contribution during the year. They also wish to place on record their appreciation of the Company's customers, shareholders, investors, bankers, agents, suppliers, distributors and other business associates for their cooperation and support.

For and on behalf of the Board

28 May 2015 Nihal Kaviratne CBE Gurgaon Chairman


Mar 31, 2014

Dear Members,

The Directors are pleased to present their report for the year ended 31 March 2014. This report has been prepared with reference to and in compliance of section 217 of the Companies Act, 1956 in terms of the General Circular no 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs.

Business Environment

Indian economy faced another year of strong headwinds both from global factors and domestic issues. GDP growth in fiscal year 2013-14 is estimated at around 5% (previous year 4.5%). Overall industrial activity slowed down with the Index of Industrial production (IIP) refecting a marginal de-growth in 2013-14 compared to a growth of 1% in the previous year and 3% in the earlier year (2011-12).

The year also saw significant volatility in foreign exchange rates in mid-2013 which impacted business profitability; certain strong exchange control measures were taken by RBI during that period, some of which have since been rolled back.

On the positive side, the Companies Act, 2013 has replaced the Companies Act, 1956 with several provisions to protect investor interests, especially minority shareholders, improving governance standards and mandating corporate participation in CSR etc.

Finance and Accounts

Revenue for the year at Rs. 24,179 million is 8% ahead of previous year, with contribution from all segments. EBITDA from business operations at Rs. 1,919 million grew marginally ahead of previous year; however, profit after tax for the year at Rs. 1,502 million declined compared to previous year''s Rs. 2,188 million mainly on account of lower income from investments and certain non-recurring income included in the previous year''s results.

The highlights of the performance during the year are:

(Rs. million)

2013-14 2012-13

Revenue from operations 24,179 22,320

Operating profit 1,919 1,885

Depreciation (437) (386)

Other Income net of Finance costs 552 1,292

Profit before tax 2,034 2,791

Tax (532) (603)

Profit after tax 1,502 2,188

The appropriations from the profit are as follows:

Surplus brought forward from 5,015 8,214 previous year

Profit after tax for the year 1,502 2,188

Total available for appropriation 6,517 10,402

Appropriations

Transfer to general reserve (660) (1,050)

Proposed dividend (699) (933)

Proposed special dividend (2,800) (2,800)

Tax on proposed dividend (595) (634)

Write-back of previous year dividend (excess provision) 30

Balance carried to Balance 1,763 5,015 Sheet

The Company has not accepted any public deposits during the year and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

Dividend

Keeping in view the current year''s performance, the Board is pleased to recommend a dividend of Rs. 15 per share for the finanicial year 2013-14 (previous year Rs. 20 per share). In addition, the Board has, after taking into account the fund requirements of the Company and other relevant factors, recommended a special dividend of Rs. 60 per share for approval of the members at the forthcoming Annual General Meeting. (previous year Rs. 60 per share). The special dividend also signifies the milestone of the Company completing sixty years since incorporation.

Investor Education and Protection Fund (IEPF)

A sum of Rs. 2.3 million was remitted to the IEPF of the Central Government towards Dividend remaining unclaimed in respect of the finanicial year ended 31 March 2006, in terms of section 205C of the Companies Act, 1956 (which corresponds to section 124 of the Companies Act, 2013).

significant development

During the year, your Company inaugurated its eco-efficient Greenfield facility – its sixth factory in India – for manufacturing decorative paints at Gwalior, Madhya Pradesh. This facility will help in servicing the hitherto underserved markets of Central India in a cost efficient way.

Corporate governance

Annexure II to this report summarises the details of compliance with the corporate governance norms outlined in Clause 49 of the Listing Agreements with BSE and National Stock Exchange.

Directors

Mr Partha Sarathi Basu, Wholetime Director resigned from the Board with effect from 30 August 2013, consequent to his taking up an assignment with Akzo Nobel N V, based in the Netherlands.

Mr Himanshu Agarwal joined the Board as a Wholetime Director with effect from 2 September 2013.

Mr Amit Jain, Managing Director, resigned from the Board with effect from 31 December 2013, consequent to his taking up an assignment with Akzo Nobel NV based in the Netherlands. He was appointed as an Additional Director with effect from 2 January 2014.

Mr Raj Kapur was appointed as an Additional Director of the Company with effect from 1 March 2014.

Mr Jayakumar Krishnaswamy was appointed as the Managing Director of the Company with effect from 1 March 2014.

Mr Nihal Kaviratne CBE, Mr Rob Molenaar and Dr Sanjiv Misra will be retiring by rotation at the forthcoming Annual General Meeting and are eligible for re-appointment.

The Board wishes to place on record its deep appreciation of the contributions of Mr A Jain as Managing Director and

Mr P S Basu as Wholetime Director, during their respective tenures.

Auditors

M/s B S R & Associates LLP retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment.

Cost Auditors

The Board has appointed M/s Chandra Wadhwa & Associates as the Cost Auditors for conducting Cost Audit for the finanicial year 2013-14. Their report for the previous year ended 31 March 2013 was fled with MCA within the stipulated time.

Directors'' responsibility statement The Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed;

b) they have selected such accounting policies and applied them consistently and 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 on 31 March 2014 and the profit for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) they have prepared the annual accounts on a going concern basis.

Acknowledgment

The Directors wish to convey their gratitude and appreciation to all the employees of your Company for their valuable contribution during the year. They also wish to place on record their appreciation of our Company''s customers, shareholders, investors, bankers, agents, suppliers, distributors and other business associates for their cooperation and support.

On behalf of the Board New Delhi N Kaviratne CBE

16 May 2014 Chairman


Mar 31, 2013

Dear Members,

The Directors are pleased to present their report for the year ended 31 March 2013.

Business environment

GDP growth in fiscal year 2012-13 is estimated at around 5% (previous year 6.2%). The overall slowdown in the economy was visible and reflected in the low growth of just around 1% in the Index of Industrial Production (IIP) for the year 2012-13.

During the financial year 2012-13, most of the markets your Company operates in were impacted by the volatility in the macroeconomic environment. Overall revenue growth in line with market could still be achieved, thanks to the Company''s customer-centric approach, its ability to innovate and strong internal processes.

Finance and Accounts

Revenue for the year at Rs 22,320 million is 12% ahead of previous year, with contribution from all segments. Profit after tax for the year at Rs 2,188 million is higher than previous year by 8%.

Keeping in view the current year''s performance, the Board is pleased to recommend a dividend of Rs 20 per share for the financial year 2012-13 (previous year Rs 20 per share).

The highlights of the performance during the year are:

(Rs million)

2012-13 2011-12

Revenue from operations 22,320 19,878

Operating profit 2,942 2,737

Depreciation (386) (366)

Interest income (net) 235 93

Profit before tax 2,791 2,464

Tax (603) (446)

Profit after tax 2,188 2,018

The appropriations from the profit are as follows:

Balance in Profit & Loss Account brought forward from previous year 8,214 8,351

Profit after tax for the year 2,188 2,018

Total available for appropriation 10,402 10,369

Appropriations

Transfer to general reserve (1,050) (1,040)

Proposed dividend (933) (959)

Proposed special dividend (2,800)

Tax on proposed dividend (634) (156)

Write-back of previous year dividend (excess provision) 30 -

Balance carried to Balance Sheet 5,015 8,214

In addition, the Board has, after taking into account the fund requirements of the Company to support growth and other relevant factors, also recommended a Special Dividend of Rs 60 per share for approval of the members at the forthcoming Annual General Meeting.

A sum of Rs 1.9 million was remitted to the Investor Education and Protection Fund of the Central Government towards Dividend remaining unclaimed in respect of the financial year ended 31 March 2005, in terms of section 205C of the Companies Act, 1956.

The Company has not accepted any public deposits during the year and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

Significant development Share buyback

As briefly reported last year, the share buyback programme initiated on 21 May 2012, was completed on 24 July 2012, after obtaining necessary regulatory approvals. The Board notes with satisfaction that the programme saw overwhelming participation from the shareholders. In all, 1.3 million shares were bought back by the Company at a price of Rs 920 per share at a total cost of Rs 1,209 million including expenses.

Responsible care

Health, Safety, Environment & Security (''HSE&S'') is always the top priority of your Company in the conduct of its business. Your Company continued to focus on people safety and process safety at all its sites. Special attention was given during the year to the safety of personnel while they commute to work. Some of the initiatives taken by the Company during the year like Take-care programme, Behavior Based Safety programme and Life Saving Rules have helped the Company to conduct its activities in a safe and secure manner. The Company is committed to provide a safe workplace to its employees and contractors; and safety to the communities where it operates.

In line with global norms and regulatory requirements, the Company continues to upgrade its standards of compliance of all applicable (''HSE&S'') norms.

Conservation of energy, research, development and innovation

Your Company continues to use its research and development base to bring consumers new products with improved performance features and products for special applications. Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 217(1)(e) of the Companies Act, 1956, are given in Annexure I to this report.

Corporate Social Responsibility

Social welfare and community development continue to be a priority of the Company. During the year, your Company implemented several CSR initiatives in partnership with NGOs mainly in the areas of health, education and development of the poor and underprivileged as well as caring the environment.

Company''s employees actively participated in the welfare programmes in and around the places where they operate.

Information technology

Your Company maintains a globally linked IT and communication network and applications to support its business operations. During the year, it has completed roll out of SAP SRM (Supplier Relationship Management) to most of its factories to manage indirect spend and further working towards its expansion to other locations. The Company continued to focus on leveraging SAP functionality to improve business operations.

Human resources

Your Company had cordial relations with employees across all locations during the year.

The Company saw improvement in its engagement score (which indicates the level of engagement and hence commitment to the Company''s goals) of its employees through sustained communication and development programmes. The total number of employees on the rolls of the Company as at 31 March 2013 was 1795 (previous year 1716).

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, forms part of this report. However, as per the provisions of Section 219(1) (b)(iv) of the Act, the report and accounts are being sent to the members excluding the aforesaid information. Any member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy.

Internal control systems

Your Company has an effective risk management framework, which helps the Board to monitor the state of preparedness in key business processes. Your Company has well-established procedures for internal controls commensurate with its size and operations. The organisation is appropriately staffed with qualified and experienced personnel for implementing and monitoring the internal control environment. The internal audit function reports to the Audit Committee.

Corporate governance

Annexure II to this report summarises the details of compliance with the corporate governance norms outlined in Clause 49 of the Listing Agreements with BSE and National Stock Exchange.

Directors

Mr G Armstrong resigned as a Director of the Company w.e.f. 29 March 2013. Mr R Molenaar joined the Board as a Director in the casual vacancy caused by the resignation of Mr G Armstrong, w.e.f. 14 May 2013. The Board wishes to place on record its deep appreciation for the contribution of Mr G Armstrong during his tenure as a Director of the Company. Ms Sucheta Govil, Global Head of Marketing, Decorative Paints, Akzo Nobel, has been appointed as the Alternate Director to Mr R Molenaar.

Ms R S Karnad and Mr A Uppal, Directors, will be retiring by rotation at the forthcoming Annual General Meeting and are eligible for re-appointment.

Auditors

M/s B S R & Associates retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment.

Cost Auditors

The Board has appointed M/s Chandra Wadhwa & Associates as the Cost Auditors for conducting Cost Audit for the financial year 2012-13. Their report for the previous year ended 31 March 2012 was filed with MCA within the stipulated time.

Directors'' responsibility statement

The Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed;

b) they have selected such accounting policies and applied them consistently and 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 on 31 March 2013 and the profit for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) they have prepared the annual accounts on a going concern basis.

Cautionary statement

Some of the statements in this report, describing your Company''s objectives and expectations expressed in good faith, may constitute ''forward looking statements'' within the meaning of applicable laws and regulations. Actual results might differ materially from those, in the event of changes in the assumptions/market conditions.

Acknowledgment

The Directors wish to convey their gratitude and appreciation to all the employees of your Company for their valuable contribution during the year. They also wish to place on record their appreciation of our Company''s customers, shareholders, investors, bankers, agents, suppliers, distributors and other business associates for their cooperation and support.

On behalf of the Board

Gurgaon N Kaviratne CBE

20 May 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting their report for the year ended 31 March 2012.

Business environment

GDP growth in fiscal year 2011-12 is estimated at below 7% (previous year 8.4%). Signs of slowdown are visible in the economy as reflected in the low growth of just around 3% in Index of Industrial Production (IIP) for the year 2011-12 (previous year 8%). Coatings market growth in 2012-13 is expected to slow down, with several challenges posed by factors like increase in rates of Excise and Service Tax and hardening of US dollar, putting pressure on costs and business profitability.

Finance and accounts

Total revenue for the year at Rs 21,001 million crossed the psychologically significant level of Rs 20 billion for the first time in the Company's history, thanks to the robust growth achieved by the Decorative Paints business and the amalgamation of three AkzoNobel group companies with our Company. Profit before tax for the year at Rs 2,464 million is higher than previous year by 12%, though it is not comparable due to the amalgamation referred to above and changes in exceptional/non-recurring items. Keeping in view the current year's performance and other relevant factors, the Board has recommended a dividend of Rs 20.00 per share for the year 2011-12 (Rs 18.00 for the previous year), which will be paid after the approval of the members at the forthcoming Annual General Meeting.

The highlights of performance for the year are:

(Rs million)

2011-12 2010-11

Total income 21,001 11,955

Operating profit 2,737 2,065

Depreciation (366) (217)

Interest income (net) 93 238

Profit before tax from operations 2,464 2,086

Exceptional items - 113

Profit before tax 2,464 2,199

Tax (446) (433)

Profit after tax 2,018 1,766

The appropriations from the profit are as follows:

Balance in Profit & Loss Account b/d

- from previous year 6,276

- by amalgamating companies 2,075

Profit after tax for the year 2,018

Total available for appropriation 10,369

Appropriations

Transfer to general reserve (1,040)

Proposed dividend (959)

Tax on dividend (156)

Balance carried to Balance Sheet 8,214

Interest income of the Company came down significantly during the year mainly due to reduction in the interest on Income Tax refunds received during the year to Rs 89 million against Rs 222 million in the previous year.

No public deposits were accepted by our Company during the year. Unclaimed dividends amounting to Rs 4 million were remitted into the Investor Education and Protection Fund of the Central Government as required under section 205C of the Companies Act, 1956.

Significant developments

Amalgamation

The amalgamation of M/s Akzo Nobel Car Refinishes India (Private) Limited, Akzo Nobel Chemicals (India) Limited and Akzo Nobel Coatings India (Private) Limited after all necessary approvals and sanction by the jurisdictional High Courts was completed on 18 May 2012. As per the scheme of amalgamation, the Accounts covered in this report include the results of the amalgamating companies with effect from 1 April 2011 being the 'Appointed Date' for the amalgamation.

In terms of the scheme of amalgamation, equity shares of the Company to be issued to the shareholders of the amalgamating companies will rank pari passu with the existing shares of the Company including for the purpose of determining entitlement to the Dividend for the year 2011-12. Post this issue, promoter holding in the Company will go up to 68.9%. As a result of the amalgamation and share issue as aforesaid, the capital structure of the Company has changed/will change as follows:

Pre-amalgamation Post-amalgamation Rs million Rs million

Authorised capital 416.9 1,266.9

Paid-up capital 368.4 479.6

The Board is delighted to welcome the new shareholders to the Akzo Nobel India fold and look forward to their support to the Company in its endeavours to enhance shareholder value.

Arising from the amalgamation, the Company will be reporting its financials under two business segments, viz. Coatings and Others (mainly Chemicals).

Share buyback

A share buyback programme through Tender Offer process was initiated by the Board on 21 May 2012, subject to necessary regulatory and other approvals. Under this programme, a maximum of 1.3 million shares will be bought back by the Company at a price of Rs 920 per share from the non promoter shareholders. The total cost of this buyback assuming full acceptance will be Rs 1,196 million plus incidental costs. The buyback is expected to be completed by end July 2012.

Responsible care

Our Company continued to drive its Health, Safety, Environment & Security objectives by taking on challenging targets for reduction in energy and water consumption, waste and VOC. Our Company continued to drive its safety initiatives like behaviour based safety and driving safety. Commissioning of the expansion of Hyderabad factory has helped in reducing primary freight CO2 emissions through reduction of the transportation distance to service the south India market.

In line with global norms and regulatory requirements, the Company continues to upgrade its standards of compliance of all applicable ('HSE&S') norms while maintaining operational integrity.

Conservation of energy, research, development and innovation

Our Company continues to use its research and development base to bring consumers new products with improved performance features and products for special applications. Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 217(1)(e) of the Companies Act, 1956, are given in Annexure I to this report.

Corporate Social Responsibility

During the year, the Company encouraged several CSR initiatives directly and in partnership with NGOs with main focus on health, hygiene & education for underprivileged segments and creating livelihood opportunities for below poverty line (BPL) category and has been able to bring about a positive change in many challenging situations. An Aaghanwadi project was taken up with the objective to provide help and work with BPL farmers to develop their land to ensure steady and sustainable income. By implementing "Model Farm", which consisted of an inter- crop of fruit-bearing trees and vegetables which will provide immediate returns as well as long-term benefits, combined with water harvesting tank, their efforts resulted in conversion of arid lands to lush farms. This project won 1st prize in Akzo Nobel Global Community Program Best Practices competition - 2011. A team consisting of employee volunteers worked extensively in raising contributions to construct a new building for a rural school - Mahatma Gandhi Vidyalaya, in Navi Mumbai.

Information technology

Our Company maintains global IT and communication networks and applications to support its business activities. IT security processes protecting these systems are in place and subject to assessment as part of the review of internal control over financial reporting.

Video conferencing facilities have been installed at all factories and regional sales offices, thereby creating a video network across all major sites and HO. Decorative Paints business has also started a project to leverage the existing SAP platform to provide real time business analytics in a visual form for regular review and monitoring.

Human resources

Our Company ensured cordial relations with employees across all locations during the year.

In appreciation of its efforts in developing and managing talent, Akzo Nobel India has been awarded the 'Best Talent Management Organisation of the Year' at the World HRD Congress 2012, held in Mumbai. The total number of employees on the rolls of the Company including the amalgamating companies, as at 31 March 2012 was 1,716.

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, forms part of this report. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the report and accounts are being sent to the members excluding the aforesaid information. Any member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy.

Internal control systems

Our Company has an effective risk management framework, which helps the Board to monitor the exposure and state of preparedness in key business processes. Our Company has well-established procedures for internal controls commensurate with its size and operations. The organisation is appropriately staffed with qualified and experienced personnel for implementing and monitoring the internal control environment. The internal audit function is adequately resourced and reports to the Audit Committee.

Corporate governance

Annexure II to this report summarises the details of compliance with the corporate governance norms outlined in Clause 49 of the Listing Agreements with Bombay Stock Exchange and National Stock Exchange.

Directors

Mr R Gopalakrishnan and Dr S Misra, Directors, will be retiring by rotation at the forthcoming Annual General Meeting and are eligible for re-appointment.

Auditors

M/s B S R & Associates retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment.

Cost Auditors

As required under the Companies Act, the Company has appointed M/s Chandra Wadhwa & Associates as the Cost Auditors for its Coatings (Paints & Varnishes) and Chemicals segments for the year 2011-12.

Directors' responsibility statement

The Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed;

b) they have selected such accounting policies and applied them consistently and 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 on 31 March 2012; and

- the profit for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) they have prepared the annual accounts on a going concern basis.

Cautionary statement

Some of the statements in this report, describing our Company's objectives and expectations expressed in good faith, may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ materially from those, in the event of changes in the assumptions/market conditions.

Acknowledgment

The Directors wish to convey their gratitude and appreciation to all the employees of our Company for their valuable contribution during the year. They also wish to place on record their appreciation of our Company's customers, shareholders, investors, bankers, agents, suppliers, distributors and other business associates for their cooperation and support.

On behalf of the Board

Gurgaon

21 May 2012 N Kaviratne CBE

Chairman


Mar 31, 2010

The Directors have pleasure in presenting their report for the year ended 31 March 2010.

BUSINESS ENVIRONMENT

After a sluggish start, the Indian economy picked up momentum in the second half of the year under review. The estimated GDP growth in 2009-10 was over 7% (previous year 6.7%); the Index of Industrial Production also indicates a growth of around 10% in 2009-10, against previous years 2.8%. The Union Budget for 2010-11 has, as widely anticipated, partially withdrawn some of the stimulus measures introduced in 2008-09 in the wake of improvement in economic environment, besides re-adjusting corporate tax rates. A road map for implementing the new Direct Taxes Code and the Goods and Services Tax with effect from 1 April 2011 has also been laid out. RBIs macro economic forecast for the fiscal year 2010-11 is a GDP growth at 8% with an upward bias, assuming normal monsoon and moderate inflation. The credit policy announced by the RBI in April 2010 factors in the above outlook and has initiated measures to adjust interest rates to contain inflationary pressures.

FINANCE AND ACCOUNTS

Total income for the year at Rs 10,433m was up by 5% while the PBT at Rs 2,000m grew by 12% over the previous year. PAT for the year at Rs 1,593m is however not comparable with the previous years Rs 2,946m because of exceptional items. Keeping in view the current years performance and other relevant factors, the Board has recommended a dividend of Rs 16.00 per share for the year 2009-10 (same as in the previous year) which will be paid after the approval of the members at the forthcoming Annual General Meeting.

The performance highlights for the year are (Rs million)

2009-10 2008-09

Total Income 10,433 9,963 Operating Profit (PBDIT) 2,198 1,967 Depreciation (212) (213) Interest income (net) 14 38 Profit before tax from operations 2,000 1,792 Exceptional items - 1,995 Profit before tax 2,000 3,787 Tax (407) (841) Profit after tax 1,593 2,946

The appropriations from the profit are as follows: Balance in Profit & Loss Account brought forward from previous year 5,924 Profit after tax for the year 1,593 Total available for appropriation 7,517

Appropriations Transfer to General Reserve (760) Proposed Dividend (net) (588) Tax on Dividend (98) Balance carried to Balance Sheet 6,071

No public deposits were accepted by the Company during the year. Unclaimed dividends amounting to Rs 3m were remitted into the Investor Education and Protection Fund of the Central Government as required under section 205C of the Companies Act, 1956.

SIGNIFICANT DEVELOPMENTS

After obtaining all necessary approvals, the name of the Company has been changed to Akzo Nobel India Limited. This change reflects the alignment of your Company with the AkzoNobel Group which had acquired Imperial Chemical Industries PLC (ICI) worldwide.

SHARE BUYBACK

The share buyback through market operations, approved by the members on 19 December 2008 was closed on 18 December 2009, after buying back a total of 1.38m shares, constituting 3.6% of the pre-buyback paid up capital of the Company, spread over two financial years 2008-09 and 2009-10. The premium paid over the face value of the shares bought back during the year and other costs of the buyback amounting to Rs 684m have been adjusted against General Reserve. In addition, as required under the Companies Act 1956, a Capital Redemption Reserve of Rs 12m has been created by adjustment to the General Reserve.

MANAGEMENT DISCUSSION & ANALYSIS

Paints

Your Companys Paints business segment consists of Decorative and Refinish businesses. In the early part of the financial year, the business took a cautious approach to protect its profitability. Segment sales for the year grew 4% while segment profit grew by 26%, on the back of savings in raw materials costs, improved mix and innovation.

In Decorative Paints business, your Company continued to invest in Retail Modernization which was started last year under the brand Dulux Decorator Centre. A new initiative for improving your Companys visibility in the retail segment called Visual Merchandising was launched during the year, providing world class visibility elements to its dealers to differentiate their outlets.

In Refinish Paints business, your Company initiated focus on new emerging segment Mid Tier PU and revamped the Brand Strategy for Eterna with clear market segmentation. The business continued its focus on demand generation through programmes like The Great Finishers Club1, colour workshops and training in colour matching skills for painters.

Having created a strong growth platform in the previous year, the outlook for the business segment in the new financial year is positive in the backdrop of revived economic conditions. The governments thrust on infrastructure development and the extension of the interest subsidy scheme on small individual housing loans is likely to improve the sentiments in the real estate sector, which in turn could help the paints industry.

The business segment has positioned itself to target growth ahead of market in the next few years and has been building capbility for taking advantage of new opportunites. The key aspects of the growth strategy are to place customers interests first and empower its people, besides operating in a sustainable manner. However, volatility in crude oil prices and exchange fluctuations may adversely impact input costs, which will be addressed through innovation and value creation plans.

Others

This segment consisting of the trading operations in Surface Chemistry and National Starch products registered a sales growth of 6% and profit growth of 18% over the previous year.

RESPONSIBLE CARE - HEALTH, SAFETY, ENVIRONMENT & SECURITY (HSE&S) AND CORPORATE SOCIAL RESPONSIBILITY (CSR)

HSE&S

Your Company continued to sustain its high standards of HSE&S performance, returning yet another year with no major injury or incidents. The integrated HSE&S system has stabilized and is being used uniformly across the organization. Your Company continued to drive its sustainability objectives by taking up challenging targets for energy, water and waste reduction in all its plants. Your Company has also become a member of the TERI- BCSD (Business Council for Sustainable Development) to participate in issues related to sustainable development and to promote leadership in environmental management and social responsibility. No occupational illness was reported during the year.

CSR

During the year under review, your Company encouraged a number of CSR initiatives in the neighbouring communities in partnership with NGOs for improving childrens awareness on health, safety and environment. Your Companys efforts won recognition from AkzoNobel Group with a second prize in the Global Community Programs 2009 Best Practices Competition for the project A self-sustaining home for street children.

CONSERVATION OF ENERGY, RESEARCH, DEVELOPMENT & INNOVATION

Your Companys performance on energy and waste reduction continued to improve ahead of targets. Your Company continues to use its research and development base to bring to the consumers new products with improved performance features and products for special applications.

Particulars in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, pursuant to section 217( 1 )(e) of the Companies Act, 1956, are given in Annexure I to this report.

INFORMATION TECHNOLOGY

Your Company continued to invest in upgrading its Information Technology systems to enhance competitive advantage.

With a view to improve operational effectiveness and efficiency, AkzoNobels proven global SAP solution called SATURN has been implemented at all sites across Paints business. The new system provides a single end-to-end platform to facilitate management decision making and enable deployment of advanced integrated functionalities in future.

The data network has been completely revamped and upgraded to provide high-speed links at all sites to ensure the connectivity and quality of service required to run all the relevant applications.

HUMAN RESOURCES

Cordial relations with employees prevailed at all the Company locations during the year. The total number of employees on the rolls of the Company as at 31 March 2010 was 873.

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this report. However, as per the provisions of Section 219(l)(b)(iv) of the Act, the report and Accounts are being sent to the members excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

INTERNAL CONTROL SYSTEMS

The Company has an effective Risk Management framework, which helps the Board to monitor the exposure and state of controls in the key business processes. Your Company has well-established procedures for internal control commensurate with its size and operations. The organization is appropriately staffed with qualified and experienced personnel for implementing and monitoring the internal control environment. The internal audit function is adequately resourced and reports to the Audit Committee.

CORPORATE GOVERNANCE

Annexure II to this report summarizes the details of compliance with the Corporate Governance norms outlined in clause 49 of the Listing Agreements with National Stock Exchange and Bombay Stock Exchange.

DIRECTORS

Mr M V Subbiah resigned from the Board with effect from 20 June 2009. Mr. A J Britt resigned from the Board with effect from 1 July 2009. In the casual vacancy caused by Mr. Britts resignation, Ms Kerris Bright was appointed as a Director with effect from 1 July 2009; she has since resigned from the Board with effect from 30 April 2010. Dr Sanjiv Misra joined the Board with effect from 14 May 2010 in the casual vacancy caused by the resignation of Ms Kerris Bright. Mr M R Rajaram stepped down from the Board with effect from 1 November 2009.

Mr R Gopalakrishnan and Dr Sanjiv Misra, Directors, will be retiring by rotation at the forthcoming Annual General Meeting and are eligible for re-appointment.

The Board wishes to place on record its deep appreciation of the contribution of Mr. M V Subbiah, Mr A J Britt, Mr M R Rajaram and Ms Kerris Bright during their respective tenures as members of the Board.

AUDITORS

M/s B S R & Associates retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment.

DIRECTORS* RESPONSIBILITY STATEMENT

Your Directors confirm that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

b) they have selected such accounting policies and applied them consistently and made judgements 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 on 31 March 2010;and

- the profit for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) they have prepared the annual accounts on a going concern basis.

Cautionary Statement

Some of the statements in this report, describing the Companys objectives and expectations expressed in good faith, may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those, in the event of changes in the assumptions/market conditions.

ACKNOWLEDGMENT

The Directors wish to convey their gratitude and appreciation to all the employees of the Company for their valuable contribution during the year. They also wish to place on record their appreciation to the Companys customers, shareholders, investors, bankers, agents, suppliers, distributors and other business associates for their cooperation and support.



On behalf of the Board

Gurgaon A NARAYAN 14 May 2010 Chairman

 
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