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Directors Report of Andhra Petrochemicals Ltd.

Mar 31, 2016

Dear Shareholders,

The Directors have pleasure in presenting the Thirty Second Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2016.

CORPORATE OVERVIEW:

Your Company is the sole manufacturer of Oxo-Alcohols in India. The Oxo-Alcohols consist of the products viz., 2 Ethyl Hexanol, Normal Butanol and Iso Butanol. Your Company is an associate of The Andhra Sugars Ltd., and has its Regd. Office at Tanuku.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2016 is summarized below:

(Rs. in Lakhs)

2015-16

2014-15

Net Sales (excl. Excise Duty)

33565.83

14026.17

Profit / (Loss) before Interest & Depreciation

(1039.48)

(2879.45)

Less : Interest

1365.73

969.65

Depreciation

982.91

899.95

Profit / (Loss) after Interest and

Depreciation before Extra-ordinary item

(3388.12)

(4749.05)

Extra-ordinary items - Insurance Claim received

694.75

---

Profit / (Loss) before Tax Provision for:

(2693.37)

(4749.05)

Current Tax for earlier years

2.15

---

Deferred Tax

(287.67)

(297.14)

Profit / (Loss) after Taxation

(2407.85)

(4451.91)

Balance brought forward from previous year Adjustment of carrying amount of the assets whose remaining useful life is nil as per Schedule II to the Companies Act, 2013 (net of

2919.46

7582.76

deferred tax of Rs.101.53 lakhs)

---

(211.39)

Profit carried forward to next year

511.61

2919.46

OPERATIONAL AND FINANCIAL PERFORMANCE :

During the Financial Year 2015-16, the Plant produced 57,348 MTs (previous year 18,766 MTs), total Alcohols which works out to 79% (approx.) capacity utilization. Sales during the year were 57,245 MTs ( previous year 19,101 MTs). Company had incurred a Net Loss of Rs.24.08 crores during the current Financial Year 2015-16 as compared to Rs.44.52 crores Net Loss incurred during the previous year. Details are given in Audited, unqualified Financial Statements forming part of this Report.

DIVIDEND:

Due to loss incurred during the year under report, your Directors are unable to recommend any dividend for the Financial Year 2015-16.

CAPITAL & RESERVES:

Authorized and Paid-up Capital:

The Authorized Capital of the Company is Rs.85 crores and the Paid-up Capital is Rs.84.97 crores.

Reserves:

The total Reserves position as on 31.3.2016 stood at Rs.34.48 crores against Rs. 58.55 crores in the previous year.

MANAGEMENT DISCUSSION AND ANALYSIS: INDUSTRY STRUCTURE AND DEVELOPMENTS:

The year 2015-16 was somewhat unfavourable to the Company. The economic slowdown globally and particularly in China has adversely impacted Company''s performance. In the light of supply-demand gap for Oxo-Alcohols internationally, product prices were subdued and un-remunerative for the Company. The Company also suffered on account of surge in imports of Oxo-Alcohols at very low prices.

The Company''s operations were restricted to minimize losses but at the same time continued to be in the market. Towards the end of the year Company succeeded in getting Govt. of India to impose Anti Dumping Duty on 2-Ethyl Hexanol from certain countries. Anti Dumping Duty on Normal Butanol was levied subsequently in the following year in April, 2016. Further, the Company has taken up with Govt. of India for levying Anti Dumping Duty on imports from certain other countries that were not covered during the earlier investigation period. Also efforts are on, if possible, to get Anti Dumping Duty on the end product DOP manufactured out of Company''s main product 2-Ethyl Hexanol. The existing Anti Dumping Duties together with those proposed are expected to improve product prices.

During the year under review the Company has received a Loss of Profit Insurance Claim of Rs.694.75 lakhs. Further efforts are on with the Insurance company for settlement of additional amount. For the year the Company has posted a net loss of Rs.2407.84 lakhs, mainly on account of external factors, beyond the control of the Company.

OPPORTUNITIES AND THREATS:

Estimated demand of Oxo-Alcohols at 2,00,000 MTPA, with healthy growth rate of 8 to 10% per annum in general is a good opportunity for the Company with existing capacity of 80,000 MTPA, considering the huge demand-supply gap in the country. As such there are no constraints in the Company''s production capability with Hindustan Petroleum Corporation Limited''s (HPCL) ability to meet full Propylene requirement. Sales realization is also expected to improve over time, firstly on account of Anti Dumping Duties imposed by Govt. of India on imports from certain countries and secondly fructifying Company''s efforts of bringing certain other countries and products in this fold, though it may take some time. With these, some positive developments are likely for the Company.

However, downturn in product price scenario internationally and dumping of the products and currency fluctuations may impact the Company''s performance and recovery process to some extent.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

As required by the provisions of Companies Act, 2013, Internal Control Systems Report has been appended to Independent Auditor''s Report given by Statutory Auditors regarding Financial Year 2015-16. The Company has internal control systems commensurate with the size of the business operations. A Chartered Accountancy firm is engaged to carry out internal audit covering the entire operations. The audit firm submits internal audit report periodically with their suggestions and /or corrections. Audit Committee critically deliberates and reviews such internal audit reports and ensures effectiveness of the control systems through necessary recommendations.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS :

As far as the Human Resources is concerned, the employees are being trained to meet the Plant requirements from time to time by motivating them in a positive way and the industrial relations continue to be cordial throughout the year.

The total number of employees employed as on 31.3.2016 is 286.

FUTURE OUTLOOK:

Company''s performance capability is expected to be good as the Propylene supply constraint from HPCL has since been sorted out. However, the Company''s performance to a large extent is dependent on international supply and demand for these products and their prices which are influenced by crude prices, exchange fluctuations and dumping by sources other than that covered by Anti Dumping Duty.

RISKS AND CONCERNS:

The Company is depending for its major raw material i.e.,

Propylene from a single source, HPCL refinery. However, the risk is built in the project evaluation. Crude prices, Exchange rate fluctuations and political instability in the gulf area are of major concern.

CAUTIONARY STATEMENT:

The statements describing the Company''s outlook, estimates or predictions may be forward-looking statements based on certain assumptions of future events. Actual results may differ materially from those expressed or implied, since the Company''s operations are influenced by external or internal factors. Your Company closely monitors all major developments likely to affect the operations and will respond to meet the potential threats and to gain from any possible opportunities.

DEPOSITS:

During the year under review, your Company did not accept any deposits within the meaning of provisions of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

SAFETY, HEALTH AND ENVIRONMENT:

Safety:

Company has achieved 10 million accident free Man hours in last 7 years.

Company has received the following Safety Awards during the year:

Silver Trophy (2nd Level) in National Safety Awards (NSA) -2013 for lowest Average Frequency Rate (2011, 2012, 2013) awarded by Directorate General Factory Advice Services and Labour Institute (DGFASLI), Govt of India, Mumbai.

Certificate of Appreciation (5th level) in National Safety Awards - 2015 for the assessment years 2012, 2013, 2014 by National Safety Council of India (NSCI), Mumbai.

8,500 training man-hours have been organized for employees including contract workman for induction as well as refresher training. Safety of human and Plant assets are of top priority of the Company. Continuous training of personnel at various levels on safety and strict compliance of regulations is ensured which resulted in another accident-free year.

Health:

Health monitoring of all employees including contract labour and canteen workers is done on regular basis.

Environment:

Installation of online effluent quality monitoring station at a cost of Rs.15 lakhs has been done. The data is transmitted to CPCB and APPCB for monitoring. The Company has installed the necessary monitoring equipment for stacks and ambient air.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstatement value basis.

LISTING:

The Equity Shares of your Company are listed on the Bombay Stock Exchange. Listing fees has been paid.

EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure - "A" and forms an integral part of this report.

DIRECTORS:

Board of Directors at their Meeting held on 11.8.2016, appointed Dr. B B Ramaiah as Managing Director for a period of 5 years i.e., from 12.11.2016 to 11.11.2021. His appointment is being placed for the approval of the shareholders at the ensuing 32nd Annual General Meeting.

APIDC withdrew the nomination of Sri Shamsher Singh Rawat, I.A.S., as its Nominee Director from the Board of the Company w.e.f., 30.5.2016. Further it has nominated Sri B Sreedhar, I.A.S., on the Board of the Company and he has been co-opted as Additional Director on the Board of the Company w.e.f., 11.8.2016 on the recommendation of Nomination and Remuneration Committee at its meeting held on 11.8.2016.

Sri B Sreedhar, I.A.S., holds office upto the date of the ensuing 32nd Annual General Meeting (AGM). Resolution seeking his appointment as Director is being placed for the approval of the shareholders at the ensuing 32nd AGM.

Your Directors place on record their warm appreciation for the valuable guidance rendered by Sri Shamsher Singh Rawat, I.A.S., during his tenure as Director of the Company.

IDBI Bank Ltd., nominated Sri Animesh Kumar Sinha as its Nominee Director on the Board of the Company from 5.4.2016.

All Independent Directors, viz., Sri M R B Punja, Sri A A Krishnan, Sri Surinder Kumar Kapoor and Smt. D Manjulatha have given declarations at the first meeting of the Board of Directors held during the Financial Year 2016-17 (i.e., on 20.5.2016) that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013.

In accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, Directors Sri Ravi Pendyala and Smt. Y V Anuradha, I.A.S., retire by rotation at the ensuing 32nd AGM and being eligible offer themselves for reappointment.

KEY MANAGERIAL PERSONNEL:

Details of Key Managerial Personnel of the Company are as under:

Sl No.

Name of the person

Designation

1.

Dr. V N Rao

Chief Executive &

Chief Operating Officer

2.

Sri P Ratna Rao

General Manager (Finance)

3.

Sri K Raghu Ram

Manager (Finance) & Asst.

(Up to 2.1.2016)

Secretary

AUDIT COMMITTEE:

Audit Committee consists of three Non-Executive Independent Directors Sri A A Krishnan (Chairman) with Sri M R B Punja and Sri Surinder Kumar Kapoor as its members. Sri Ravi Pendyala, Non-Executive Non-Independent Director was inducted as a Member of the Committee from 6.11.2015.

SECRETARIAL AUDIT:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed D Hanumanta Raju & Co., Practising Company Secretaries (CP No.7824), Hyderabad, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure-”B” and forms an integral part of this report.

BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Securities & Exchange of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Board has carried out a formal process of evaluation of the Board, its Committees and the individual Directors.

The performance was evaluated based on the parameters such as effectiveness of Board / Committee process and functioning, contribution of Board / Committee members to overall effectiveness of the Board / Committee, avoiding conflict with Company''s interest, bonafide discharge of responsibilities in the interest of the Company and upholding ethical standards, integrity and probity etc.

The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The evaluation process reflected valuable contribution of members of the Board / Committee thereof.

NUMBER OF MEETINGS OF THE BOARD:

The details of the Number of Meetings of the Board held during the Financial Year 2015-16 are given in the Corporate Governance Report which forms part of this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY:

Your Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013. Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to financial statements.

WHISTLE BLOWER POLICY:

As per the provisions of the Companies Act, 2013 and Securities & Exchange of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has established a Vigil Mechanism / Whistle Blower Policy for Directors and employees to report genuine concerns (unethical behaviour, actual or suspected fraud or violation of the Company''s Code of Conduct) in prescribed manner.

The Policy provides adequate safeguards against victimization of the complainant and direct access to the Chairman of the Audit Committee. The protected disclosures, if any, reported under this Policy will be appropriately and expeditiously investigated.

The Whistle Blower Policy may be accessed on the Company''s website at the link: http:// www.andhrapetrochemicals.com/Whistle Blower Policy.pdf.

RISK MANAGEMENT:

Your Board of Directors at its Meeting held on 27.3.2015 framed and adopted a Risk Management Policy of the Company to identify and mitigate the risks. The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also risk mitigation measures and reporting mechanism of such risks. Risk Management Policy of your Company can be viewed by entering the url http:// www.andhrapetrochemicals.com/POLICY ON CORPORATE RISK MANAGEMENT.pdf in the web browser.

CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE:

For details of CSR Committee composition, please refer Corporate Governance section of this report.

As per the provisions of Schedule VII of the Companies Act, 2013 and Company''s CSR Policy, as there is no average net profit for the three immediately preceding Financial Years, the Company is not required to incur CSR expenditure for the Financial Year 2015-16. The report on CSR activities as required under the Companies (CSR Policy) Rules, 2014 is set out as Annexure-”C” forming part of this report.

NOMINATION AND REMUNERATION COMMITTEE:

Nomination and Remuneration Committee consists of Sri Surinder Kumar Kapoor as Chairman and Sri M R B Punja and Sri P Narendranath Chowdary as its members.

NOMINATION AND REMUNERATION POLICY:

The Board of Directors of your Company has, on recommendation of the Nomination & Remuneration Committee, adopted a Nomination & Remuneration Policy which lays down the framework in relation to the criteria for selection and appointment of Board members and remuneration of Directors / Key Managerial Personnel and Senior Management of the Company. This Policy can be accessed on the Company''s website at the link: http://www.andhrapetrochemicals.com/NOMINATION REMUNERATION POLICY.pdf.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, have been appointed as Statutory Auditors of the Company for the Financial Years 2014-15, 2015-16 and 2016-17 by the shareholders at the 30th Annual General Meeting held on 12th September, 2014. Now approval of shareholders is sought for ratification of appointment and fixation of remuneration for the Financial Year 2016-17.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2016. Cost Auditors'' Report in respect of Financial Year 2014-15 has been filed with the Ministry of Corporate Affairs on 28th September, 2015 i.e., within the stipulated time.

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

Particulars prescribed under Section 134 (3) (m) of the Companies Act, 2013 read with the Rule 8 (3) of Companies (Accounts) Rules, 2014 are given below:

I) CONSERVATION OF ENERGY

1. Steps taken or impact on conservation of energy:

a) Provision of UPS control supply for certain critical motors to prevent spurious trips due to power dips

b) Interconnection of Naphtha pre-heater and start-up heater of the two reforming units. Earlier, production had to be stopped for decoking of the Naphtha preheater. Now production continues at 40% level and quick come-back is achieved thus saving considerable amount of Naphtha. The cost of the modification is recovered in two decoking operations and has prevented loss of production.

2. Steps taken by the Company for utilisting alternative sources of energy: Company could not take-up any steps in this regard due to poor financial position.

3. Capital Investment on energy conservation equipments: Rs.15.3 lakhs

II) TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

a) Efforts made & Benefits: Technology has been fully absorbed and various innovative ideas enable the Company to operate the Plant even above 100% load.

b) Imported Technology: NIL

c) Expenditure incurred on R & D: NIL

III) Foreign Exchange earning and outgo : (On cash basis)

(Rs. in lakhs)

For the year ended

For the year ended

31.3.2016

31.3.2015

i. Earnings

--

--

ii. Outgo

541.02

225.85

PARTICULARS OF EMPLOYEES:

Statement of particulars of employees of the Company as required under Section 197 (12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forming part of this report is annexed hereto (Annexure-"D").

Employee mentioned in the said Annexure is not a relative of any Director of the Company. None of the employees holds (by himself or along with his spouse and dependent children) more than 2% of the Equity Shares of the Company.

DEMATERIALISATION OF SHARES:

As on 31st March, 2016, out of the total number of 8,49,71,600 Equity Shares, 7,70,38,241 Equity Shares constituting 90.66% stand dematerialized.

RELATED PARTY TRANSACTIONS:

As per the provisions of Regulation 23 of Securities & Exchange of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has established a Policy on materiality of Related Party Transactions and on dealing with Related Party Transactions.

The Policy on Related Party Transactions as approved by the Board of Directors is available on the website of the Company. The weblink of the same is http:// www.andhrapetrochemicals.com/POLICY ON RELATED PARTY TRANSACTIONS.pdf.

All transactions entered with Related Parties for the year under review were on arm''s length basis and in the ordinary course of business.

All Related Party Transactions are placed before the Audit Committee and the Board for approval. Omnibus approval was granted by the Audit Committee on yearly basis for transactions which are repetitive in nature. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and ratification on a quarterly basis.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

Your Company has in place a Prevention of Sexual Harassment Policy in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) was setup to redress complaints received regarding sexual harassment. During the year 2015-16, there were no complaints received by the ICC.

PARTICULARS OF REMUNERATION:

The information required under Section 197 of the Act and the Rules made there under in respect of employees of the Company, is as follows:-

(a) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the Financial Year:

Our Directors draw remuneration only by way of sitting fees. The details of the same are provided in Corporate Governance which forms an Annexure to this report. No other remuneration is drawn by them including the Managing Director. Hence, the ratio of remuneration of each Director to the median remuneration is not required to be given.

(b) the percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary or Manager, if any, in the Financial Year: There is no change in sitting fee during the current Financial Year. Other details are as follows:

Name of the Person

% increase in remuneration

Dr. V N Rao,

10.18 %

Chief Executive&Chief Operating Officer

Sri P Ratna Rao,

General Manager (Finance)

10.77%

Sri K Raghu Ram,

Manager (Finance)&Asst. Secretary (upto 2.1.2016)

---

(c) the percentage increase in the median remuneration of employees in the Financial Year: 3.71%

(d) the number of permanent employees on the rolls of Company: 286

(e) the explanation on the relationship between average increase in remuneration and Company performance;

On an average, employees received an increase of 3.71%. The increase in remuneration is in line with the market trends. The increased percentage in the median remuneration compared to previous year is decreased due to increase in number of employees during the Financial Year 2015-16 at lower level. A direct co-relation of employee remuneration and Company performance as envisaged in the rules is not feasible considering the qualitative factors involved in measuring performance.

(f) comparison of the remuneration of the Key Managerial Personnel against the performance of the Company:

Particulars Rs. in lakhs

Remuneration of Key Managerial 126.51

Personnel (KMP) during Financial Year 2015-16 (aggregated)

Revenue from operations 33699.69

Remuneration (as % of revenue) 0.38%

(g) variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current Financial Year and previous Financial Year and percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the Company as at the close of the current Financial Year and previous Financial Year:

Particulars

Unit

As at 31st March, 2016

As at 31st March, 2015

Variation

Closing rate of share at BSE

Rs.

11.05

11.64

(5.07%)

EPS (Consolidated)

Rs.

(2.83)

(5.24)

(45.99%)

Market capitalisation

Rs./lakh

9389.36

9890.69

(5.07%)

Price Earnings ratio

Ratio

(3.90)

(2.22)

75.68%

Percentage in bracket represents negative percentage.

(h) 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

The average increase in salaries of employees other than managerial personnel in 2015-16 was 3.71%. Percentage increase in the managerial remuneration for the year was NIL.

(i) Comparison of each remuneration of the Key Managerial Personnel against the performance of the Company:

Particulars

Chief

Executive

Officer

Chief

Financial

Officer

Company

Secretary

(Up to

2.1.2016)

Rs. in lakhs

Rs. in lakhs

Rs. in lakhs

Remuneration

84.25

31.35

10.91

Revenue

33699.69

33699.69

33699.69

Remuneration (as % of revenue)

0.25%

0.09%

0.03%

(j) the key parameters for any variable component of remuneration availed by the Directors:

Not applicable as Directors do not draw any remuneration except by way of sitting fees.

(k) 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 as Directors'' remuneration consists of only sitting fees.

(l) affirmation that the remuneration is as per the remuneration Policy of the Company:

The Company''s Remuneration Policy is driven by the success and performance of the individual employees and the Company. Through its compensation package, the Company endeavours to attract, retain, develop and motivate a high performance staff. The Company follows a compensation mix of fixed pay, benefits and performance based variable pay. Individual performance pay is determined by business performance and the performance of the individuals measured through the annual appraisal process. The Company affirms remuneration is as per the Remuneration Policy of the Company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:

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

DIRECTORS'' RESPONSIBILITY STATEMENT:

To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013:

i) that in the preparation of the Annual Accounts for the year ended 31st March, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

ii) that Accounting Policies have been selected and applied consistently and that judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the loss of the Company for the year ended on that date;

iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) the annual accounts have been prepared on a going concern basis;

v) that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

vi) that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

REPORT ON CORPORATE GOVERNANCE:

As required under Regulation 34(3) of Securities & Exchange of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 the report on Corporate Governance and the Auditors'' Certificate on the compliance of Corporate Governance are annexed and forms part of the Directors'' Report (Annexure "E").

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received from Central and State Government authorities, the Promoters - The Andhra Sugars Limited and APIDC, Financial Institutions, Banks, Shareholders, Customers, HPCL, GAIL and other Suppliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the employees at all levels.

On behalf of the Board Hyderabad

M R B Punja

11.8.2016 Chairman


Mar 31, 2014

Dear Shareholders,

The Directors have pleasure in presenting the Thirtieth Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2014 is summarised below:

(Rs. in Lakhs) 2013-14 2012-13 Net Sales (excl. Excise Duty) 25929.25 56276.00 Profit / (Loss) before Interest & Depreciation (1039.30) 3148.89

Less: Interest 650.16 860.16 Depreciation 1334.53 1371.63 Profit / (Loss) after Interest and Depreciation before Extraordinary Items (3023.99) 917.10 Less: Extraordinary Items (FSA charges relating to earlier years) -- 453.93 Profit / (Loss) after Extraordinary Items (3023.99) 463.17 Provision for: Current Tax -- 93.40 Deferred Tax (457.14) 151.64 MAT credit entitlement -- (93.40) Excess provision for Direct Taxes of earlier years written back -- (0.34) Profit / (Loss) after Taxation (2566.85) 311.87 Balance brought forward from previous year 10149.61 9837.74 Profit carried forward to next year 7582.76 10149.61

OPERATIONAL AND FINANCIAL PERFORMANCE:

During the Financial Year 2013-14, the Plant produced 26,460 MTs (previous year 66,564 MTs), which works out to 36% (approx.) capacity utilisation. Sales during the year were 29,157 MTs (previous year 64,407 MTs). Lower production was due to non-supply of Propylene by HPCL for revamp of Propylene Recovery Unit (PRU) in the 1st quarter to enhance Propylene production capacity that resulted in shutdown of our Plant for 58 days and a fire accident on 23rd August, 2013 in HPCL''s cooling tower that resulted in shutdown of PRU during most part of the remaining period in this year. Com- pany had incurred a net loss of Rs.25.67 crores during the current Financial Year 2013-14 against profit after tax of Rs.3.12 crores made during the previous year. This is mainly due to non-availability of Propylene for a long period result- ing in 212 days production loss.

DIVIDEND:

In view of the loss incurred during the year under report, your Directors are unable to recommend any dividend for the Financial Year 2013-14.

CAPITAL & RESERVES:

Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs.85 crores and the Paid-up Capital is Rs.84.97 crores.

Reserves:

The total Reserves position as on 31.3.2014 stood at Rs.105.19 crores against Rs.130.86 crores in the previous year.

The Andhra Petrochemicals Limited

DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed Deposits from the Public.

SAFETY, HEALTH AND ENVIRONMENT: Your Company has been awarded the 3rd Level of Award SURAKSHA PURASKAR, Bronze Trophy for 2013 (Manu- facturing sector) Group-A by the National Safety Council of India. There is no 1st Level award in this category.

Safety of human and Plant assets is the top priority of the Company. Continuous training of personnel at various levels on safety and strict compliance of regulations is ensured which resulted in one more accident-free year. Your Company has established several process measures and a number of en- vironmental control systems to contain environmental impact and ensures their close monitoring. It may be noted that your Company is always in the forefront and proactive in implementing environment protection measures.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstate- ment value basis.

LISTING:

The Equity Shares of your Company are listed on the Bombay Stock Exchange. Listing fees has been paid.

DIRECTORS:

During the year under report, Andhra Pradesh Industrial De- velopment Corporation Ltd., (APIDC) withdrew Sri S V Kanaka Seshu as its Nominee Director from the Board of the Com- pany from 13.8.2013 and in his place Sri K Rajendra Prasad has been co-opted as Additional Director on the Board of the Company with effect from 6.11.2013. Dr. Anumolu Ramakrishna ceased to be the Director of your Company w.e.f., 20.8.2013 consequent upon his sad demise. Your Di- rectors place on record their warm appreciation for the valu- able guidance rendered by Sri S V Kanaka Seshu and Dr. Anumolu Ramakrishna during their tenure as Directors of the Company.

Sri K Rajendra Prasad holds office upto the date of the ensu- ing 30th Annual General Meeting (AGM). Resolution seeking his appointment as Director is being placed for the approval of the shareholders at the ensuing 30th AGM.

In accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, Directors Sri P Narendranath Chowdary and Sri Ravi Pendyala retire by rotation at the ensuing 30th AGM and being eligible offer them- selves for reappointment.

Individual Independent Directors appointment is placed be- fore Shareholders for approval at the ensuing 30th AGM.

AUDIT COMMITTEE:

Audit Committee consists of four Non-Executive Independent Directors Sri A A Krishnan, Sri M R B Punja, Sri Surinder Kumar Kapoor and Sri Justice G Ramanujam (Retd.) (Chair- man upto 5.11.2013). Sri A A Krishnan is the Chairman of the Committee from 6.11.2013.

CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE:

As required by the provisions of the Companies Act, 2013, Board of Directors at its Meeting held on 24.5.2014 consti- tuted Corporate Social Responsibility (CSR) Committee com- prising Directors viz., Dr. B B Ramaiah, Smt. Anita Rajendra, I.A.S., and Sri A A Krishnan as its Members.

NOMINATION AND REMUNERATION COMMITTEE:

As required by the provisions of the Companies Act, 2013, Board of Directors at its Meeting held on 24.5.2014 consti- tuted Nomination and Remuneration Committee comprising

Directors viz., Sri M R B Punja, Sri Surinder Kumar Kapoor and Sri P Narendranath Chowdary as its Members.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2014. Cost Auditors'' Report in respect of Financial Year 2012-13 has been filed with the Ministry of Corporate Affairs on 19.8.2013 i.e., within the stipulated date.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORP- TION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Particulars prescribed under Section 217(1)(e) of the Com- panies Act, 1956 read with Companies (Disclosure of Par- ticulars in the Report of Board of Directors) Rules, 1988 are given in Annexure ''A'' to this Report.

PARTICULARS OF EMPLOYEES:

Statement of particulars of employees of the Company as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules, 2011 forming part of this Report is an- nexed hereto (Annexure-''B'').

DEMATERIALISATION OF SHARES:

As on 31st March, 2014 out of the total number of 8,49,71,600 Equity Shares, 7,67,79,293 Equity Shares constituting 90.36% stand dematerialised.

DIRECTORS'' RESPONSIBILITY STATEMENT:

It is hereby confirmed:

i) that in the preparation of Annual Accounts, the appli- cable Accounting Standards have been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent, so as to give a true and fair view of the State of Affairs of the Com- pany at the end of the Financial Year and of the loss of the Company for that year.

iii) that proper and sufficient care has been taken 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 ir- regularities.

iv) that the Directors had prepared the Annual Accounts on a going concern basis.

REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the report on Corporate Governance and the Auditors'' Certificate on the compliance of Corporate Governance are annexed and form part of the Directors'' Re- port (Annexure ''C'').

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received from Central and State Govern- ment authorities, the Promoters - The Andhra Sugars Lim- ited and APIDC, Financial Institutions, Banks, Sharehold- ers, Customers, HPCL, GAIL and other Suppliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the em- ployees at all levels.

On behalf of the Board Hyderabad M R B Punja 21.7.2014 Chairman


Mar 31, 2013

Dear Shareholders,

The Directors have pleasure in presenting the Twenty Ninth Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2013 is summarised below:

(Rs. in Lakhs)

2012-13 2011-12

Net Sales (excl. Excise Duty) 56276.00 59715.57

Profit before Interest & Depreciation 3148.89 7968.88

Less: Interest 860.16 1254.72

Depreciation 1371.63 2265.06

Profit / (Loss) after Interest and

Depreciation before Extraordinary Items 917.10 4449.10

Less: Extraordinary Items

(FSA charges relating to earlier years) 453.93

Profit / (Loss) after Extraordinary Items 463.17 4449.10

Provision for: Current Tax 93.40 1206.00

Deferred Tax 151.64 242.00

MAT credit entitlement (93.40)

Excess provision for Direct Taxes of earlier years written back (0.34) (0.37)

Profit / (Loss) after Taxation 311.87 3001.47

Balance brought forward from previous year 9837.74 7830.05

Profit available for appropriation 10149.61 10831.52

APPROPRIATIONS:

TransfertoGeneral Reserve 500.00

Proposed Dividend on Equity

Shares@5% 424.86

TaxonDistributable Profits 68.92

Balance carried forward to next year 10149.61 9837.74

10149.61 10831.52

OPERATIONAL AND FINANCIAL PERFORMANCE:

During the Financial Year 2012-13, the Plant achieved 91% capacity utilisation with a production of 66,564 MTs (previ- ous year 73,593 MTs). Sales during the year were 64,407 MTs (previous year 73,436 MTs). Lower production is due to non-remunerative prices for some time and shortage of Pro- pylene. Profit after tax during the current Financial Year 2012- 13 is lower at Rs.3.12 crores (previous year Rs.30.01 crores) due to increase in the prices of raw materials with no corre- sponding increase in sale prices of products, increased power cost due to 30% to 50% power cuts imposed by the APEPDCL (met from alternate sources at higher costs), charging of Fuel Surcharge Adjustment (FSA) of the Financial Years 2010-11 (from 2nd Quarter) and 2011-12 as Extraordinary Item.

DIVIDEND:

In view of the steep fall in profit during the year under report, your Directors are unable to recommend any dividend for the Financial Year 2012-13.

CAPITAL & RESERVES:

Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs.85 crores and the Paid-up Capital is Rs.84.97 crores.

Reserves:

The total Reserves position as on 31.3.2013 stood at Rs. 130.86 crores against Rs.127.74 crores in the previous year.

DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed Deposits from the Public.

SAFETY, HEALTH AND ENVIRONMENT:

Your Company has been awarded the 2nd Level of Award SHRESHTHA SURAKSHA PURASKAR Silver Trophy for 2012 (Manufacturing sector) Group-A by the National Safety Council of India. There is no 1st Level Award in this category.

Safety of Human and Plant assets is the top priority of the Company. Continuous training of personnel at various levels on safety and strict compliance of regulations is ensured which resulted in one more accident-free year. Your Company has established several process measures and a number of en- vironmental control systems to contain Environmental impact and ensures their close monitoring. It may be noted that your Company is always in the forefront and proactive in implementing environment protection measures.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstate- ment value basis.

LISTING:

The Equity Shares of your Company are listed on the Bombay Stock Exchange. Listing fees has been paid.

DIRECTORS:

During the year under report, Andhra Pradesh Industrial De- velopment Corporation Ltd., (APIDC) withdrew Sri M Venkateswara Rao and Smt. Shalini Misra, I.A.S., as its Nominee Directors from the Board of the Company from 17.8.2012 and 12.4.2013 respectively and in their place Sri S V Kanaka Seshu and Smt. Anita Rajendra, I.A.S., have been co-opted as Additional Directors on the Board of the Company with effect from 7.11.2012 and 25.5.2013 respec- tively. Your Directors place on record their warm apprecia- tion for the valuable guidance rendered by Smt. Shalini Misra, I.A.S., and Sri M Venkateswara Rao during their tenure as Directors of the Company.

Smt. Anita Rajendra, I.A.S., and Sri S V Kanaka Seshu hold office upto the date of the ensuing 29th Annual General Meet- ing (AGM). Resolutions seeking their appointment as Direc- tors are being placed for the approval of the shareholders at the ensuing 29th AGM.

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Directors Sri P Narendranath Chowdary, Sri M Thimmaraja and Sri A A Krishnan retire by rotation at the ensuing 29th AGM and be- ing eligible offer themselves for reappointment.

AUDIT COMMITTEE:

As on the date of this report, the Audit Committee consists of five Non-Executive Independent Directors Sri Justice G Ramanujam (Retd.), Sri A A Krishnan, Dr. Anumolu Ramakrishna, Sri Surinder Kumar Kapoor and Sri M R B Punja. Sri Justice G Ramanujam (Retd.) is the Chairman of the Committee. Sri M R B Punja has been inducted as mem- ber with effect from 20.7.2013.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2013. Cost Auditors'' Report in respect of Financial Year 2011-12 has been filed with the Ministry of Corporate Affairs on 24.12.2012 i.e., within the stipulated date.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORP- TION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Particulars prescribed under Section 217(1)(e) of the Com- panies Act, 1956 read with Companies (Disclosure of Par- ticulars in the Report of Board of Directors) Rules, 1988 are given in Annexure ''A'' to this Report.

PARTICULARS OF EMPLOYEES:

There is no employee of your Company drawing a remunera- tion requiring disclosure under Section 217(2A) of the Com- panies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Par- ticulars of Employees) Amendment Rules, 2011.

DEMATERIALISATION OF SHARES:

As on 31st March, 2013 out of the total number of 8,49,71,600 Equity Shares, 7,66,85,741 Equity Shares constituting 90.25% stand dematerialised.

DIRECTORS''RESPONSIBILITY STATEMENT:

It is hereby confirmed:

i) that in the preparation of Annual Accounts, the appli-

cable Accounting Standards have been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent, so as to give a true and fair view of the State of Affairs of the Com- pany at the end of the Financial Year and of the Profit of the Company for that year.

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the CompaniesAct, 1956 for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities.

iv) that the Directors had prepared the Annual Accounts on a going concern basis.

REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the report on Corporate Governance and the Auditors'' Certificate on the compliance of Corpo- rate Governance are annexed and form part of the Direc- tors'' Report (Annexure ''B'').

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and contin- ued valuable support received from Central and State Government authorities, the Promoters - The Andhra Sug- ars Limited and APIDC, Financial Institutions, Banks, Shareholders, Customers, HPCL, GAIL, and other Sup- pliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the employees at all levels, which enabled the Company to achieve a sustained growth in the operational performance during the year under review.

On behalf of the Board

Hyderabad MRBPunja

20.7.2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Twenty Eighth Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2012 is summarised below:

(Rs. in lakhs)

2011-12 2010-11

Net Sales (excl. Excise Duty) 59715.57 45659.29

Profit before Interest & Depreciation 7968.88 9159.27

Less: Interest 1254.72 1710.45

Depreciation 2265.06 2287.75

Profit / (Loss) after Interest and Depreciation 4449.10 5161.07

Provision for:

Current Tax 1206.00 1033.09

Deferred Tax 242.00 1597.72

MAT credit entitlement --- (1032.79)

Excess provision for Direct

Taxes of earlier years written back (0.37) (0.47)

Profit / (Loss) after Taxation 3001.47 3563.52

Balance brought forward from previous year 7830.05 6254.09

Profit available for appropriation 10831.52 9817.61

APPROPRIATIONS:

Transfer to General Reserve 500.00 1000.00

Proposed Dividend on

Equity Shares @5% 424.86 849.72

Tax on Distributable Profits 68.92 137.84

Balance carried forward to next year 9837.74 7830.05

10831.52 9817.61

OPERATIONAL AND FINANCIAL PERFORMANCE:

Your Directors are happy to report that during the year the Plant has operated well achieving 100% capacity utilisation by achieving a production of 73,593 MTs (previous year 57,726 MTs). Sales during the year were 73,436 MTs (previous year 57,472 MTs). This performance of higher production and sales in terms of volume and value is as a result of implementing effective measures, change in product mix and marketing strategies. Inspite of higher Gross Sales of Rs.659.75 crores, profit for the year before tax is lower at Rs.44.49 crores. The contribution on sales was lower on account of raw materials and energy price hikes, higher crude prices, depreciation of rupee, general inflation and lower international product prices consequent upon the creation of additional capacities for the product in international market during the year, which may be absorbed by growth in the sector.

DIVIDEND:

Your Directors have recommended a Dividend of 50 paise per share (@5% Dividend on 8,49,71,600 Equity Shares) for the year 2011-12 commensurate with the profit earned. The outflow towards the payment of Dividend would amount to Rs. 4,93,78,059 inclusive of Tax thereon. Dividend, if approved by the shareholders, will be paid to all the eligible shareholders.

CAPITAL & RESERVES:

Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs. 85 crores and the Paid-up Capital is Rs. 84.97 crores.

Reserves:

With the transfer of Rs. 5.00 crores to Reserves during the current year the total Reserves position as on 31.3.2012 stood at Rs. 127.74 crores.

DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed Deposits from the Public.

SAFETY, HEALTH AND ENVIRONMENT:

Safety of Human and Physical assets is the top priority of the Company. Continuous training of personnel at various levels on safety and strict compliance of regulations is ensured which resulted one more accident free year. Your Company has established several process measures and a number of Environmental control systems to contain Environmental impact and ensures their close monitoring. It may be noted that your Company is always in the forefront and proactive in implementing environment protection measures.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstatement value basis.

LISTING:

The Equity Shares of your Company are listed on The Bombay Stock Exchange. Listing fees has been paid.

DIRECTORS:

Your Directors express profound grief over the sad demise of Managing Director, Dr. Mullapudi Harischandra Prasad on 3rd September, 2011, who was instrumental in bringing the Company to the position of what it is today and place on record their warm appreciation of his commendable contribution to the growth and developement of the Company.

Board of Directors at its Meeting held on 12th November, 2011, appointed Dr. B B Ramaiah as Managing Director for a period of 5 years i.e., from 12.11.2011 to 11.11.2016. His appointment is being placed for the approval of the shareholders at the ensuing 28th Annual General Meeting.

During the year under report, APIDC withdrew Smt. Nilam Sawhney, I.A.S., as its Nominee Director from the Board of the Company from 21.4.2012. Your Directors palce on record their warm appreciation of her valuable guidance rendered during her tenure as Director of the Company. In her place Sri B R Meena,

I.A.S., Nominee Director of APIDC was co-opted as an Additional Director on the Board of the Company with effect from 19.5.2012. He holds office upto the date of the ensuing 28th Annual General Meeting. Resolution seeking his appointment as Director is being placed for the approval of Shareholders at the ensuing 28th Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Directors Sri M R B

Punja, Sri Surinder Kumar Kapoor and Dr. Anumolu Ramakrishna retire by rotation at the ensuing 28th Annual General Meeting and, being eligible, offer themselves for re- appointment.

AUDIT COMMITTEE:

With effect from 12.11.2011 Sri Surinder Kumar Kapoor, Director, has been inducted as Member of the Audit Committee. Consequent upon his induction, the Audit Committee consists of four Non-Executive Independent Directors Sri Justice G Ramanujam (Retd.), Sri A A Krishnan, Dr. Anumolu Ramakrishna and Sri Surinder Kumar Kapoor. Sri Justice G Ramanujam (Retd.) is the Chairman of the Committee.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2012. Cost Auditors' report in respect of Financial Year 2010-11 has been filed with the Ministry of Corporate Affairs on 19.8.2011, i.e., within the stipulated date of 30.9.2011.

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

Particulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure 'A' to this Report.

PARTICULARS OF EMPLOYEES:

There is no employee of your Company drawing a remuneration requiring disclosure under Section 217(2A) ofthe Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules, 2011.

DEMATERIALISATION OF SHARES:

As on 31st March, 2012 out of the total number of 8,49,71,600 Equity Shares, 7,65,39,159 Equity Shares constituting 90.08% stands dematerialised.

DIRECTORS' RESPONSIBILITY STATEMENT:

It is hereby confirmed:

i) that in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent, so as to give a true and fair view of the State of Affairs of the Company at the end of the Financial Year and of the Profit of the Company for that year.

iii) that proper and sufficient care has been taken 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.

iv) that the Directors had prepared the Annual Accounts on a going concern basis.

REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the report on Corporate Governance and the Auditors' Certificate on the compliance of Corporate Governance are annexed and form part of the Directors' Report (Annexure 'B').

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received from Central and State Government authorities, the Promoters - The Andhra Sugars Limited and APIDC, Financial Institutions, Banks, HPCL, Davy Process Technology Ltd., London, Aker Solutions Pvt. Ltd., Shareholders, Customers and Suppliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the employees at all levels, which enabled the Company to achieve a sustained growth in the operational performance during the year under review.

On behalf of the Board

Hyderabad M R B Punja

21-7-2012 Chairman


Mar 31, 2011

Dear Shareholders,

The Directors have pleasure in presenting the Twenty Seventh Annual Report of the Company together with the Audited accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2011 is summarised below:

(Rs. in lakhs)

2010-11 2009-10

Net Sales (excl. Excise Duty) 45659.29 13714.27

Profit before Interest & Depreciation 9159.27 486.74

Less: Interest 1689.54 134.93

Depreciation 2287.75 1202.81

Profit / (Loss) after Interest and Depreciation 5181.98 (851.00)

Provision for:

Current Tax (MAT) 1054.00 76.00

Deferred Tax 1597.72 (386.77)

MAT credit entitlement (1032.79) —

Excess provision for Direct

Taxes written back (0.47) (2.18)

Profit / (Loss) after Taxation 3563.52 (538.05) Balance brought forward from

previous year 6254.09 6792.14

Profit available for appropriation 9817.61 6254.09

APPROPRIATIONS:

Transfer to General Reserve 1000.00 —

Proposed Dividend on

Equity Shares @Re.1/- per share 849.72 —

Tax on Distributable Profits 137.84 —

Balance carried forward to 7830.05 6254.09

next year

9817.61 6254.09

OPERATIONAL AND FINANCIAL PERFORMANCE:

Your Directors are glad to report that the Modernisation- cum- Optimisation of the Expanded Oxo-Alcohols Plant at an actual cost of Rs.255 crores was completed within the time schedule.

Production of Oxo-Alcohols for the 11 months from 1st May, 2010 was a record 57,726 MTs and sale was 57,472 MTs during the year. Even in the first year of operation after Expansion your Company has achieved Gross Sales of Rs.504.20 crores and Profit Before Tax of Rs.51.82 crores. Overall improvement in operational and marketing performance resulted in the record performance.

DIVIDEND:

In view of the good performance your Directors are pleased to recommend a Dividend of Re.1/- per share (@10% Dividend on 8,49,71,600 Equity Shares) for the year 2010-11. The outflow towards the payment of Dividend would amount to Rs.9,87,56,118 inclusive of Tax thereon. Dividend, if approved by the shareholders, will be paid to all the eligible shareholders.

CAPITAL & RESERVES:

Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs.85 crores and the Paid-up Capital is Rs.84.97 crores.

RESERVES:

With the transfer of Rs.10 crores to General Reserve during the year 2010-11 the total Reserves position as on 31.3.2011 stood at Rs.102.66 crores.

MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY STRUCTURE AND DEVELOPMENTS: The Expanded Plant, on completion of trial runs during the month of April, 2010, commenced commercial production from 1 May, 2010. The Unit has demonstrated stabilised operations at designed capacity. The market for Oxo-Alcohols business is continuing to grow at around 8-10% per annum. The price trends of raw-materials and finished goods during the year were favourable that resulted in good earnings for the Company. Barring unforeseen circumstances, like increase in raw material prices and volatility in selling prices, the present trends, together with enhanced capacity and improved market share, are expected to result in improved performance of the Company in future.

OPPORTUNITIES AND THREATS:

Your Company's market share has increased in view of the enhanced capacity. Customers' dependence on Imports has comparatively reduced.

Lower production cost of South East Asia and Middle East companies from where bulk of the Imports are witnessed is an area of concern to your Company.

INTERNAL CONTROL SYSTEMS:

Your Company has an established effective Internal Control Systems with regard to various business areas. Internal Audit on a quarterly basis, by an external audit firm, covers detailed audit of all the activities and also the effectiveness of Internal Control Systems. Detailed audit is also carried out covering one specific area in each quarter. The Audit committee of the Board reviews the Internal Audit reports and monitors the implementation of the recommendations.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

Your Company continues to lay emphasis on good HR practices to motivate employees at all levels for retention and better performance. Necessary training is imparted periodically to keep the employees abreast with the latest technological developments in their area of operations. Industrial relations continued to be cordial throughout the year. As on 31st March, 2011 the Company has 292 employees on its rolls.

FUTURE OUTLOOK:

The enhanced production capacity and consequent increase in market share of the Company, combined with efficient and economic operation puts the Company in a better position to compete with imports, in spite of it being a small unit in comparison with the world scale capacities.

CAUTIONARY STATEMENT:

The statements describing the Company's outlook, estimates or predictions may be forward-looking statements based on certain assumptions of future events. Actual results may differ materially from those expressed or implied, since the Company's operations are influenced by external or internal factors. Your Company closely monitors all major developments likely to affect the operations and will respond to meet the potential threats and to gain from any possible opportunities.

DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed Deposits from the Public.

SAFETY, HEALTH AND ENVIRONMENT:

Your Company continues to accord top priority to Safety, Occupational Health and Environment. Pollution control systems are functioning satisfactorily and are being closely monitored to ensure that gaseous emissions and effluents discharged are within the prescribed norms. It may be noted that the year 2010-11 was accident free.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstatement value basis.

LISTING:

The Equity Shares of your Company are listed on the Bombay Stock Exchange. Listing fees has been paid.

DIRECTORS:

During the year under report, APIDC withdrew Sri Vinod Kumar Agrawal, I.A.S., as its Nominee Director from the Board of the Company from 20.8.2010. In his place Sri V Nagi Reddy, Nominee Director of APIDC, was co- opted as an Additional Director on the Board of the Company with effect from 27.9.2010. Subsequently he was withdrawn from the Board from 21.5.2011.

IDBI Bank Ltd., withdrew Sri Pradeep Kumar Keshari as its Nominee Director from the Board of the Company from 29.4.2011 and in his place Sri Anirudha Behera has been appointed as its Nominee Director from 20.5.2011.

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Directors Sri Justice G Ramanujam (Retd), Sri A A Krishnan and Dr. B B Ramaiah retire by rotation at the ensuing 27th Annual General Meeting and, being eligible, offer themselves for re-appointment.

The term of office of Dr. Mullapudi Harischandra Prasad as Managing Director expired on 30.9.2010. The Board of Directors re-appointed him as Managing Director for a period of 5 years i.e., from 1.10.2010 to 30.9.2015.

AUDIT COMMITTEE:

Audit Committee consists of four Non-Executive Independent Directors Sri Justice G Ramanujam (Retd.), Sri A A Krishnan, Dr. Anumolu Ramakrishna and Sri Pradeep Kumar Keshari (upto 28.4.2011). Sri Justice G.Ramanujam (Retd.) is the Chairman of the Committee.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2011. Cost Auditors' Report in respect of the Financial Year 2009-10 has been filed with Ministry of Corporate Affairs on 13.9.2010 i.e., within the stipulated date of 30.9.2010.

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

Particulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure 'A' to this Report.

PARTICULARS OF EMPLOYEES:

No employee is drawing a remuneration requiring disclosure under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules, 2011.

DEMATERIALISATION OF SHARES: As on 31st March, 2011 out of the total number of 8,49,71,600 Equity Shares, 5,54,86,611 Equity Shares constituting 65.30% stands dematerialised.

DIRECTORS' RESPONSIBILITY STATEMENT: It is hereby confirmed:

i) that in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent, so as to give a true and fair view of the State of Affairs of the Company at the end of the Financial Year and of the Profit of the Company for that year.

iii) that proper and sufficient care has been taken 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.

iv) that the Directors had prepared the Annual Accounts on a going concern basis.

REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the report on Corporate Governance and the Auditors' Certificate on the compliance of Corporate Governance are annexed and form part of the Directors' Report (Annexure 'B').

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received from Central and State Government authorities, the Promoters - The Andhra Sugars Limited and APIDC, Financial Institutions, Banks, HPCL, Davy Process Technology Ltd., London, Aker Solutions Pvt. Ltd., Shareholders, Customers and Suppliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the employees at all levels, which enabled the Company to achieve a sustained growth in the operational performance during the year under review.

On behalf of the Board M R B Punja Chairman

Visakhapatnam 23-5-2011


Mar 31, 2010

The Directors have pleasure in presenting the Twenty Sixth Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2010.

FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2010 is summarised below:

(Rs. in lakhs)

2009-10 2008-09

Net Sales (excl. Excise Duty) 13714.27 24493.84 Profit before Interest &

Depreciation 486.74 4008.52

Less: Interest 134.93 303.34

Depreciation 1202.81 1206.16 Profit /(Loss) after Interest and

Depreciation (851.00) 2499.02 Provision for:

Current Tax 76.00 1223.00

Deferred Tax (386.77) (343.34)

Fringe Benefit Tax - 4.12

Excess provision for Direct

Taxes written back (2.18) (2.97)

Profit / (Loss) After Taxation (538.05) 1618.21 Balance brought forward

from previous year 6792.14 5173.93

Balance of Profit carried

forward to next year 6254.09 6792.14

OPERATIONAL AND FINANCIAL PERFORMANCE:

During the Financial Year 2009-10, the Plant was shut down for 141 days in connection with the Modernisation-cum-Optimisation of the Oxo-Alcohols Plant and for trial runs. This resulted in lower turnover compared to 2008-09. The recessionary trends of 2008-09, which continued in first half of 2009-10, resulted in lower sales realisations.

Operating the Plant for part of the Financial Year and disproportionate fall in selling prices without corresponding reduction in raw material prices resulted in lower financial performance. However, the Company has implemented the Modernisation-cum-Optimisation programme well within the time frame and cost as envisaged originally. This indicates the financial leverage of your Company in the future.

DIVIDEND:

In view of loss incurred by the Company during the year under report and requirement of funds to meet the post Expansion needs (payment of installments to the Banks during the Financial Year 2010-11) your Directors considered it prudent not to recommend any dividend for the Financial Year 2009-10.

CAPITAL & RESERVES: Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs.85 crores and the Paid-up Capital is Rs.84.97 crores.

Reserves:

The total Reserves position as on 31.3.2010 stood at Rs.76.90 crores against Rs.82.28 crores in the previous year.



DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed Deposits from the Public.

SAFETY, HEALTH AND ENVIRONMENT:

Your Company continues to accord top priority to Safety, Occupational Health and Environment. Pollution control systems are functioning satisfactorily and are being closely monitored to ensure that gaseous emissions and effluents discharged are within the prescribed norms.

INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and Inventories are insured on reinstatement value basis.

LISTING:

The Equity Shares of your Company are listed on the Bombay Stock Exchange. Listing fees has been paid.

DIRECTORS:

During the year under report, Sri M. Venkateswara Rao, Nominee Director of APIDC, was co-opted as an Additional Director on the Board of the Company with effect from 22.10.2009. He holds office upto the date of the ensuing 26th Annual General Meeting. Resolution seeking his appointment as Director is being placed for the approval of Shareholders at the ensuing 26th Annual General Meeting.

Sri Surinder Kumar Kapoor was co-opted as an Additional Director on the Board of the Company with effect from 13.5.2010. He holds office upto the date of the ensuing 26th Annual General Meeting. Resolution seeking his appointment as Director is being placed for the approval of Shareholders at the ensuing 26th Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Directors Dr. Anumolu Ramakrishna, Sri P Narendranath Chowdary and Sri M. Thimmaraja retire by rotation at the ensuing 26th Annual General Meeting and, being eligible, offer themselves for re-appointment.

AUDIT COMMITTEE:

Audit Committee consists of four Non-Executive Independent Directors Sri Justice G Ramanujam (Retd.), Sri A A Krishnan, Dr. Anumolu Ramakrishna and Sri Pradeep Kumar Keshari. Sri Justice G Ramanujam (Retd.) is the Chairman of the Committee.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re- appointment.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost Auditors of the Company for the year ended 31st March, 2010.

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

Particulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure ‘A to this Report.

PARTICULARS OF EMPLOYEES:

Statement of particulars of employees of the Company as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 (as amended) forming part of this Report is annexed hereto.

DEMATERIALISATION OF SHARES:

As on 31st March, 2010 out of the total number of 8,49,71,600 Equity Shares, 5,50,89,486 Equity Shares constituting 64.83% stand dematerialised.

DIRECTORS RESPONSIBILITY STATEMENT:

It is hereby confirmed:

i) that in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent, so as to give a true and fair view of the State of Affairs of the Company at the end of the Financial Year and of the Profit of the Company for that year.

iii) that proper and sufficient care has been taken 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.

iv) that the Directors had prepared the Annual Accounts on a going concern basis.

REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the report on Corporate Governance and the Auditors Certificate on the compliance of Corporate Governance are annexed and form part of the Directors Report (Annexure C).

ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received from Central and State Government authorities, the Promoters - The Andhra Sugars Limited and APIDC, Financial Institutions, Banks, HPCL, Davy Process Technology Ltd., London, Aker Solutions Pvt. Ltd., Shareholders, Customers and Suppliers. Your Directors also wish to place on record their deep sense of appreciation of the valuable contribution made by the employees at all levels, which enabled the Company to achieve a sustained growth in the operational performance during the year under review.

On behalf of the Board Visakhapatnam M R B Punja 5-8-2010 Chairman

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