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Directors Report of Asahi Songwon Colors Ltd.

Mar 31, 2014

Dear Members,

The Directors are pleased to present their 24th Annual Report together with the Audited Financial Statement of your Company for the financial year ended 31st March, 2014.

Financial Results

The financial performance of your Company in the year under review is summarized below:

(Rs. In lac )

Particulars 2013-2014 2012-2013

Revenue from Operations (Net of Excise Duty) 30,200.99 23,216.59

Other Income 63.57 46.30

Total Income 30,264.56 23,262.89

profit for the year before Finance Costs, Depreciation, Extra 3,931.32 2,533.57 Ordinary Item and Taxation

Less: Finance Costs 626.76 489.56

profit for the year before Depreciation, Extra Ordinary Item and 3,304.56 2,044.01 Taxation

Less : Depreciation and Amortization Expenses 673.17 533.96

profit for the year before Extra Ordinary Item and Taxation 2,631.39 1,510.05

Extra Ordinary Item 227.42 -

profit for the year before Taxation 2,403.97 1,510.05

Less: Current Tax 327.06 188.60

Less: Deferred Tax 618.16 285.82

Net profit for the year 1,458.75 1,035.63

Add: Balance brought forward from previous year 4,816.20 4,433.10

Surplus available for Appropriation 6,274.95 5,468.73

Appropriation:

General Reserve 150.00 150.00

Proposed Dividend at Rs.3.50 (Previous Year Rs.3.50) per Equity 429.53 429.53 Shares

Dividend Distribution Tax 73.00 73.00

Balance Carried to Balance Sheet 5,622.42 4,816.20

Total 6,274.95 5,468.73

Dividend

Your Directors are pleased to recommend final dividend of Rs.3.50 (35.00%) per equity share on the face value of Rs.10 each subject to approval of the shareholders in the ensuing Annual General Meeting.

The final dividend, if declared as above would involve an outflow of Rs.430 lac towards dividend and Rs.73 lac towards dividend distribution tax.

During the previous financial year, the Company had paid a dividend of Rs.3.50 per equity share.

Review of Operations General

The fiscal year 2013-14 proved to be a challenging year with the Indian economy witnessing a slowdown across all sectors, particularly in the industrial sector The Indian economy had to contend with high infation, high energy prices and weakening of Rupee to an all time low. High interest rates and rising cost of raw material further slowed the growth of the economy, which also affected all manufacturing sectors including Pigments.

The performance of the Company was remarkable given that the global economy too continued to remain sluggish, affecting consumer sentiment across the countries. The fact that the Company responded with profitable growth marked by percentage increase in margins over a percentage increase in revenues, which was a result of a global shift to Asia on the one hand and the Company''s established competitive advantage on the other.

Financial Performance

During the year under review, the Company earned a total income of Rs.30,264 lac compared to Rs.23,263 lac in the previous year.

The total sales of the Company increased from Rs.23,217 lac to Rs.30,201 lac which is a hefty growth of over 30%. The profit after tax (PAT) increased by 41% from Rs.1,036 lac to Rs.1,459 lac in the previous year.

Operations

Exports

During the year, the total exports value to Rs.25,840 lac compared to Rs.19,436 lac during the previous year, showing a growth of 33%. Your Company is constantly exploring new markets to enhance the exports of its product despite stiff competition in the global market.

Capital expenditure

The Company has incurred a capital expenditure of Rs.1,740 lac in year under review compared to Rs.2,970 lac in the previous year.

Transfer to reserve

Your Company proposes to transfer Rs.150 lac (Previous Year Rs.150 lac) to the General Reserves. An amount of Rs.5,622 lac is proposed to be retained in the Statement of profit and Loss.

Scheme of Arrangement

The Board of Directors of the Company at its meeting held on 19th December, 2013 has approved a Composite Scheme of Arrangement in the nature of de-merger and transfer of CPC Green Division of Asahi Songwon Colors Limited to AksharChem (India) Limited and consequential restructure of the share capital of Asahi Songwon Colors Limited. The scheme is subject to requisite approvals, including sanction of Hon''ble High Court. The shareholders of the Company present at the Court Convened Meeting held on 1st July, 2014 and public shareholders through voting by postal ballot have approved the said scheme of arrangement with requisite majority. It is now awaiting sanction of the Court.

Management Discussions and Analysis Report

A detailed review of operations performed and future outlook of your Company and business is given in the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange(s) is presented in a separate section forming part of the Directors'' Report.

Corporate Governance

Your Company has been practicing principle of Corporate Governance over the years. As per Clause 49 of the Listing Agreement with the Stock Exchange(s) a separate section on Corporate Governance practice followed by the Company, together with a certifcate from M/s. Trushit Chokshi & Associates, Chartered Accountants, Ahmedabad, statutory auditors of the Company confirming compliance with the conditions of Corporate Governance is set out in the Annexure forming part of this report.

Directorate

Various provisions in respect of Directors contained in the Companies Act, 2013 ("the Companies Act") were notifed with effect from April 1, 2014 repealing the corresponding provisions in the Companies Act, 1956 ("the 1956 Act").

Independent Directors

As per the provisions of Section 149 of the Companies Act, 2013, independent directors shall hold office for a term up to five consecutive years on the Board of the Company, but shall be eligible for reappointment for another term up to five years. Further, Section 152 of the Companies Act, 2013 provides that the independent directors shall not be liable to retire by rotation in the Annual General Meeting ("AGM") of the Company.

Dr. Pradeep Jha and Mr. Gaurang N. Shah retire by rotation at the ensuing Annual General Meeting under the erstwhile applicable provisions of the Companies Act, 1956. Under Section 149 of the Companies Act, 2013 and Rules made there under and as per Clause 49 of the Listing Agreement, an Independent Director now shall hold office for a term of 5 (five) consecutive years on rotation. In terms of Section 149 and other applicable provisions of the Companies Act, 2013 and Rules made there under the Board of Directors of the Company has appointed Dr. Pradeep Jha and Mr. Gaurang N. Shah as Independent Directors of the Company for a term of 5 (five) consecutive years up to the conclusion of the Twenty Ninth Annual General Meeting.

Mr. H. K. Khan, Mr. R. K. Sukhdevsinhji and Mr. Arvind Goenka are Independent Directors of the Company whose period of office is liable to determination under the erstwhile applicable provisions of the Companies Act, 1956. Under Section 149 of the Companies Act, 2013 and Rules made there under, and as per Clause 49 of the Listing Agreement, an Independent Director now shall hold office for a term of 5 (five) consecutive years on rotation. In terms of Section 149 and other applicable provisions of the Companies Act, 2013 and Rules made there under the Board of Directors of the Company has appointed Mr. H. K. Khan, Mr. R. K. Sukhdevsinhji and Mr. Arvind Goenka as Independent Directors of the Company for a term of 5 (five) consecutive years up to conclusion of Twenty Ninth Annual General Meeting.

The aforesaid independent directors fulfll the conditions specified in the Companies Act, 2013 and the Rules made there under, and are independent of the management.

The Board recommend to the shareholders appointment of Dr. Pradeep Jha, Mr. Gaurang N. Shah, Mr. H. K. Khan, Mr. R. K. Sukhdevsinhji and Mr. Arvind Goenka as Independent Directors of the Company for 5 (five) consecutive years up to conclusion of Twenty Ninth Annual General Meeting.

Non-independent Directors

In terms of the provisions of Section 152 of the Companies Act, 2013, two third of the total strength of the Board (excluding Independent Directors) shall be liable to retire by rotation. One-third of such directors who are liable to retire by rotation shall retire at every Annual General Meeting. The Board of Directors of your Company at present consists of three (3) Non-Independent Directors. In light of the above referred provisions of the Companies Act, 2013, it is desirable that the period of office of Executive Directors is made liable to determination by retirement of directors by rotation. The Board of Directors of the Company has revised the terms of appointment of Mrs. Paru M. Jaykrishna, Mr. Gokul M. Jaykrishna and Mr. Munjal M. Jaykrishna. Accordingly, Mrs. Paru M. Jaykrishna, Chairperson and Managing Director of the Company, Mr. Gokul M. Jaykrishna, Joint Managing Director of the Company and Mr. Munjal M. Jaykrishna, Joint Managing Director of the Company retire by rotation. The other terms of appointment aforesaid executive directors remain the same and there is no break in their employment. The Company seeks your approval for the variation in terms of appointment of the executive directors.

Out of three Non–Independent Directors, two directors shall be liable to retire by rotation and one of them (ie.1/3rd) will retire every year starting from Annual General Meeting - 2014. Mrs. Paru M. Jaykrishna, being the longest serving director in this category, shall retire by rotation in the ensuring Annual General Meeting of the Company. Mrs. Paru M. Jaykrishna, being eligible, offers herself for reappointment as director and the Board recommends her reappointment in the ensuing Annual General Meeting.

Executive Directors

The Board of Directors has revised the remuneration of Mr. Gokul M. Jaykrishna, the Joint Managing Director of the Company.

The Company is seeking your approval for revision in terms of remuneration of Mr. Gokul M. Jaykrishna, Joint Managing Director of the Company.

Attention of the Members is invited to the relevant items in the notice of the Annual General Meeting for seeking your approval for aforesaid appointments. The information required under Clause 49 of the Listing Agreement is given in the Notice and the Explanatory Statement annexed thereto of the 24th Annual General Meeting as per Section 102 of the Companies Act, 2013.

Women Director

The composition of the Board of Directors of the Company includes a woman director viz. Mrs. Paru M. Jaykrishna. Accordingly the Company is in compliance with the requirement of Section 149(1) of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

DireCtors'' responsibility statement

In accordance with the requirement under section 217(2AA) of the Companies Act, 1956, with respect to the Directors Responsibility Statement, the Directors hereby confirm that:

(i) in the preparation of the annual accounts for the year ended 31st March, 2014, the applicable accounting standards have been followed along with proper explanations in case of material departures;

(ii) the Directors 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 31st March, 2014 and of the profit or loss of the Company for that period;

(iii) the Directors have taken proper and suffcient 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;

(iv) the Directors have prepared the annual accounts for the year ended 31st March, 2014 on a going concern basis.

Auditors And Auditors'' Report

The Statutory Auditors of the Company M/s. Trushit Chokshi & Associates, Chartered Accountants, Ahmedabad (Firm Registration No.111072W) hold office until the conclusion of the ensuing Annual General Meeting. Your Company has received intimation to the effect that the proposed reappointment, if made, would be within the prescribed limit under Section 141 of the Companies Act, 2013 and Rules made there under. Further, the appointment will have to be in terms of provisions of Section 141 of the Companies Act, 2013.

The said Auditors have confirmed their willingness to accept office if reappointed. The Board on the recommendation of the Audit Committee have proposed the reappointment of M/s. Trushit Chokshi & Associates, Chartered Accountants, Ahmedabad (Firm Registration No.111072W), Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting till the conclusion of the 27th Annual General Meeting - three years (subject to ratifcation of the appointment by the members at every Annual General Meeting held after this Annual General Meeting) at such remuneration to be decided by the Board of Directors in consultation with the said Auditors.

The notes on financial statement referred to in their Audit Report are self explanatory and do not call for any further explanation.

Cost Auditiors

The Board of Directors of the Company on the recommendation of the Audit Committee have reappointed Ms. Stuti R. Shah, Cost Accountants, as the Cost Auditors to audit the cost records maintained by your Company for the financial year 2014-15 on a remuneration of Rs.20,000/- (Rupees Twenty Thousand Only) plus service tax and out of pocket expenses at actuals. As per Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the appointment and remuneration payable to the Cost Auditors is to be ratifed by the shareholders and the same is given in the notice and explanatory statement annexed thereto of the 24th Annual General Meeting as per Section 102 of the Companies Act, 2013. The Cost Report for the year 2012-13 was fled in due time.

Fixed Deposits

The Company did not accept/renew any fixed deposits from public and no fixed deposits were outstanding or unclaimed as on March 31, 2014.

Finance And Insurance

The Company has been financed by State Bank of India for both working capital and term loans.

All the insurable interests of your Company including inventories, plant and machinery, building, stocks, vehicles, stores and spares have been adequately insured against various risks and perils.

Credit Rating

CARE has reaffirmed credit rating of "CARE A " (Single A Plus) for long term bank facility and "CARE A1 " (A One Plus) for short term bank facilities.

Listing

The Equity Shares of the Company continue to be listed on BSE Limited and National Stock Exchange of India Limited. Listing Fees for the year 2014-15 has been paid to them.

Particulars of Conservation of Energy, Technology Absorption and Foreign exchange Earnings and outgo The information pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given as per Annexure – A forming part of this Report.

Particulars of employees

The particulars of employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended is attached herewith as per Annexure "B" forming part of this Report.

Human Resources and Industrial Relations

Overall industrial relations of the Company during the year were harmonious and cordial.Your Directors wish to place on record their sincere appreciation for the devoted services of all the employees and workers of the Company.

Environment, Health and Safety

Your Company continues to give greater importance to health and safety of its employees and its neighborhood. Safety and environmental standards are periodically reviewed and upgraded. The Company preserves in its efforts to educate safe and environmentally accountable behavior in every employee, as well as its vendors.

The solid waste generated at the Works, after treatment of its liquid effuent is shifted to a Gujarat Pollution Control Board (GPCB) approved site.

The Company has maintained a greenbelt around its sites as a part of its commitment to environment management.

The Company continues to demonstrate its commitment to a clean and safe environment. The state of the art effuent treatment plant continues to run satisfactorily, so that the treated waste-water discharged is well within the stipulated norms set by GPCB. As a part of water conservation efforts, the Company has implemented suitable engineering solutions to utilize recycled water as much as possible in cleaning, gardening and other utilities.

Your Company has ISO 14001:2004 certification of both of its Units and ISO 9001-2008 for quality management system.

Green initiative

Your Directors would like to bring to your notice that the Ministry of Corporate Affairs (MCA) has taken a "Green Initiative in Corporate Governance" allowing paperless compliance by Companies through electronic mode and the Companies are now permitted to send various notices/documents (including annual report) to its shareholders through electronic mode at the registered e-mail addresses of shareholders.

To support this green initiative, we hereby once again appeal to all members who have not registered their e-mail addresses so far are required to register their e-mail addresses, in respect of electronic holdings with their concerned Depository Participant and in respect of shares held in physical form with Registrar and Share Transfer Agents of the Company.

Appreciation And Acknowledgements

Your Directors would like to express their appreciation for the assistance and cooperation received from the Government of India, Government of Gujarat, Electricity supply companies and Bankers during the year under review.

The Company is thankful to the shareholders for reposing trust in the Company and their unfinching enthusiasm and patronage.

For and on behalf of the Board of Directors

Place: Ahmedabad MRS. P Arun. Jaykrishna Date: August 12, 2014 Chairperson and Managing Director (DIN No. 00671721)

Registered office :

167-168, Village Indrad

Kadi – Kalol Road, Dist : Mehsana

Gujarat – 382 715 (India)

CIN: L24222GJ1990PLC014789

 
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