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Directors Report of Clariant Chemicals (India) Ltd.

Dec 31, 2014

Dear Members,

The Directors are pleased to present the 58th annual report and audited statement of accounts for the year ended December 31, 2014. As per clarification provided by the Ministry of Corporate Affairs vide Circular No. 08/2014 dated 4th April, 2014 the financial statements and the documents required to be attached thereto, the auditor''s and directors'' report in respect of the financial year under reference shall continue to be governed by the relevant provisions of the Companies Act, 1956, schedules and rules made there under.

Financial Performance

The financial performance of the Company for the year ended December 31, 2014 is summarized below:

RS. in Lakhs

2014 2013

Sales (Gross- including excise duty) 1,082,48.16 1,290,00.62

Net sales 1,008,20.49 1,213,20.25

Profit before exceptional items & tax 3,82.75 113,53.18

Add : Exceptional items 1,183,58.50 112,24.63

Profit before tax 1,187,41.25 225,77.81

Less: Tax expenses (incl. deferred tax ) 244,09.70 59,00.97

Profit after tax 943,31.55 166,76.84

Add: Balance brought forward from 188,42.04 132,26.44 previous year

Amount available for appropriation 1,131,73.59 299,03.28

Appropriations :

General reserve 9433.16 16,67.68

Interim dividend 103,97.69 26,66.07

Proposed dividend (final) - 53,32.15

Tax on dividend (interim, final proposed 17,67.09 13,95.34 & incl. previous period)

Balance carried forward to balance sheet 91,575.65 188,42.04

Review of operations

2014 was the year of transformation for the Company. The year witnessed major events in the form of sale of leather service business, acquisition of masterbatches business, shifting of registered office and sale of Kolshet site. In spite of revenue loss arising out of sale of textile, paper and emulsion business effective from October 1, 2013 and leather service business effective from May 1, 2014, the Company has been able to grow significantly in continued businesses. Despite negative business sentiments, high inflation and depreciation of Indian currency against major currencies during first half of the year, the Company has been able to minimize the revenue loss. Thanks to the acquisition of masterbatches business which provided support in recouping the revenue loss and improved Company''s market place for this business, sustained drive by marketing, resulted into record sales growth throughout the year. The performance in terms of net profit was affected by higher raw material prices and associated costs of restructuring the business.

The Company registered sales of RS. 1,008.20 crores as compared to RS. 1,213.20 crores, negative growth of 16.9% in sales. Out of the total sales revenue of the Company for the year, 26% is contributed by exports. After considering the impact of sale of Textile, Paper and Emulsion business (TPE business) effective from October 1, 2013, and sale of leather services business effective from May 1, 2014, the growth in sales on like to like basis was a record 43.6% over the previous year. The increased cost of raw materials and inflationary rise in other expenses resulted into lowering of PBDIT margin before exceptional items from 11.4% to 3.8%. Exceptional items for the current year mainly represent profit from sale of leather business (net of transfer of assets and other liabilities) RS. 104.09 crores and profit from sale of Kolshet site RS. 1085.48 crores. Exceptional item for previous year mainly represents sale of TPE business. Considering the exceptional items, the net profit after provision for tax is significantly higher over the previous year. The Company remains focused to improve its core business and look for higher market share in the business segments in which it operates.

Dividend

During the year, your Directors had declared an interim dividend of RS. 39/- per share (390%) for Financial year 2014 and the same was paid in August 2014 as compared to RS.30.00 per share (300%) paid for the previous Financial year. The dividend together with tax thereon for the year entails cash outflow of RS. 121.65 crores (previous year RS. 93.57crores) and pay out of 12.9 % of the net profits for the year. Based on the exceptional income arising from the sale of Kolshet land, the interim dividend of RS. 140/- per share for the Financial year 2015 was declared and paid in January 2015. The interim dividend together with tax thereon for the year entails cash outflow of RS. 447.88 crores and pay out of 41.3 % of the net profits from sale of Kolshet site.

The two interim dividends paid for FY 2014 and FY 2015 together amounts to RS. 179 per share (1790%). The Board of Directors do not recommend final dividend for 2014.

Sale of Leather Service Business

In accordance with the approval of shareholders granted pursuant to provisions of Section 293(1) (a) of the Companies Act, 1956 and as per value of business arrived at by M/s. Ernst & Young LLP, considered and approved by the Board, the Company executed Business Transfer Agreement with Stahl India Pvt. Ltd. and sold its Leather service business as going concern on slump sales basis for a total consideration of RS. 156 crores, on May 1, 2014. The profit arising from the sale of business, net of assets and liabilities transferred to Stahl India Pvt. Ltd. and after considering the provisions for various expenses incurred or to be incurred for transfer the business as going concern, the net profit of RS. 104.09 crores has been included in the exceptional income for the year.

Acquisition of M/s. Plastichemix Industries

In terms of agreement signed between the Company and M/s. Plastichemix Industries, a partnership firm owned by Sheth family, the Company acquired the business of Masterbatches including manufacturing facilities set up at Nandesari, Rania and Kalol in Gujarat as going concern effective from April 10, 2014 for an aggregate consideration of RS. 131 crores, net of adjustment.The acquisition helped the Company in improving its sales and improving market share in the business of Masterbatches.

Sale of Kolshet Site

In accordance with approval granted by the shareholders pursuant to provision of Section 293(1)(a) of the Companies Act, 1956, the Company executed agreement for sale of about 87 acres of land together with the buildings and structures standing thereon situated at Kolshet, Balkum and Dhokali village of Thane with M/s. Ishwar Realty and Technologies Pvt. Ltd. (a subsidiary of Lodha Developers Private Limited). As per terms of the agreement, on receipt of total consideration of RS. 1102.25 crores, the transaction was concluded and the possession of the land was handed over to the buyers as of December 31, 2014.

Relocation to New office

The Company has leased out about 142,000 sq. ft. of office space in Reliable Tech Park, Airoli, Navi Mumbai for a term of 20 years from M/s. Reliable Exports. All offices and laboratories were moved out of Kolshet and relocated to the new premises on July 1, 2014 and October 1, 2014 respectively. A sum of RS. 65 crores was incurred in creating facilities at new office.

Registered Office

In view of change in office location, the registered office of the Company shifted from Sandoz baug, Kolshet Road, Thane to Reliable Tech Park, Airoli, Navi Mumbai effective from July 1, 2014.

Fixed Deposits

The Company did not accept any fixed deposit during the year under review. There were no overdue or unclaimed deposits outstanding as on December 31, 2014.

Corporate Governance, Management Discussion and Analysis

The Company is committed to compliance standards, ensuring checks and balances between the Board and Management, as well as a sustainable approach to create value for all stakeholders. As stipulated under clause 49 of the listing agreement, report on corporate governance, management discussion and analysis as well as auditor''s certificate confirming the compliance with the conditions of corporate governance are attached herewith and forms part of this annual report.

Particulars of Employees

As per provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, Boards'' report shall include a statement providing the particulars of employees who are in receipt of remuneration as prescribed under the Section. However, pursuant to provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts are being sent to members excluding the statement of particulars of employees. Any member interested in obtaining a copy of this statement, may write to Company Secretary at the registered office of the Company.

Directors

During the year, Mr. R. A. Shah resigned as member of the Board effective from September 30, 2014. The Board considered and appointed Mr. Bharat V. Patel as Director and Chairman of the Company. The Board of Directors wishes to place on record its sincere appreciation for the valuable services rendered by Mr. Shah since formation of Clariant in India as Director and Chairman of the Company. During the year, Mr. Viktor Bernhardt was appointed as Director to fill up the casual vacancy caused by resignation of Mr. Philipp Hammel who resigned as Director effective from February 26, 2014. Mr. Viktor Bernhardt resigned from the Directorship of the Company effective from February 12, 2015, Mr. Mario Brocchi was appointed as Director to fill up the casual vacancy caused by the resignation of Mr. Viktor Bernhardt with effect from February 12, 2015. The Board of Directors places on record its sincere appreciation for the contribution and valuable service rendered by Mr. Philipp Hammel and Mr. Viktor Bernhardt during their tenure.

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Mario Brocchi retire by rotation at the forthcoming Annual General Meeting, since the Director in place of whom he is appointed in the casual vacancy, would have retired if he had not vacated the office. Being eligible, he offers himself for re-appointment.

Pursuant to Companies Act, 2013 and Clause 49 of the Listing Agreement, Mr. Y. H. Malegam, Dr. (Mrs.) Indu Shahani and Mr. Bharat V. Patel are proposed to be re-appointed as Independent Directors for a period of 4 years from April 1, 2015 and they shall not be liable to retire by rotation. In the opinion of the Board of Directors, these Directors are independent of management and they fulfilled the conditions specified in the Companies Act and the Rules made thereunder. The above appointments and re-appointments form part of the Notice of the 58th Annual General Meeting and the respective Resolutions are recommended for your approval.

As per provisions of Section 198 read with Section 309 of the Companies Act, 1956, the remuneration payable to an individual managing or whole time director shall not exceed individually 5% and collectively 10%. However, the managerial remuneration paid to Vice-Chairman & Managing Director and Executive Director -Finance & Company Secretary of the Company for the Financial year 2014 was approved by shareholders at the Annual General Meeting held on May 6, 2014, pursuant to provisions of Section 198, 269, 309, 310 read with other applicable provisions and schedule XIII of the Companies Act, 1956 and the same was approved as minimum remuneration, ifthe Company has no profits or profits are inadequate. In view of circular no. 46 dated July 14, 2011, approval of the Central Government is not required for payment of managerial remuneration, if the managerial person is not having any interest in the capital of the Company or its holding company, directly or through any other statutory body etc.

Pursuant to provisions of Section 197(1) of Companies Act, 2013, which is applicable effective from April, 1, 2014, total managerial remuneration payable by the Company to its directors, including managing director and whole time directors shall not exceed 11% of the net profits of the Company for the financial year, computed in accordance with provisions of Section 198 of the Act, provided that the Company in general meeting may, with the approval of Central Government, authorise the payment of remuneration exceeding 11 percent of the net profits of the Company. Considering the business projections for 2015, the management feels that as an abundant caution, the Company may seek approval of Central Government for payment of remuneration to Dr. Deepak Parikh, Vice-Chairman and Managing Director and Mr. B. L. Gaggar, Executive Director-Finance & Company Secretary for the Financial year 2015, which may exceed the limits prescribed under Section 197 read with Schedule V of the Companies Act, 2013 and for waiver of remuneration payable / paid in excess, if any.

The Board commends the passing of resolution for payment of remuneration to managing director and executive director.

Profiles of the directors proposed for reappointment, as required under Clause 49 of the Listing Agreement, are given in the Notice of the 58th Annual General Meeting.

Directors'' Responsibility Statement

In terms of Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that-

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and have provided proper explanation relating to material departures;

(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 at December 31, 2014 and of the profit of the Company for 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. Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo Information pursuant to 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, is annexed hereto and forms part of the report.

Auditors

M/s. Price Waterhouse LLP, Chartered Accountants (Firm Regn. No 012754N/ N500016), retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Cost Audit

The Board of Directors, in pursuance of order under Section 233B (2) of the Companies Act, 1956, appointed M/s. Nalin I. Mehta, Cost Accountants, as cost auditors of the Company to carry out the audit of the cost accounts relating to organic and inorganic chemicals of the Company for the Financial year 2015, subject to approval of Central Government, if any. The cost audit report for the Financial year 2013 has been filed on due date.

Secretarial Audit

Pursuant to provisions of Section 204 of the Companies Act, 2013, the Board appointed Mr. Jagdish Ahuja, Practising Company Secretary, as Secretarial Auditor to carry out the secretarial audit for the Financial year 2014. Since the provisions relating to the disclosures are not applicable for the year under review, the secretarial audit report is not enclosed to the Boards'' report for the year ended December 31, 2014.

Acknowledgement

The Board of Directors wish to place on record its sincere appreciation for the support received from its stakeholders including shareholders, bankers, distributors, suppliers and business associates. The Directors recognize and appreciate the sincere and hard work, loyalty, dedicated efforts and contribution of all the employees that ensured sustained performance in a challenging business environment.

The Directors also express their appreciation of the assistance and unstinted support received from Clariant group companies.

For and on behalf of the Board of Directors Bharat V. Patel Mumbai, February 12, 2015 Chairman


Dec 31, 2013

The Directors are pleased to present the 57th annual report and audited statement of accounts for the year ended December 31, 2013.

Financial Results

The financial performance of the Company for the year ended December 31, 2013 is summarized below:

Rs. Lakhs

2013 2012

Sales (Gross- including excise duty) 1,290,00.62 1,145,99.32

Net sales 1,213,20.25 1,071,22.57

Profit before exceptional items & tax 113,53.18 133,11.00

Add : Exceptional items 112,24.63 9,20.47

Profit before tax 225,77.81 142,31.47

Less: Tax expenses (incl. deferred tax ) 59,00.97 41,01.43

Profit after tax 166,76.84 101,30.04

Add: Balance brought forward from 132,26.44 126,30.48 previous year

Amount available for appropriation 299,03.28 227,60.52

Appropriations :

General reserve 16,67.68 10,13.00

Interim dividend 26,66.07 26,66.07

Proposed dividend (final) 53,32.15 46,65.63

Tax on dividend (interim, final proposed & incl. previous period) 13,95.34 11,89.38

Balance carried forward to balance sheet 188,42.04 132,26.44

Review of operations

The Company has registered a record performance over previous year, despite challenging macro economic conditions, high inflation, depreciation of Indian currency against major currencies and negative business sentiments prevailing throughout the year and across the industry. Thanks to the sustained drive and team work of the entire organisation, performance remained high on agenda. This resulted into unprecedented record sales growth throughout the year. The performance in terms of net working capital was affected by higher inventory and the profitability impacted by inflation led cost push in most of the operating areas.

The Company registered sales of Rs. 1,213.20 crores as compared to Rs. 1,071.23 crores, growth of 13.3 percent sales. Considering the impact of sale of textile, paper and emulsion business (TPE business) efective from September 30, 2013, growth in sales on like to like basis was a record 25.3 percent over previous year. Out of the total sales revenue of the Company for the year, 23.3 percent is contributed by exports. The increased cost of raw materials and inflationary rise in other expenses resulted into lowering of PBDIT margin before exceptional items from 14.6 percent to 11.4 percent. Exceptional item represents profit from sale of TPE business (net of transfer of assets and other liabilities). Net profit after accounting for exceptional items and tax is significantly higher over the previous year. The Company remains focused to improve its core business and look for higher market share in the business segments in which it operates.

Dividend

During the year, your Directors had declared an interim dividend of Rs. 10/- per share (100%) and the same was paid in August 2013. Based on the performance for the year and the exceptional income arising from the sale of TPE business, the Board of Directors is pleased to recommend a final dividend of Rs. 20/- per share (200%).

The total dividend for the year under review amounts to Rs. 30/- per share (300%) as compared to Rs. 27.5 per share (275%) paid for the previous year. The dividend together with tax thereon for the year entails cash out flow of Rs. 93,57.52 lakhs (previous year Rs. 85,57.12 lakhs) and pay out of 56% of the net profit for the year.

Sale of Businesses

In accordance with the approval of shareholders granted pursuant to provisions of section 293(1)(a) of the Companies Act, 1956, the Company has executed agreement with Archroma India Pvt. Ltd. and sold its TPE business as going concern on slump sales basis for a total consideration of Rs. 209.15 crores, on September 30, 2013. The profit arising from the sale of business, net of assets and liabilities transferred to Archroma India Pvt. Ltd. and after considering the provisions for various expenses incurred or to be incurred to transfer the business as going concern, the net profit of Rs. 114.45 crores has been included in the exceptional income for the year.

Pending receipt of certain licenses and approvals in the name of Archroma, the Company had entered into business continuation agreement with Archroma to run the business in its name for and on behalf of Archroma till the last of the permission and approval is received. On receipt of the last permission, the business continuation agreement was terminated on 31st January, 2014.

Sale of Leather Service Business:

Considering its long-term strategy and overall objective to serve markets with future perspective and strong growth rates, Clariant decided to sell its leather services business and thereby reposition its portfolio. The company intends to sell the leather services business together with the assets and liabilities pertaining to this business as going concern on slump sale basis to M/s. Stahl India Private Limited, an affiliate of Stahl Holdings B.V. Group for a consideration of Rs. 156 crores, subject to adjustment, if any, as of the effective date. The consideration so received by the Company (net of tax) will be used for furtherance of the Company''s business.

The company has production facilities for manufacture of leather dyes and chemicals located at Kanchipuram in Tamilnadu. The sale of business include transfer of all assets including land, buildings, plant and other assets located at Kanchipuram, the laboratories and relevant ofce set-up located at Ranipet, Kolkata and Kanpur, employees related to productions, sales & marketing and service functions engaged for leather service business.

The leather service business contributed about 20.9% of the net sales of the Company for the year. The decision to sell the business as going concern at a value arrived at by M/s. Ernst & Young LLP was considered by the Board and was approved by the Shareholders pursuant to section 293(1)(a) of the Companies Act. The Directors would like to assure that given the present market conditions prevailing for the business under sale, the decision will be in the best interest of the Company and its shareholders.

Sale of Kolshet Land:

With a view to unlock the value of the real estate, the Company decided to sale its land measuring about 87 acres located at Kolshet, Thane. In accordance with approval granted by the shareholders pursuant to provision of section 293(1)(a) of the Companies Act, 1956, the Company is in process to complete the sale of land. The shareholders will be appropriately informed once the agreement is concluded with the interested buyer.

Acquisition of M/s. Plastichemix Industries:

In order to deploy the surplus funds for business opportunities, the Company considered it appropriate to increase its foothold in growing business of masterbatches and thus executed an agreement to acquire business currently run by M/s. Plastichemix Industries, a partnership frm owned by Sheth family. M/s. Plastichemix Industries has set up manufacturing operations at Nandesari, Rania and Kalol in Gujarat. In terms of agreement signed between the Company and M/s. Plastichemix Industries, upon closure of the certain events and on closing of accounts, the Company expects to acquire the business as going concern and on slump sale basis effective from April 1, 2014. M/s. Ernst & Young LLP has carried out the due diligence and also provided valuation report. The consideration agreed to be paid to M/s. Plastichemix Industries amounting to Rs. 135 crores, subject to adjustment if any, is negotiated and arrived at after considering the strategic benefits expected to be realised by the Company from the acquisition.

Relocation to New office:

In order to monetise the value of the Kolshet real estate, the Company decided to relocate its operations hitherto carried out at Kolshet to a new location. The Company has leased out about 142,000 sq. ft. of space for relocating its offices and laboratories currently located at Kolshet to Reliable Tech Park, Airoli, Navi Mumbai. The new location is expected to be ready for occupation effective from June, 2014.

The manufacturing operations for masterbatches has been relocated from Kolshet, Thane to Renaissance Warehouse Park situated at village Vashere, Taluka Bhiwandi, District Thane and the relocated facility has started the production in December 2013.

Registered Office:

In view of shifting of its offices from Kolshet to Airoli, the Company is proposing to relocate its registered office from Sandoz baug, Kolshet Road, Thane to Reliable Tech Park, Airoli, Navi Mumbai.

Fixed Deposits

The Company did not accept any fixed deposit during the year under review. There were no overdue or unclaimed deposits outstanding as on December 31, 2013.

Corporate Governance, Management Discussion and Analysis

The Company is committed to compliance standards, ensuring checks and balances between the Board and Management, as well as a sustainable approach to create value for all stakeholders. As stipulated under clause 49 of the listing agreement, report on corporate governance, management discussion and analysis as well as auditor''s certificate confrming the compliance with the conditions of corporate governance are attached herewith and forms part of this annual report.

Particulars of Employees

As per provisions of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, Board''s report shall include a statement providing the particulars of employees who are in receipt of remuneration as prescribed under the section. However, pursuant to provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts are being sent to members excluding the statement of particulars of employees. Any member interested in obtaining a copy of this statement, may write to the Company Secretary at the registered ofce of the Company.

Directors

During the year, Mr. Bansi S. Mehta, Diwan Arun Nanda and Dr. H. Schloemer resigned as members of the Board. The Board considered and appointed Mr. Y. H. Malegam, Dr. (Mrs.) Indu R. Shahani and Mr. Karl H. Dierssen to fill up the casual vacancies caused by resignations. The Board of Directors wishes to place on record its appreciation for the valuable services rendered by Mr. Mehta, Diwan Nanda and Dr. Schloemer during their tenure as directors of the Company. The Board considered and appointed Mr. B.L. Gaggar as Executive Director of the Company effective from July 16, 2013. The appointment of Mr. Gaggar and terms thereof is subject to approval of members and are set out in the notice convening annual general meeting.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. A. Muench retires by rotation at the forthcoming Annual General Meeting, and being eligible, ofers himself for re-appointment.

Details of the directors seeking re-appointment as required under clause 49 of the listing agreements with the stock exchanges are provided in the report on Corporate Governance forming part of the annual report.

Directors'' Responsibility Statement

In terms of section 217 (2AA) of the Companies Act, 1956 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 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 at December 31, 2013 and of the profit of the Company for that year;

(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.

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo Information pursuant to 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, is annexed hereto and forms part of the report.

Auditors

M/s. Price water house Coopers (PwC) are the statutory auditors of Clariant Group. With a view to have common auditors, it was proposed to consider the appointment of M/s. Price Waterhouse, Indian affiliate of PwC as statutory auditors of the Company. The Board considered the proposal and proposes the appointment of M/s. Price Waterhouse as statutory auditors in place of the retiring auditors, M/s. Deloitte Haskins & Sells, who being eligible, offer themselves for re-appointment.

Cost Audit

The Board of Directors, in pursuance of order under section 233B(2) of the Companies Act, 1956, appointed M/s. Nalin I. Mehta, Cost Accountants, as cost auditors of the Company to carry out the audit of the cost accounts relating to organic and inorganic chemicals of the Company for the financial year 2014, subject to approval of Central Government, if any. The cost audit report for the financial year 2012 has been fled on due date.

Acknowledgement

The Board of Directors wish to place on record its sincere appreciation for the support received from its stakeholders including shareholders, bankers, distributors, suppliers and business associates. The Directors recognize and appreciate the sincere and hard work, loyalty, dedicated efforts and contribution of all the employees that ensured sustained performance in a challenging business environment.

The Directors also express their appreciation of the assistance and unstinted support received from Clariant group companies.

For and on behalf of the Board of Directors,

R. A. Shah

Mumbai, February 26, 2014 Chairman


Dec 31, 2012

The Directors are pleased to present the 56th annual report and audited statement of accounts for the year ended December 31,2012.

Financial Results

The financial performance of the Company for the year ended December 31, 2012 is summarized below:

Rs. Lakhs

2012 2011

Sales (Gross- including excise duty) 1145,99.32 1015,85.85

Net sales 1071,22.57 956,08.12

Profit before exceptional items & tax 133,11.00 154,07.71

Add: Exceptional items 9,20.47 241,33.20

Profit before tax 142,31.47 395,40.91

Less: Tax expenses (incl. deferred tax) 41,01.43 91,37.01

Profit after tax 101,30.04 304,03.90

Add : Balance brought forward from previous year 126,30.48 38,37.85

Amount available for appropriation 227,60.52 342,41.75

Appropriations:

General reserve 10,13.00 30,40.39

Interim dividend 26,66.07 79,98.22

Proposed dividend (final) 46,65.63 79,98.22

Tax on dividend (interim, final proposed & incl. previous period) 11,89.38 25,74.44

Balance carried forward to balance sheet 132,26.44 126,30.48

Review of operations

The business sentiments, confronted with the challenges of market conditions and slowdown in global demand, remained extremely challenging and the recessionary economic conditions led initial slowdown in sales growth. Thanks to the sustained efforts of the marketing team, improved marketing performance of the second half resulted into record sales and growth. The performance in terms of net working capital was affected by built-up of inventory and the profitability is significantly impacted by inflation led cost push in most of the operating areas. Directors are pleased to inform that in spite of challenging conditions, your Company has registered best ever performance in terms of sales growth over previous year.

The Company registered sales ofRs. 1071.23 crores as compared to Rs. 956.08 crores registering a record growth of 12.0 percent sales. Out of the total sales revenue of the Company for the year, 25.3 percent is contributed by exports. The increased cost of raw materials and inflationary rise in other expenses resulted into lowering of PBDIT margin before exceptional items from 17.7 percent to 14.6 percent. Net profit after accounting for exceptional items and tax is lower over the previous year. The Company remains focused to improve its core business and look for higher market share in the business segments in which it operates.

In view of prolonged litigation, the Company could not implement its project for manufacturing of Masterbatches at Ambernath, the site acquired by the Company in 2008 from MIDC.

Dividend

During the year, your Directors had declared an interim dividend of Rs. 10/- per share (100%) and the same was paid in August 2012. Based on the performance for the year and the policy for distribution of profits to the shareholders adopted by the Company, the Board of Directors is pleased to recommend a final dividend ofRs. 17.5/- per share (175%).

The total dividend for the year under review amounts to Rs. 27.5/- per share (275%) as compared to Rs. 60/- per share (600%) paid for the previous year, including special dividend attributable to exceptional income. The dividend together with tax thereon for the year entails cash out flow of Rs. 85,31.08 Lakhs (previous year Rs. 185,91.46 Lakhs) and pay out of 84% of the net profit for the year.

Sale of Businesses

Clariant AG Switzerland, the ultimate Holding Company has announced that USA based SK Capital has agreed to purchase the business units textile chemicals, paper specialties and business line emulsions from Clariant and that this will include the transfer of the whole R&D, applications, sales and marketing organisation along with production plants and sites worldwide.

Clariant Chemicals (India) Ltd. has production facilities for manufacture of textile chemicals and produces paper specialties and emulsion products at its Roha plant. The textile chemicals, paper specialties and emulsion businesses, included in dyes and specialty chemicals segment, together contribute about 35% of the net sales of the Company. The decision to sell the businesses including a manufacturing plant for textile products situated at Roha and other assets dedicated to the businesses under divestment, at a value to be arrived at by the professional valuers, will be considered by the Board and approval of shareholders will be sought at appropriate time in accordance with the requirements of the Companies Act, 1956. The Directors would like to assure its shareholders that given the present market conditions prevailing for the businesses under sale, the decision will be in the best interest of the Company and its shareholders.

Fixed Deposits

The Company did not accept any fixed deposits during the year under review. There were no overdue or unclaimed deposits outstanding as on December 31, 2012.

Management Discussion and Analysis Report

In accordance with Clause 49 of the listing agreements, the Management Discussion & Analysis Report forms a part of this report.

Corporate Governance

The Company has always strived to maintain applicable standards of good corporate governance and the commitment to good corporate governance is embodied in its vision, mission and corporate values. The Company aims to be the leader in specialty chemicals, adopting functional excellence as part of its culture and its corporate values to foster a shared and common set of behaviors amongst all the employees, to help Clariant to realise its goal of sustainable value creation. The report on corporate governance as stipulated under Clause 49 of the listing agreements forms part of this report. The requisite certificate from the auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under the said clause is attached to this report.

Particulars of Employees

The particulars of employees required to be furnished under section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, forms part of this report. However, as per provisions of section 219 (1) (b) (iv) of the Companies Act, 1956, the report and accounts are being sent to all the shareholders, excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy of this statement, may write to the Company Secretary at the registered office of the Company.

Directors

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Diwan A. Nanda and Dr. H. Schloemer will retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-appointment. The Directors recommend their re-appointment.

Details of the Directors seeking re-appointment are provided in the Corporate Governance Report forming part of this report, as required under Clause 49 of the listing agreements with the stock exchanges.

Directors'' Responsibility Statement

In terms of section 217 (2AA) of the Companies Act, 1956 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 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 at December 31, 2012 and of the profit of the Company for that year;

(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;

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

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

Information pursuant to section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is annexed hereto and forms part of the report.

Auditors

M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Cost Audit

The Board of Directors, in pursuance of an order under section 233B(2) of the Companies Act, 1956, appointed M/s. R. Nanabhoy & Co., Cost Accountants, as cost auditors of the Company to carry out the audit of the cost accounts relating to dyes and pigments of the Company for the financial year 2013.

Acknowledgement

The Board of Directors wish to place on record its sincere appreciation for the support received from its stakeholders including shareholders, bankers, distributors, suppliers and business associates. The Directors recognize and appreciate the sincere and hard work, loyalty, dedicated efforts and contribution of all the employees that ensured sustained performance in a challenging business environment.

The Directors also express their appreciation of the assistance and unstinted support received from Clariant group companies.

For and on behalf of the Board of Directors

R. A. Shah

Mumbai, February 28, 2013 Chairman

 
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