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Directors Report of DCM Shriram Industries Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting the Annual Report and the Audited Financial Statements of your Company for the year ended 31st March, 2015.

From the start of 2014-15 the economy, which was languishing in the previous years, moved to a growth path on the back of falling inflation and an upward trend in the manufacturing and service sectors. The economy received further fillip with the positive signals with regard to progressive reforms in areas of infrastructure development, unblocking of coal mines, allocation of telecom spectrum, deregulation of diesel prices and promises of an ambitious 'make in India' campaign. The external economic scenario turned more benign with falling crude oil prices which resulted in reduced import bills and reduced pressure on the current account of the Country. With control on inflation, which was moving up by leaps and bounds earlier, there was hope of a lower interest rate regime, to aid faster growth. This aspect is yet to crystallize up to the expectations. With anticipation of GDP growth of over 7% during the current financial year, which projection has been echoed by domestic and international agencies, one hopes that the stage is set for a turnaround in the overall economic scenario.

As for your Company's operations, segments other than sugar performed well. As far as the sugar business is concerned, during the year under review, the problems faced by the industry in the year

2013- 14 turned more acute, making further long term reforms and the need for short term relief measures even more urgent.

Financial Summary

In spite of the continued adversity in the sugar business, which is the core business of the Company, the Company achieved a turnover of Rs.1305 cr. against Rs.1329 cr. in the previous year. There was a gross profit of Rs. 29.9 cr. as compared to Rs. 67.9 cr. in the previous year and net profit of Rs. 4.4 cr. as compared to Rs. 29 cr. in the previous year.

Appropriation and Dividend

The Board of Directors is pleased to recommend a dividend of Re.1 per equity share of Rs.10 (10%) for the year ended 31.3.2015. The dividend payout for the year under review, inclusive of corporate tax on dividend distribution, is Rs. 2.09 cr.

After provision for proposed dividend, out of Rs.117.63 cr. in the Profit & Loss Account, including Rs.115.34 cr. brought forward from the previous year and on adjustment of (-) Rs. 5.56 cr. towards carrying value of fixed assets (net of deferred tax), Rs.100 cr. was transferred to General Reserve (Rs. 3 cr. in the previous year) leaving a balance of Rs.12.06 cr. in the Profit & Loss Account.

Auditors' Report

There are no qualifications, reservation, or adverse remarks or disclaimer in the Auditors Report to the members on the Annual Financial Statements for the year ended 31.3.2015.

Secretarial Audit Report

M/s. Chandrasekaran Associates, Company Secretaries, carried out a Secretarial Audit for the year 2014- 15 pursuant to Section 204 of the Companies Act, 2013 (the Act). A copy of their Report in Form MR-3 as per Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure - 1.

There are no qualifications in the Report. Regarding their observation with regard to deposits, the Company is repaying the deposits accepted prior to 1.4.2014 on the respective due dates, which in terms of the Explanation appended to Rule 19 of the Companies (Acceptance of Deposit) Rules, 2014 is deemed to be in compliance of Section 74(1)(b) of the Companies Act, 2013. Regarding 'related party transactions', as the Company had obtained prior approval of the Audit Committee and the Board of Directors to each such transactions, the need for obtaining the omnibus approval of the Audit Committee to such transactions does not arise.

THE STATE OF COMPANY'S AFFAIRS Sugar

During the year the Unit produced 1.62 lac MT of sugar, by crushing 16.79 lac MT of cane as against 1.32 lac MT of sugar by crushing 14.12 lac MT of cane in the previous year.

The financial year 2014-15 has been difficult for the Indian Sugar Industry due to continued fall in sugar prices, which dropped to lowest level in the past five years. Continued excess production over consumption in the last five years has resulted in significant increase in sugar inventory.

At the start of the financial year, the sugar prices were ruling around Rs. 3000 - 3200 per qtl., in anticipation of improved sentiments with swearing in of new Government at Centre. However, with domestic sugar production for Sugar Season 2014-15 estimated to be higher at over 27 Million MT as against consumption of around 23 Million MT, the market sentiments turned bearish and sugar prices collapsed to a low of around Rs. 2400 per qtl. before rising to a level of Rs. 2600 per qtl. in March' 15. Consequently, the Industry is straddled with huge losses and cane dues. In the current situation, companies are finding it difficult even to pay cane dues as per Fair & Remunerative Price (FRP), let alone the State Administered Price (SAP).

Internationally also the sugar prices have declined from US$ 450 per MT to a level of US$ 380 per MT for White Sugar, with surplus production in most sugar producing countries. At these prices, no exports are taking place despite the Government having declared a higher export incentive on raw sugar. Consequently, the surplus situation is continuing and the Industry is expected to carry forward a record stock of around 10 Million MT into the next Season, which is nearly 5 months consumption of sugar.

During these difficult times, the State Government has given some relief to Sugar Industry in the following manner : -

- The Uttar Pradesh Government has maintained the sugarcane price, SAP, at Rs. 280 per qtl. for Sugar Season 2014-15 at the same level as last year, to be paid in two installments, Rs. 240 per qtl. within 14 days of supply, and the balance Rs. 40 per qtl. in the following manner :

— Rs.11.40 per qtl. through waiver of taxes / charges and other payables

— Upto Rs. 28.60 per qtl. cane price subsidy, linked to selling prices of sugar, molasses, bagasse and press mud from Oct.'14 - May'15.

Keeping in mind actual realisation, it is expected that the whole of the Rs. 28.60 per qtl. incentive would accrue to the Industry.

Though above steps have helped in mitigating the financial difficulties / losses to some extent, but the losses are still huge and cane price arrears have increased substantially, and stood at around Rs. 19250 crs. as on 31st March, 2015.

For Industry to survive surplus sugar stock position needs to be further addressed by way of buffer stock creation by the Central Government, for which representations have already been made to take some initiatives to safeguard the Industry and its stakeholders. It is also necessary that a linkage between the price of sugar and sugarcane is established at the earliest, to ensure that the Industry has the capacity to meet its obligations towards its stakeholders.

In order to rationalize the Import Export Policy of Sugar, the Central Government has recently increased the import duty to 40% and enhanced export subsidy on raw sugar to Rs. 4000 per MT, to stabilize the domestic market.

On the operational front, Company continues to lay emphasis on increasing productivity, sugar recovery and reducing cost of production.

Alcohol

There was a decline in the profitability of the Alcohol Business relative to the previous year, basically because of a sharp increase in the price of the input i.e. molasses which could not be matched with increase in selling prices. In-fact sales and prices of Alcohol were under pressure due to relatively cheap imports, and limited progress in the Gasohol Programme due to various statutory and commercial reasons.

Chemicals

The profitability of the Chemicals business was maintained at the previous year's level, despite intensified competition, and aggressive pricing by Chinese manufacturers, particularly in the last quarter of the year when significant export benefits were again introduced by the Chinese Govt.

Demand for our main products was stable.

Contract Manufacturing activities declined due to sluggish offtake of the end product manufactured by the Customer.

The Company continued with its active R&D programme for optimization of processes and developing new products.

Rayon

Shriram Rayons, Unit of the Company, continued to increase its share in the Rayon market, achieving its highest export volume during the year. The Unit enhanced its efforts for widening its customer base, geographic distribution and increasing value added products.

The Nylon Chafer sale was lower due to the depressed domestic automobile market.

The Rayon debottlenecking project was completed during the year. This, along with improved machine productivity and reduction in wastages, helped the Unit in achieving higher production and lower operating cost.

To control the energy cost and also to protect the environment, the Unit is consistently replacing coal with agro fuel. During the year, the Unit met 44% of its fuel requirement from renewable sources. The Unit also completed implementation of energy related projects including the Solar Power Pilot Project to further increase usage of renewable energy and also increase operational economics.

The steep fall in the value of the Euro has adversely affected export realization in the later part of the year. All the above steps have helped us to counteract the continuing weakness in Euro, in some measure.

Material changes and commitments

No material changes or commitments have occurred between the end of the financial year to which the financial statements relate and the date of this Report, affecting the financial position of the Company.

Subsidiary/ Associate Companies

The Company has a non-material subsidiary, Daurala Foods & Beverages Pvt. Ltd.(DFBL), which is not carrying on any operations presently. DCM Hyundai Limited (DHL) is an associate company.

The required information with regard to the performance and financial position of the subsidiary and associate companies are annexed in Form AOC - I as annexure to the Annual Financial Statements for the year ended 31.3.2015.

There has been no change in relationship of any subsidiary/ associate company during the year. BOARD MEETINGS AND DIRECTORS Meetings of the Board

During the year 2014-15 the Board met five times. The dates of the meetings, attendance, etc., are given in the Corporate Governance Report annexed hereto.

Declaration u/s 149(6) of the Act

All the Independent Directors (IDs) have given declarations u/s 149(6) of the Act confirming that they meet the criteria of independence as laid down under the said Section.

Familiarization Programme for Independent Directors

Four of the six IDs in the Company have been on the Board for a long time and are fully conversant with the business of the Company, nature of the industries in which it operates, business model, etc. The two IDs appointed during the year have been fully briefed about the Company and its operations. The IDs, at the time of appointment, have been provided with the details of their roles, rights and responsibilities as IDs through the letter of appointment issued to them.

The Directors are also kept updated with information on the Company, the industry and developments in different segments at the Board meetings while reviewing the operations, quarterly/annual financial results and considering the budgets.

Your Company will arrange visits of the IDs to the Plants according to their convenience in future.

A familiarization programme for IDs, to be laid down by the Board, will be put on the Company's website - www.dcmsr.com in due course.

Directors Appointment and Remuneration

Appointment of directors on the Board of the Company is based on the recommendations of the Nomination & Remuneration Committee (NRC). NRC identifies and recommends to the Board, persons for appointment on the Board, after considering the necessary and desirable competencies. NRC takes into account positive attributes like integrity, maturity, judgement, leadership position, time and willingness, financial acumen, management experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, etc.

In case of Independent Directors (IDs) they should fulfill the criteria of independence as per the Act and Clause 49 of the Listing Agreement in addition to the general criteria stated above. It is ensured that a person to be appointed as director has not suffered any disqualification under the Act or any other law to hold such an office.

The directors of the Company are paid remuneration as per the Remuneration Policy of the Company, the gist of which is given under the heading 'Remuneration Policy' herein below. The details of remuneration paid to the directors during the year 2014-15 are given in Form MGT-9 annexed hereto and also in the Corporate Governance Report forming part of this Report.

Changes in Directors or KMP

Pursuant to Section 161 (4) of the Act, Shri K.N. Rao, who was appointed in a casual vacancy on the Board, effective from 1.2.2014, holds office till the ensuing AGM and being eligible offers himself for appointment as a director liable to retire by rotation. Shri K.N. Rao is presently Director & CEO (Rayons).

Shri C. Vikas Rao was appointed as an ID on the Board, on the recommendation of NRC, for a term of 5 years w.e.f. 14.8.2014. His appointment is subject to the approval of the shareholders in the ensuing Annual General Meeting. Particulars of Shri C.Vikas Rao have been given in the explanatory statement annexed to the notice for the AGM.

Mrs. Kavitha Dutt Chitturi has been appointed on the Board as an I ndependent Director, on recommendation of the NRC, for a term of 5 years w.e.f. 2.2.2015, subject to the approval of the shareholders in the ensuing AGM. With this appointment, your Company has complied with the requirement of having a woman director on its Board as per the Act and the Listing Agreement. Particulars of Mrs. Kavitha Dutt Chitturi have been given in the explanatory statement annexed to the notice for the ensuing AGM.

Dr. V.L. Dutt, who had joined the Board in May, 1990 and continued on the Board with a break between 2001-2005, resigned from the Board as an ID due to restrictions on his travel and other business engagements, effective from 12.1.2015. The Board of Directors placed on record its appreciation of the valuable advice and guidance provided by Dr. V.L. Dutt during his long tenure with the Company.

Shri B.P. Khandelwal demitted office as Company Secretary effective from 04.11.2014, to take up his new assignment in the Company as President. The Board appointed, on the recommendation of NRC, Shri Y.D. Gupta, Sr. General Manager (Law & Taxation), as Company Secretary from the said date.

Annual Evaluation of Board and Directors

As required under the Act and the Listing Agreement, an evaluation of the performance of the IDs was carried out by the Board of Directors during the year, based on the criteria laid down by the NRC. A copy of the 'criteria' is annexed as Annexure 2 hereto. On an overall assessment, it was found that all the IDs have given a good account of themselves. The Board concluded that the IDs individually and collectively were well qualified and their contributions were in the interest of the Company.

The IDs in a separate meeting held on 02.02.2015 reviewed and evaluated the performance of non- Independent Directors, the Board as a whole, the Board Committees and the performance of the Chairman of the Company taking into account the views of executive and non-executive directors.

Keeping the requirements under the Act and the Listing Agreement, the IDs have laid down broad areas for evaluation. After detailed discussion, it was concluded that the performance of the Board/ Committees collectively and the directors individually on all counts of evaluation were appreciable.

The performance of the Chairman and other Executive Directors was evaluated for leadership and direction to the Company judging as per the parameters of the evaluation criteria and noted that the performance was satisfactory. It was further noted that the Chairman was duly following long term strategy for the Company generally.

Directors' Responsibility Statement

As required under Section 134(3)(c) of the Act your Directors state that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

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

c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

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

Internal Financial Controls

The Company has over the years evolved effective systems and procedures to ensure internal financial controls in all its establishments. An internal audit process is in place under the overall supervision of the Audit Committee of the Board. The services for the internal audit are outsourced. Qualified and experienced professionals are engaged to ensure effective and independent evaluation of, inter alia, the internal financial controls. The appointment of internal auditors are approved by the Board on recommendations of the Audit Committee. The Audit Committee also lays down the schedule for internal audit. Internal audit reports are placed before the Committee with management comments. Suggestions are implemented and reported to the Audit Committee.

Apart from the above, an effective budgeting and monitoring system is also in place. Budgets are reviewed by Audit Committee and approved by the Board. The operating results are compared and monitored with the approved budgets periodically. An Executive Committee comprising of senior management team meets every month, reviews all aspects of operations and chalks out remedial measures and strategies, wherever required.

An effective communication/ reporting system operates between the Units, Divisions and Corporate Office to keep various establishments abreast of regulatory changes and ensure compliances.

The Company has, with a view to further strengthen the internal financial controls, engaged the services of an expert agency to draw out a more comprehensive internal financial control system for the Company. The Company expects to commence implementation of its recommendations during the current financial year.

Loans, Guarantees and Investments

The Company has not given any loan or made any investment covered u/s 186 of the Act during the year.

The Company has agreed to act as facilitator for disbursement of crop loan of up to Rs.100 cr. to the designated cane growers attached to the Company's Unit, Daurala Sugar Works from IDBI Bank Limited. In this regard the Company has executed a Deed of Guarantee for providing necessary services and to ensure repayment of the crop loans by the cane growers who avail the facility. No disbursement has so far been made under the Scheme.

Related Party Transactions

The transactions entered with related parties during the year under review were on Arm's Length basis and in the ordinary course of business. The provisions of Section 188 of the Companies Act, 2013 are therefore, not attracted. All related party transactions were approved by the Audit Committee and the Board. The relevant information regarding related party transactions has been set out in Note 38 of the Standalone Financial Statement for the y.e. 31.3.2015. Thus, disclosure in Form AOC-2 is not required.

The Board has framed a Policy on related party transactions and placed the same on the Company's website.

CSR Activities

Pursuant to Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, a report in the prescribed proforma is annexed - Annexure 3.

Risk Management

The Board of Directors in its meeting held on 30.01.2006 undertook a comprehensive review of the risk assessment and minimization procedures/ policies followed by the Company at its various operations. While taking note of the same, the Board laid down that a half yearly status report of the risk assessment and steps taken to minimize the risks be placed before the Board. Such a report in respect of all the operations of the company is regularly placed before the Board and suggestions, if any, are implemented.

In view of the diversified business, there are no elements of risks, which in the opinion of the Board may threaten the existence of the Company.

Public Deposits

i. The Company has not accepted any deposit covered under Chapter V of the Act during the year.

ii. No deposit remained unpaid as at the end of the year. An amount of Rs.1.54 lacs remained unclaimed as at the close of the year.

iii. There has been no default in repayment of public deposits during the year.

iv. The Company has not accepted any deposits after the commencement of the Act.

Significant Material Orders Passed by Regulators or Courts or Tribunals

No significant orders have been passed by any Regulators, Courts or Tribunals impacting the going concern status and Company's operations in future.

Extract of the Annual Return

Extract of the Annual Return for the year 2014-15 in Form MGT-9 is annexed - Annexure 4.

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

The required information as per Rule 8 (3) A, B & C of Companies (Accounts) Rules, 2014 is annexed - Annexure 5.

REMUNERATION POLICY

The Board of Directors in its meeting held on 14.8.2014 laid down a Remuneration Policy as recommended by the NRC relating to remuneration of the Directors, Key Managerial Personnel (KMP), Sr. Management Personnel (SMP) and other employees of the Company. The Remuneration Policy is in accordance with Section 178 of the Act and the Rules made thereunder. The salient features of the Policy are given below:

i. Guiding principle

The guiding principle of the Policy is that the remuneration and other terms of employment should effectively help in attracting and retaining committed and competent personnel. The remuneration packages are designed keeping in view industry practices and cost of living.

ii. Directors

Non-executive directors are paid remuneration in the form of sitting fees for attending Board/ Committee meetings as fixed by the Board from time to time subject to statutory provisions. Presently sitting fee is Rs. 50,000 per Board meeting and Rs. 25,000 per Committee meeting.

Remuneration of Executive Directors (Whole-time Directors) including Managing Director is fixed by the Board of Directors on the recommendation of the NRC, subject to the approval of the shareholders. The NRC, while recommending the remuneration, takes into account pay and employment conditions in the industry, merit and seniority of the person and paying capacity of the Company. The remuneration which comprises of salary, perquisites, performance based reward/ profit based commission and retirement benefits as per Company Rules is subject to the limits laid down under the Act.

iii. KMP and SMP

Appointment and cessation of service of KMP are subject to the approval of the NRC and Board of Directors. Remuneration of KMP and SMP are approved by CMD on the recommendation of the concerned Executive Director, keeping in view the Remuneration Policy.

iv. Other employees

The remuneration of other employees is fixed from time to time by the Management as per the guiding principle laid down in the Remuneration Policy and considering industry standards and cost of living. In addition to salary, they are also provided perquisites and retirement benefits as per Schemes of the Company and statutory requirements, where applicable.

The Remuneration Policy of the Company is available on its website.

Managerial Remuneration

The information required as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 pertaining to remuneration of Directors, KMP and comparisons are annexed - Annexure 6. It is affirmed that the remuneration is as per the Remuneration Policy of the Company.

Particulars of employees who have drawn remuneration of Rs.60 lacs or more during the year 2014-15 are annexed - Annexure 7.

Audit Committee

The Audit Committee presently comprises of three IDs and one executive director. Shri P.R. Khanna is the Chairman and Shri S.B. Mathur, Shri S.C. Kumar and Shri K.N. Rao, Director & CEO (Rayons) are Members. There was no instance of the Board not accepting the recommendation of the Audit Committee.

Vigil Mechanism

Pursuant to Section 177 of the Act and Clause 49 of the Listing Agreement, the Board of Directors, on the recommendation of the Audit Committee, adopted a Vigil Mechanism (Whistle Blower Policy) in its meeting held on 14.8.2014. The Policy has been widely circulated amongst the employees and also put on the website of the Company.

The Policy provides a channel to the employees to report to the management concerns about unethical behavior, actual or suspected fraud or violation of the code of conduct or policies. The mechanism provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.

Share Capital

During the year, the Company has not issued any share capital with differential voting rights, sweat equity or ESOP nor provided any money to the employees or trusts for purchase of its own shares.

Statutory Auditors

The statutory auditors of the Company are M/s A. F. Ferguson & Co. (Registration No.112066W), Chartered Accountants, 9, Scindia House, K.G. Marg, New Delhi - 110001. There was no change in the statutory auditors during the year. They being eligible, are being recommended to the shareholders for re-appointment for holding office as statutory auditors from the close of the ensuing AGM till the conclusion of the next AGM. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from M/s. A.F. Ferguson & Co. that their appointment, if made, would be in conformity with the limits specified in the said Section.

Cost Auditors

M/s Ramanath Iyer & Co., Cost Accountants , 808, Pearls Business Park, Netaji Subhash Place, Pitampura, Delhi - 110034, who were appointed as Cost Auditors of the Company for the year 2013-14, submitted the Cost Audit report, due for filing on or before 27.9.2014, to the Central Government on 15.9.2014. They have been reappointed as Cost Auditors for the years 2014-15 and 2015-16. A resolution for ratification of their remuneration for the years 2014-15 and 2015-16, as required under the Companies Act, 2013, forms part of the Notice convening the AGM.

Corporate Governance

Reports on Corporate Governance and Management Discussion & Analysis are annexed - Annexure 8. Anti-Sexual Harassment Policy

Pursuant to the "Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013," the Company constituted Internal Complaints Committees at all its workplaces. There has not been any instance of complaint reported in this regard to any of the Committees.

Acknowledgement

The Directors acknowledge the continued co-operation and support received from the banks and various government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board

New Delhi

May 29, 2015 CHAIRMAN


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Annual Report and the Audited Accounts of your Company for the year ended 31st March 2014.

In the year 2013-14, the Economy languished and the Manufacturing sector stagnated, affecting overall growth. High Infation and rising prices, compounded by some debatable and retrospective tax measures, resulted in a less than optimal investment climate.

After a period of three decades, the recent elections have given the new government a clear mandate for development & change, unhindered by the vagaries of coalition formations. This change promises to kick start economic development and put an end to the stagnation of the last few years. A strong government at the Centre is the need of the day and will go a long way in raising the status of the Country in the comity of nations.

The sugar industry''s problems continued for most part of the year. The Governments at Centre and States had initiated certain measures to ameliorate the crisis faced by this industry, but they were too little too late.

FINANCIAL RESULTS

In spite of the adverse business climate, your Company could achieve an all time high turnover including other income of Rs.1329 cr. against Rs.1109 cr. in the previous year. There was a gross profit of Rs.67.9 cr. as compared to Rs.40.9 cr. in the previous year and net profit of Rs.29 cr. as compared to Rs.11.2 cr in the previous year.

DIVIDEND

Looking into the improved all-round performance, the Board of Directors is pleased to recommend a dividend of Rs.3.50 per equity share of Rs.10 (35%) for the year ended 31.3.2014. The dividend payout for the year under review, inclusive of Corporate Tax on Dividend distribution, is Rs.7.12 cr.

After provision for proposed dividend and transfer of Rs.3 cr. to General Reserve (previous year Rs.1 cr) the balance carried forward in the profit & Loss Account will be Rs.115.3 cr., which includes Rs.96.5 cr. brought forward from the previous year.

OPERATIONS

Sugar

During the year, the Unit produced 1.32 Lac MT of Sugar by crushing 14.12 Lac MT of cane as against 1.26 Lac MT of Sugar and 13.80 Lac MT of crush respectively during previous year. During the Season 2013-14, the Unit achieved the highest cane crush out of all the Units in the State of U.P.

Supply of surplus power to the grid was further optimised this year. After much delay, the Unit has been issued the due Renewable Energy Certifcates (RECs) against its consumption of green energy. Going forward, this will add to revenues, through sale of RECs.

The Financial Year 2012-13 had ended on a promising note with the Central Government removing the levy sugar obligation from Mills and decontrolling sugar sales. After the initial euphoria, the Financial Year 2013-14 progressed with the sugar market taking on a bearish tone. Despite the declining sugar price, the U.P. Govt. announced a cane price of Rs.280 per qtl. for Sugar Season 2013-14, which was same as last year, with some minor reliefs in taxation on cane etc. However, the continued excess of the State Advised Price over the Fair and Remunerative Price declared by the Central Government, resulted in continued losses and high cane dues. Some Sugar Mills especially in U.P. resorted to distress sales at low prices.

High sugar stocks alongwith a drop in international prices to around US$ 450 per MT leading to heavy imports by Coastal Refneries, further affected the sentiment adversely. Sugar prices fell from Rs.3200 per qtl. in April, 2013 to around Rs.2800 per qtl. by February, 2014.

Considering, the dire financial position of the Sugar Mills due to huge losses and high cane dues, the Central Govt. notifed a Scheme to extend financial assistance with interest subvention upto 12%. To encourage raw sugar exports, it declared an incentive of Rs.3333 per MT. Consequently, during March 2014, there was slight improvement in sugar prices.

Going forward, the sugar scenario would depend to a large extent on the emerging demand supply situation. The sugar stocks continue to be high. In a situation where the domestic sugar market has been effectively deregulated, as per the recommendation of the Rangarajan Committee, it is necessary that the remaining recommendations also be implemented as soon as possible. Foremost amongst them are establishment of a linkage between the sugar and sugar cane price and the rationalization of EXIM Policy to ensure that the industry has the paying capacity to meet its obligation towards the statutorily mandated cane price.

The operations of the Unit continued to be satisfactory and continuous efforts are being made to improve effciencies and operating parameters. The Unit is also making efforts to improve the sugar recovery in cooperation with farmers who are being educated to grow high yielding cane varieties to get better results in the near future.

Alcohol

The performance of the Alcohol business showed considerable improvement over the previous year as the Company was able to increase both sales volumes and selling prices. This has more than offset the substantial increase in the cost of the main input i.e. Molasses.

Demand remained strong particularly from the Chemicals sector. There was some revival of the Ethanol blending programme of the Government, though not to the expected level.

Chemicals

The Chemicals business of the Company showed strong performance with substantial increase in sales and profits relative to the previous year. This was achieved mainly by increasing selling prices of key products, which offset the continued rise in the prices of major raw materials.

Also, the operations and volumes of an intermediate manufactured on contract basis showed improvement, and the Company also benefited due to higher rates of export benefits under Govt''s Focused Product Scheme (FPS) for exports.

Demand for the main products remained strong as Chinese manufacturers were not as aggressive as in the past in selling their products due to strengthening of the Chinese currency and increase in their manufacturing costs.

The Company continued with its active R&D programme for optimization of processes and developing new products.

Rayon

The Unit achieved its highest turnover for the third consecutive year. The strategy for achieving broader customer base, wider geographic distribution and increasing value addition resulted in higher sales with improved margins.

The Unit has been able to further control wastages, improve quality and plant productivity, resulting in lower cost of production.

Steps for debottlenecking capacity, increasing value addition and improving energy effciency were taken during the year.

Nylon Chafer sales were maintained despite the depressed domestic automobile market.

The Unit has been able to significantly reduce its coal consumption and increase use of agro fuel. The Unit is implementing further energy related projects to improve the operational economics.

Subsidiary

Plant & Machinery of Daurala Foods & Beverages Pvt. Limited continue to be operated by the Company on lease basis.

RESEARCH & DEVELOPMENT

Research & Development are ongoing activities which have an important role in providing inputs for developing new products, devising energy saving measures, upgrading methods of production and quality of products. These activities have helped the Company in attaining leadership in its chemical products and substantial qualitative change in other operational areas.

UNCLAIMED SHARES SUSPENSE ACCOUNT

The position with regard to the unclaimed equity shares transferred to the Demat Suspense Account as required under Clause 5A of the Listing Agreement is as under:

No. of Folios No. of Shares

Position as on 1st April, 2013 6107 84620

Shares released during 2013-14 11 191

Balance as on 31.3.2014 6096 84429

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:

- While preparing annual accounts the applicable accounting standards had been followed.

- The Company had selected such accounting policies and applied them consistently and made judgements that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for the period.

- That the Company had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- That the Company had prepared the annual accounts on a going concern basis.

AUDITORS'' OBSERVATIONS

The Auditors have been qualifying their Report on the annual financial statements of the previous years to the effect that various issues arisen/arising out of the reorganization arrangement of 1989-90 of DCM Limited will be settled and accounted for as and when the liabilities / benefits are finally determined. During the year, based on a detailed assessment of the maximum possible exposure on ultimate settlement of these issues, the Company has made a provision for contingencies of Rs.1 cr in the accounts. Based on this the Auditors have deleted the qualification in their report for the year 2013-14.

CORPORATE GOVERNANCE

Reports on Corporate Governance, Management Discussion & Analysis and Corporate Social Responsibility are given in Annexure-I.

DIRECTORS

Pursuant to Section 152 of the Companies Act, 2013 Shri Madhav B. Shriram retires by rotation at the forthcoming Annual General Meeting and being eligible offers himself for reappointment.

In compliance with Section 149 of the Companies Act, 2013, as far as it relates to independent directors, Shri P.R. Khanna, Dr. V.L. Dutt, Shri S.B. Mathur, Shri Ravinder Narain and Shri S.C. Kumar, independent directors, who were liable to retire by rotation as per the Companies Act, 1956, demitted office with effect from the close of 29.5.2014 and have been appointed as independent directors with effect from 30.05.2014 by the Board of Directors for terms not exceeding 5 years i.e. upto 31.3.2019, subject to the approval of the shareholders at the ensuing AGM. These directors have given declarations to the effect that they meet the criteria of independence as provided in Sub-section 6 of Section 149 of the Companies Act, 2013 at the time of their appointment.

Shri Tilak Dhar, Chairman & Managing Director, and Shri Madhav B. Shriram, Whole-Time Director, have been reappointed for a period of 5 years with effect from 1.4.2014. Their remuneration and other terms and conditions of appointments have been approved by the shareholders through postal ballot by resolution dated 24.12.2013.

The term of Shri Anil Gujral, Director & CEO (Chemicals & Alcohol), expired on 31.1.2014. The Board of Directors have inducted Shri K.N. Rao in the casual vacancy and appointed him as Director & CEO (Rayons) for a period of 3 years with effect from 1.2.2014. The remuneration and other terms and conditions of Shri K.N. Rao have been approved by the shareholders through postal ballot by resolution dated 24.12.2013.

AUDIT

M/s. A.F. Ferguson & Co., Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi, who are Statutory Auditors of the Company, hold office up to the forthcoming Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the financial year 2014-15. M/s A. F. Ferguson and Co. have provided necessary certifcate under section 139 (1) read with section 141 of the Companies Act, 2013.

As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956 your Company was required to carry out cost audit of sugar, industrial alcohol, chemicals, rayon and nylon products. M/s. Ramanath Iyer & Co., Cost Auditors, 808, Pearls Business Park, Netaji Subhash Place, Delhi - 110 034, had carried out the cost audit of the above products for the F.Y. 2012-13. The Company''s cost audit report due for fling on or before 27.9.2013 was fled on 6.9.2013.

The said firm was reappointed as Cost Auditors for the F.Y. 2013-14. Appointment for F.Y. 2014-15 will be considered after notifcation of Cost Audit Rules to be prescribed u/s 148 of the Companies Act, 2013.

OTHER INFORMATION

The information required under Section 217 (2A) of the Companies Act, 1956 and the Rules framed thereunder relating to particulars of employees is given in Annexure II to this report.

The information pursuant to Section 217(1 )(e) of the Companies Act on conservation of energy, technology absorption and foreign exchange earnings/ outgo is given in Annexure - III.

The Central Government has granted general exemption from annexing the Annual Report of subsidiary companies with the holding companies'' annual report as required under Section 212 of the Companies Act, 1956. Accordingly, the Company has presented in this report the consolidated financial statements of the holding and subsidiary companies. The annual accounts of the subsidiary company will be kept for inspection by any member at the Registered office of the Company and that of the subsidiary company. A copy of the audited annual accounts and related information of the subsidiary will be made available to any member upon request.

ACKNOWLEDGEMENT

The Di recto rs acknowl edge the continued co -operation and support received from the financial institutions, banks and various government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board

New Delhi

May 30, 2014 CHAIRMAN


Mar 31, 2013

The Directors have pleasure in presenting the Annual Report and the Audited Accounts of your Company for the year ended 31st March 2013.

The tremors faced by the global economy in the year 2008-09 continue to cause problems for economies world over from time to time. When signs of recovery start showing, one or the other crisis crops up at different places, even affecting those economies, which were feeling insulated earlier. Indian economy which continued to be on a growth path till the year 2011-12, has also felt the impact on its growth and prospects. The GDP growth came down to just about 5% in 2012-13 from over 8%, lowest in a decade. Failure to tame inflation and high interest rates adversely affected every sector. The investment slowdown is one of the major challenges that India faces today. Certain taxation measures adversely impacted foreign investments. Uncertain political climate, failure to put in place progressive policies/ reforms and legislations for lack of consensus, unearthing of scam after scams - all created a sense of pessimism. National interest appears to have taken a back seat to petty political considerations. Unless a national consensus emerges towards inclusive development and all concerned work together to achieve this goal the economy would continue to suffer.

FINANCIAL RESULTS

Turnover for the year including other income was Rs.1109 cr. against Rs.1001 cr. in the previous year. There was a gross profit of Rs.40.9cr. as compared to Rs.13.2cr. (before exceptional item) in the previous year and net profit of Rs.11.2cr. as compared to net loss of Rs.17.4 cr. in the previous year.

DIVIDEND

The Board is pleased to recommend a dividend of Rs.1.50 per equity share of Rs.10 (15%) for the year ended 31.3.2013. The dividend payout for the year under review, inclusive of Corporate Tax on Dividend distribution, is Rs.3 cr.

After provision for proposed dividend and transfer of Rs.1 cr. to General Reserve (previous year nil) the balance carried forward in the Profit & Loss Account will be Rs.96.5 cr., which includes Rs.89.3 cr. brought forward from the previous year.

OPERATIONS

Sugar

During the year the Unit produced 1.26 lac MT of sugar, by crushing 13.80 lac MT of cane as against 1.32 lac MT of sugar by crushing 15.06 lac MT of cane in the previous year. For the crushing season 2012-13, the crush was the highest in Western U.P. and the second highest amongst the factories in the State. As crushing started somewhat late in November, the crop condition was better and with all round efforts put in, the Unit achieved a sugar recovery of 9.27% in the season as against 8.74% during the last season.

During the current year, the performance of the factory on energy efficiency and that of the power plant also improved. Consequently we exported more power this season.

The financial year 2012-13 continued to be difficult for the industry, in the absence of linkage between cane and sugar prices. The U.P. sugar Industry was further burdened with an unwarranted increase of Rs.40 per qtl. of cane by the State Government. Despite the significant steps taken by the Unit to reduce conversion cost, the cost of production continued to be higher than sugar price realized.

At the end of the year, the Central Government took the much needed steps of abolition of the levy sugar obligation on the sugar mills and disbanding the free sugar release mechanism. This has helped the industry in reducing the substantial burden of Levy subsidy, and given the industry the freedom to sell sugar as per its own sales strategy. The effect of the latter has yet to be seen in terms of its impact on the industry.

Even with the large opening stock of sugar, due to a reasonable quantity of sugar being exported, the sugar prices improved during the first and second quarter of the year and were at a reasonable level in the third quarter also. Moreover, drought like conditions in Maharashtra and Karnataka aided the sugar sentiment. However, due to higher than expected sugar production and import of raw sugar for domestic consumption, sentiments became bearish and sugar prices fell steadily to a level of around Rs.3200 per qtl. in February and March, 2013 after touching a high of Rs. 3700 per qtl. in August, 2012. Internationally, the prices of white sugar are range bound between US$ 500- 530/ MT, at a level where it is not possible for India to export its surplus sugar.

The sugar sentiments can improve only if the demand supply balance is restored. It is reported that in some States the next year''s crop might be lower due to drought conditions. However, the trade sentiment and prices can improve only if imports are put on a level playing field by imposition of adequate import duty.

Industry has taken up the matter with the Government. t Overall, the performance of the Unit on all operational parameters was better, and efforts will be made to further improve all areas. Extensive efforts are being made to increase the acreage under higher sugared varieties of cane and we hope to improve the sugar recovery further.

Alcohol

The performance and profitability of the Alcohols Business Group improved, relative to the previous year due to higher selling prices and exports. Demand for alcohol remained strong even though the programme for blending alcohol with petrol proceeded at a slow pace. Relatively high international prices made imports unviable and boosted exports.

Efficiencies in use of raw material and energy were maintained at high levels.

Chemicals

The profitability of the Chemicals Business improved relative to the previous year, despite high prices of raw materials. The Company was able to increase selling prices of its major products to more than offset the cost increases, in spite of continued aggressive international competition, mainly from China.

Demand for major products remained stable, except for a few products like Benzyl Alcohol whose demand was depressed due to stagnating requirement of the user industries, both domestic and international.

The Company has commissioned a plant for manufacturing a high value product on contract basis for a large multinational corporation. This could open new opportunities in future.

The Company continues its focus on R & D and process improvements.

Rayon

In the face of the continuing global recession, impacting the automobile industry worldwide, the Unit achieved its highest ever turnover for the second consecutive year. Capability built up in the last few years to supply value added fabric along with a broadened customer base helped the Unit to achieve this.

The Unifs improved and consistent product quality is well established in the market, making it one of the preferred sources by the international tyre manufacturers in the high performance segment.

Our products are currently at advanced stages of trials with new consumers. Based on the expected approvals, the requirement of our product is expected to increase. To meet the anticipated increased requirement, the Unit is currently debottlenecking its Rayon capacity.

Nylon Chafer production facilities have also been upgraded. The Unit achieved its highest Nylon Chafer sale during the year. The Unit continues efforts to diversify the product base.

To control the energy cost and to protect the environment, thrust on enhancing agro fuel consumption continued. Shriram Rayons met 40% of its fuel requirement from renewable sources during the year.

Subsidiary

The bottling facilities having been acquired by the Company earlier and the remaining plant & machinery leased to it, the operations of Daurala Foods & Beverages Pvt. Limited remain temporarily suspended.

RESEARCH & DEVELOPMENT

Research & Development have always been and continue to be a priority area in the Company''s scheme of things. The outcome of these activities helped the Company by providing inputs for developing new products, energy savings, upgrading production processes and quality. These are essential to remain competitive and maintain leadership position in its chemical products and achieve substantial qualitative change in other operations.

UNCLAIMED SHARES SUSPENSE ACCOUNT

As required under Clause 5A of Listing Agreement, the Company had transferred 84620 unclaimed equity shares, which were standing registered under 6107 folios into the Unclaimed Shares Demat Suspense Account, after sending three reminders to those shareholders.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:

- While preparing annual accounts the applicable accounting standards had been followed.

- The Company had selected such accounting policies and applied them consistently and made judgements that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for the period.

- That the Company had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- That the Company had prepared the annual accounts on a going concern basis.

AUDITORS'' OBSERVATIONS

The explanations/ information in respect of the observations of the Auditors in their Report on the standalone Accounts are given in detail in Note 31 (b) of notes to the financial statements. The said note read with the relevant audit observations are self-explanatory.

CORPORATE GOVERNANCE

Reports on Corporate Governance, Management Discussion & Analysis and Corporate Social Responsibility are given in Annexure-I.

DIRECTORS

Shri P.R. Khanna and Shri S.B. Mathur, Directors, retire by rotation at the forthcoming Annual General Meeting and being eligible offer themselves for reappointment.

On the Company clearing all its dues, IFCI Limited has withdrawn the nomination of Shri S.C. Kumar on the Board w.e.f. 08.01.2013. Considering Shri S.C. Kumar''s wide experience and in-depth knowledge of the segments in which the Company operates, the Board co-opted him on the Board as an Additional Director under independent category and also nominated him to the Audit and Remuneration Sub-committees of the Board. Proposal is being placed before the shareholders for approval to his appointment as a regular director, liable to retire by rotation. *''''

AUDIT

M/s. A.F. Ferguson & Co., Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi, who are Statutory Auditors of the Company, hold office up to the forthcoming Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the financial year 2013-14. As required under the provisions of Section 224(1 B) of the Companies Act, 1956, the Company has obtained written confirmation from M/s. A.F. Ferguson & Co. that their appointment, if made, would be in conformity with the limits specified in the Section.

As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956 your Company was required to carry out cost audit of sugar, industrial alcohol and rayon. M/s. Ramanath Iyer & Co., Cost Auditors, 808, Pearls Business Park, Netaji Subhash Place, Delhi -110034, had carried out the cost audit of the above products for the F.Y. 2011 -12. The Company''s cost audit report due for filing on or before 31.1.2013 was filed on 3.1.2013.

The said firm was reappointed as Cost Auditors for the F.Y. 2012-13 and subject to the approval of the Government, has been reappointed for the F.Y. 2013-14.

OTHER INFORMATION

There was no employee in the Company whose particulars are required to be given under Section 217(2A) of the Companies Act, 1956.

The information pursuant to Section 217(1)(e) of the Companies Act on conservation of energy, technology absorption and foreign exchange earnings/outgo is given in Annexure-ll.

The Central Government has granted general exemption from annexing the Annual Report of subsidiary companies with the holding companies'' annual report as required under Section 212 of the Companies Act, 1956. Accordingly, the Company has presented in this report the consolidated financial statements of the holding and subsidiary companies. The annual accounts of the subsidiary company will be kept for inspection by any member at the Registered Office of the Company and that of the subsidiary company. A copy of the audited annual accounts and related information of the subsidiary will be made available to any member upon request.

ACKNOWLEDGEMENT

The Directors acknowledge the continued co-operation and support received from the financial institutions, banks and various government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board

New Delhi

May 23,2013 CHAIRMAN


Mar 31, 2012

The Directors have pleasure in presenting the Annual Report and the Audited Accounts of your Company for the year ended 31 st March 2012.

Just as the world economy was emerging from the crisis caused by the volatility in South East Asia and the devastating Tsunami and nuclear catastrophe in Japan, a new crisis situation has emerged in the Euro Zone, threatening not only the European economy but other countries around the world, including India.

The Indian economy which had weathered the earlier storms reasonably well has since been affected and growth is stagnating. Internal pressures and uncertainties at various levels are affecting policy and decision making and this is affecting the developmental process. Spiralling inflation and depreciation of the Rupee have compounded the problem and desirable measures such as reduction of subsidies are not being taken. The steps taken by the Government and the RBI have not been enough to achieve the desired results. All concerned will need to act in tandem in matters of national interest, which presently is not happening, causing concern.

FINANCIAL RESULTS

Turnover for the year including other income for the first time crossed the rupees thousand crore mark at Rs.1001 Cr. against Rs.913 Cr. in the previous year. There was a gross profit of Rs.13.2 Cr. before exceptional item as compared to Rs. 10.2 Cr. in the previous year and net loss of Rs. 17.4 Cr. as compared to net loss of Rs.5.5 Cr. in the previous year.

In view of the net loss for the year under review, the Directors have not recommended any dividend for the year.

OPERATIONS

Sugar

During the year Company achieved a sugar production of 1.32 lac MT by crushing 15.06 lac MT of cane as against 1.38 lac MT of sugar and 15.10 lac MT of cane crushed in the previous year.

The Company has been endeavouring to increase its revenue from co-generation of power and towards this end made changes to achieve a peak export of 25 MW as against 23 MW last year.

The financial year 2011-12 was turbulent for the sugar industry especially in U.P. Besides low sugar prices and low recovery in the region, the U.P. sugar industry faced a serious mismatch of sugar cane and sugar prices. The State Government further increased the SAP for cane payable by the industry. Additionally, the Supreme Court passed an adverse judgement directing sugar factories to pay cane price differential for the previous two years. The Company had to pay Rs. 18.75 crores on this account.

On the other hand, sugar prices remained soft because of weak sentiment and traders' reluctance to carry inventory due to uncertainties in marketing policies. The prices were further impacted by sale of sugar by some mills against Court Orders. Sugar prices which at the beginning of the year were Rs.2900 per qtl. remained range bound through-out the year, though the cane price increased by 17% over last year.

During the year, Government took some positive steps such as allowing 3 Million MT of exports and replacing the monthly release mechanism by quarterly releases for the current year. Though these steps have stabilised the sugar prices despite surplus sugar production in the Country, more needs to be done to provide relief and stability to the Industry. Considering a projected surplus sugar position, Government's support would be essential to keep the sugar industry on an even keel.

The Unit's performance during the season on key operating parameters such as cane crushed, sugar losses, steam consumption and co-generation of power was satisfactory. Recovery in the entire region was adversely impacted by climatic and other agronomic conditions.

Alcohol

The overall performance and profitability of the Alcohol Business improved relative to the previous year due to improved selling prices and increased sales of high value added products (Anhydrous Alcohol and

Extra Neutral Alcohol). Also, there were improvements in efficiencies and reduction in energy consumption. Overall demand for alcohol increased in most sectors, except for blending with petrol where the demand remained static.

Chemicals

The profitability of the Chemical business was adversely affected by a sharp increase in the cost of several raw materials, which could only be partially passed on to the market, as Chinese competitors, faced with surplus capacity and stocks, adopted aggressive pricing and marketing strategies. To mitigate the impact of the above, the Company continues to focus on new products and process/efficiency improvement.

Rayon

In spite of difficult global market conditions, especially in Europe, Shriram Rayons (SR) achieved its highest ever turnover during the year. Increase in sale, both in export and domestic markets, coupled with improved realisation helped the Unit achieve the same.

SR consolidated improvement in product quality and operational efficiency leading to wider acceptance of its products.

With regular off-take of greige and treated fabric by two new European tyre customers, SR has been able to achieve higher value addition and export volumes. The Unit is pursuing approval of its products with new customers and expects further increase in export volumes.

To meet the market requirement, the Unit is implementing a project for Rayon expansion and modification. The yarn production capability is being increased by modification of the existing machines and installing balancing equipment. The higher fabric requirement anticipated will be met through enhancement of conversion capacity in the Textile Section.

Considering consistent growth in sale of Nylon Chafer, SR has upgraded nylon chafer dipping facilities during the year. Steps are being taken to increase the grey chafer conversion capacity.

SR further increased agro-fuel consumption and met 35% of the fuel requirement from renewable sources during the year to control energy cost and to promote clean fuel usage.

Subsidiary

The Company having acquired/ taken on lease its bottling facilities, Daurala Foods & Beverages Pvt. Limited's operations remain suspended.

RESEARCH & DEVELOPMENT

Research & Development is integral to an industry to maintain/ improve the quality of products and services so as to make them competitive and economical. R & D is also essential to innovate and invent new products and improve efficiency in operations. This is particularly important in the case of chemicals, drug intermediaries and energy. The Company has R & D facilities to match its operations. These facilities are upgraded from time to time according to operational requirements.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:

- While preparing annual accounts the applicable accounting standards had been followed.

- The Company had selected such accounting policies and applied them consistently and made judgements that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for the period.

- That the Company had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- That the Company had prepared the annual accounts on a going concern basis.

AUDITORS' OBSERVATIONS

The explanations/ information in respect of the observations of the Auditors in their Report on the standalone accounts are given in detail in note no. 31 (b) of notes forming part of the financial statements. The said note read with the relevant audit observations are self-explanatory.

CORPORATE GOVERNANCE

Reports on Corporate Governance, Management Discussion & Analysis and Corporate Social Responsibility are given in Annexure-I.

DIRECTORS

Shri Alok B. Shriram, retires by rotation at the forthcoming Annual General Meeting and being eligible offers himself for reappointment.

Shri Anil Gujral, who was appointed as a director in the casual vacancy caused by the retirement of Shri G. Kumar, effective from 1.2.2011, holds office till the ensuing AGM. The Company has received a notice u/s 257 of the Companies Act from a member signifying intention to propose Shri Anil Gujral's candidature for the office of director at the forthcoming AGM.

AUDIT

M/s. A.F. Ferguson & Co., Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi, who are Statutory Auditors of the Company, hold office up to the forthcoming Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the financial year 2012-13. As required under the provisions of Section 224(1 B) of the Companies Act, 1956, the Company has obtained written confirmation from M/s. A.F. Ferguson & Co. that their appointment, if made, would be in conformity with the limits specified in the Section.

As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956 your Company was required to carry out cost audit of sugar, industrial alcohol and rayon. M/s. Ramanath Iyer & Co., Cost Auditors, BL- 4, Shalimar Bagh (Paschimi), Delhi - 110 088, had carried out the cost audit of the above products for the F.Y. 2010-11. The reports due for filing on or before 27.9.2011 were filed on 8.9.2011 (sugar and rayon) and on 9.9.2011 (industrial alcohol).

The said firm was reappointed as Cost Auditors for the F.Y. 2011-12 and subject to the approval of the Government, has been reappointed for the F.Y. 2012-13 also.

OTHER INFORMATION

There was no employee in the Company whose particulars are required to be given under Section 217(2A) of the Companies Act, 1956.

The information pursuant to Section 217(1 )(e) of the Companies Act on conservation of energy, technology absorption and foreign exchange earnings/ outgo is given in Annexure - II.

The Central Government has granted general exemption from annexing the Annual Report of subsidiary companies with the holding companies' annual report as required under Section 212 of the Companies Act, 1956. Accordingly, the Company has presented in this report the consolidated financial statements of the holding and subsidiary companies. The annual accounts of the subsidiary company will be kept for inspection by any member at the Registered office of the Company and that of the subsidiary company. A copy of the audited annual accounts and related information of the subsidiary will be made available to any member upon request.

ACKNOWLEDGEMENT

The Directors acknowledge the continued co-operation and support received from the financial institutions, banks and various government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board New Delhi

May 30, 2012 CHAIRMAN


Mar 31, 2011

The Directors have pleasure in presenting the Annual Report and the Audited Accounts of your Company for the year ended 31st March 2011.

Despite occasional hiccups, the world witnessed the process of economic recovery during the year. Tumultuous conditions prevailed in South East Asia and the devastating earthquake and tsunami followed by a near nuclear catastrophe in Japan dampened the economic scene, which was otherwise on an upswing.

Our Country to a great extent was successful in insulating itself from the economic upheaval by taking timely measures and attained economic growth, envied even by developed countries. However, the momentum was somewhat disturbed by continued high infation driven by surging global commodity prices and disclosures of a slue of incidents of economic misgovernance in the realm of public affairs, unprecedented in the history of the Country. In light of strong public opinion and growing intolerance to economic misgovernance, the Government is taking/ planning various measures and it is hoped that the Country will emerge stronger.

The recent assembly elections witnessed unprecedented levels of turnout for voting, refecting the vibrancy of the Countrys democracy. The results seem to point towards a desire for more transparent governance and faster progress and development.

For the Company 2010-11 was a diffcult year. For most part of the year, the Companys sugar business suffered from the overhang of the severe mismatch of last years cane and sugar prices, which situation improved in the last quarter. Linkage of these two through rational policy initiatives is an imperative need for survival of the industry. Overall, infationary pressure and competition were countered by various steps taken during the year.

FINANCIAL RESULTS

Turnover for the year including other income at Rs.913 cr. was at an all time high against Rs.874 cr. in the previous year. There was a gross Profit of Rs.10.2 cr. as compared to Rs.76.3 cr. in the previous year and net loss of Rs.5.5 cr. as compared to net Profit after tax of Rs.38.9 cr. in the previous year.

In view of the net loss for the year under review, the Directors have not recommended any dividend for the year.

OPERATIONS

Sugar

During the year your Company achieved a sugar production of 1.38 lac MT by crushing 15.10 lac MT of cane against 1.20 lac MT of sugar and 13.05 lac MT of cane in the previous year. The crushing at the Unit was highest in the State for the second consecutive year. The crushing capacity at the Unit was increased by 500 TCD and it achieved a peak crush of 12,500 TCD during this season. Additionally, a 15 MW TG Set was commissioned, so as to generate more power with the same amount of fuel. With this, the peak export of the power to the grid was around 23 MW, as against 19 MW last year.

The fnancial year 2010-11 has been a diffcult year for the industry because of low sugar prices and high cane prices. The year started with the Government putting pressure and checks on institutional buyers, which drove them to contracting large quantities of imported white sugar (equivalent to 8-9 months of their consumption). The State Government announced an SAP of Rs.205/Qtl. of cane for the season 2010-11, which was relatively high in light of market prices of sugar.

The lack of off-take by the institutional buyers through most of the year impacted the sentiment and the prices remained sluggish and range-bound with a negative bias. This was despite the international prices being high with prices of white sugar touching an all time high of USD 800 per MT. The industry made repeated representations to the Government to lift controls imposed on institutional buyers and also to allow exports. The Government took some minor steps in the later half but they were all too little and too late, to prevent the year from being fnancially unsatisfactory for the industry. This was a year, wherein the Indian sugar industry lost a golden opportunity to export surplus sugar at attractive prices and recoup some of its losses considering the shortage of sugar in international markets.

Overall, while the Units operations were satisfactory, it suffered losses due to the sugar industrys environment. The set back was minimized through appreciable showing in other areas such as power, alcohol and chemicals.

Alcohol

Due to higher availability of captive molasses, and consequently higher production, the sales volumes of bulk alcohol more than doubled as compared to the previous year. As a result, there was a substantial increase in Profitability of the alcohol business. The alcohol market remained relatively stable due to resumption of the programme for blending of ethanol with petrol, and slight revival of demand from the alcohol-based chemical industry.

Chemicals

While sales revenue of chemical business of the Company was broadly at last years level, the Profit was lower due to higher cost of raw materials on the one hand, and lower selling prices arising out of intensifed international competition on the other.

To mitigate the impact of the above adverse factors, the Company is working on cost reduction, productivity improvement, and product mix changes, as also exploring development of new products.

Various initiatives at the Daurala complex towards conserving water, electricity, fuel and numerous steps towards "going green" have been recognized by various authorities. For our efforts in the direction of environment protection, conservation of natural resources and its utilisation, we were awarded "Frost & Sullivans - Green Manufacturing Excellence - Aspirants Award 2011" in the large industry category. It is a matter of pride for us that we are the frst sugar complex to be given this recognition and award. This is an achievement, which is the result of past and present efforts at being environment friendly.

Rayon

The global recession continued to take its toll on the automobile industry. This was further compounded by the problems in the European economies in the frst half of the year. Shriram Rayons, however, was able to improve the export tonnage marginally. The selling prices were also increased, but the Rupee realisations were affected due to adverse exchange movements.

The Units efforts to get approval of the value added dipped fabric materialized and it achieved substantial increase in the sale of dipped fabric. Renewed efforts were made to widen the customer base by pursuing approvals from new customers. The Unit has been successful in getting approval from two more European Tyre Manufacturers and the supply of material has commenced. Shriram Rayons also maintained consistent growth in sale of Nylon Chafer.

The prospects in the coming year appear favourable, and in view of higher demand steps have been taken to technologically upgrade the textile operations. These efforts will continue this year also.

SR maintained continued thrust on quality and reduction in wastages. The Unit was accredited with Environmental Management System Certifcation (ISO 14001 : 2004) during the year. To control the energy cost and also promote clean fuel usage, the Unit undertook modification of Power House. The Unit met 30% of energy requirement from renewable sources during the year.

Subsidiary

The bottling plant of Daurala Foods & Beverages Pvt. Limited, which was leased to the Company, having been relocated to the Companys Distillery for better control and economy, the Company has acquired the super structure and some other equipments of DFBPL for alternate use.

RESEARCH & DEVELOPMENT

At a time of fast changing technology and formulations, Research & Development activities have a pivotal role not only in developing new products but also in innovating measures for upgrading quality, production processes and energy saving measures. This is all the more important in case of chemicals and drug intermediaries having international market. The Company is fully seized of the importance of R&D and has facilities to match its operations, which are kept upgraded from time to time according to the need of the segments in which the Company operates.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:

- While preparing annual accounts the applicable accounting standards had been followed.

- The Company had selected such accounting policies and applied them consistently and made judgements that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the fnancial year and of the Profit or loss of the Company for the period.

- That the Company had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- That the Company had prepared the annual accounts on a going concern basis.

AUDITORS OBSERVATIONS

The explanations/ information in respect of the observation of the Auditors in their Report on the standalone Accounts are given in detail in Notes to Accounts - (2)(b) of Schedule 11. This Note read with the relevant Audit observation is self-explanatory.

CORPORATE GOVERNANCE

Reports on Corporate Governance, Management Discussion & Analysis and Corporate Social Responsibility are given in Annexure-I.

DIRECTORS

Shri G. Kumar, Whole-time Director, retired on 31.1.2011 and Shri Anil Gujral has been appointed as a Whole-time Director from 1.2.2011 for a period of 3 years. His appointment and terms of remuneration were approved by the shareholders by postal ballot.

Shri Madhav B. Shriram and Shri Ravinder Narain, retire by rotation at the forthcoming Annual General Meeting and being eligible offer themselves for reappointment.

OTHER INFORMATION

There was no employee in the Company whose particulars are required to be given under section 217(2A) of the Companies Act, 1956.

The information pursuant to Section 217(1)(e) of the Companies Act on conservation of energy, technology absorption and foreign exchange earnings/ outgo is given in Annexure - II.

ACKNOWLEDGEMENT

The Directors acknowledge the continued co-operation and support received from the fnancial institutions, banks and various Government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board

New Delhi

May 30, 2011 CHAIRMAN


Mar 31, 2010

The Directors have pleasure in presenting the Annual Report and the Audited Accounts of your Company for the year ended 31st March 2010.

The earlier part of the year found the world gasping in the aftermath of the economic upheaval faced in the previous year, taking various measures to address the unprecedented crisis. Fortunately for the Indian economy the impact was relatively mild, and the timely measures initiated and implemented by an alert Central Government mitigated the impact on the economy, and helped in steadying the path of growth.

It gives a sense of accomplishment to report that notwithstanding the severe set back in the later part of the year, your Company achieved its best ever results. Various measures, such as cost saving, energy conservation, co-generation of power and quality improvement, initiated and implemented during the last few years, yielded satisfactory results. This is a continuous process and further areas for betterment are being explored.

FINANCIAL RESULTS

Turnover for the year including other income at Rs.874 cr. was at an all time high against Rs.835 cr. in the previous year. Gross profit and net profit of Rs.76 cr. and Rs.57 cr. as compared to Rs.61 cr. and Rs.44 cr., respectively are also the highest ever.

DIVIDEND

The Company has paid an interim dividend of Rs.1.50 (15%) per equity share of Rs.10 in November, 2009. Considering the better results the Board is pleased to recommend a final dividend of Rs.3.00 (30%) for the year ended 31st March, 2010. The aggregate dividend for the year will amount to Rs.4.50 (45%) per equity share against Rs.2.00 (20%) declared last year.The total dividend payout for the year under review, inclusive of corporate tax on dividend distribution, is Rs.9.14 cr.

After payment of dividend and transfer of Rs.5.00 cr to General Reserve (previous year Rs. 10.00 cr.) the balance carried forward in the Profit & Loss Account will be Rs. 110.10 cr, which includes Rs.82.54 cr brought forward from previous year and Rs.2.78 cr Debenture Redemption Reserve written back.

OPERATIONS

Sugar

During the year, your Company achieved a sugar production of 1.20 lac MT by crushing 13.05 lac MT of cane against 1.25 lac MT sugar and 13.31 lac MT of cane in the previous year. The performance of the Unit was satisfactory with crush being the highest in the State. The Unit commissioned a new 90 TPH boiler and achieved a peak export of 19 MW power to the Grid.

The first three quarters of the year saw sugar prices at very attractive levels anticipating low domestic and international production. The Government initiated various steps to control sugar prices. However, the subsequent unexpected upward revision of domestic and global sugar production estimates resulted in sugar prices collapsing drastically. In the changed scenario, the high cane prices paid in anticipation of the continued strength in the sugar markets, in order to combat diversion of cane to the unorganised sector, became unrealistic. Domestic prices remain weak due to the reluctance of the Government to roll back the price control measures in place, as also, a collapse of the global markets due to higher production prospects for next year.

The State Government announced a higher SAP of Rs.165 per quintal of cane for the season 2009-10. The Central Government in the meantime amended the Sugar Cane (Control) Order, 1966 replacing "minimum price" with "fair and remunerative price" (FRP). The intention was that if any authority fixed a cane price above FRP, the said authority was to bear the difference, so as to insulate sugar mills from any unrealistic cane pricing. This provision was subsequently withdrawn, bringing the situation back to square one, and leaving the mills vulnerable to unrealistic cane pricing/ litigation once again.

Overall, considering the volatility seen in the industry last year, the performance of the Companys Sugar Unit has been satisfactory.

The Company has taken in hand debottlenecking of cane crushing capacity, as also an expansion of its co- generation facility so as to increase the peak export of power to the Grid to 23 MW in the next season.

Alcohol

Overall performance of the alcohol business was maintained despite volumes being largely limited to captive molasses availability. The market was sluggish because the alcohol based chemical sector reduced purchases of domestic alcohol as imported alcohol and finished products were cheaper, and off take by oil companies for blending with petrol was low. Towards the end of the year, molasses availability as well as alcohol demand from the chemical sector have shown some signs of revival.

Chemicals

The performance of the Companys chemical business was largely maintained despite appreciation of the Rupee and increased competition leading to lower sales volumes and prices towards the year end. This was achieved by focusing on raising productivity and cost reduction.

To further consolidate its market position, the Company is undertaking expansion wherever viable and diversification in its range of products.

Rayon

In spite of the global recession we succeeded in maintaining our market share. The Unit improved its operating margins through better realizations and improved operating efficiencies. Continuous use of the TQM philosophy enabled the Unit in improving product quality and reduce process wastages.

To control energy costs and also promote clean fuel usage, one more boiler is being modified to use agro fuels in place of coal. With this the carbon foot print of the Unit should come down significantly in the current year.

The Unit achieved higher domestic sale of Nylon Chafer as well as Carbon di Sulphide.

Subsidiary

The bottling facility of Daurala Foods & Beverages Pvt. Ltd. continued to be on lease with the Company.

RESEARCH & DEVELOPMENT

Research and Developments have always been and continue to be a priority area in the Companys scheme of things. The outcome of these activities helped the Company by providing inputs for developing new products, energy saving, upgrading production processes and quality. These are essential to remain competitive and maintain leadership position in its chemical products and achieve substantial qualitative change in other operational areas.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:

- While preparing annual accounts the applicable accounting standards had been followed.

- The Company had selected such accounting policies and applied them consistently and made judgements that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for the period.

- That the Company had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- That the Company had prepared the annual accounts on a going concern basis.

AUDITORS OBSERVATIONS

The explanations/ information in respect of the observations of the Auditors in their Report on the standalone Accounts are given in detail in Notes to Accounts - (2)(b) of Schedule 11. These Notes read with the relevant Audit observations are self-explanatory.

CORPORATE GOVERNANCE

Corporate Governance and Management Discussion and Analysis Reports are given in Annexure-I.

DIRECTORS

Shri Atam Parkash, an independent director, resigned from the Board with effect from 31.10.2009 on health grounds after serving on the Board for about 2 decades. He passed away on 21.11.2009. The Company all through immensely benefited from his mature advice. The Board of Directors deeply mourns his passing away. The Board decided not to fill the vacancy for the time being.

Dr. V. L. Dutt and Shri S.B. Mathur, retire by rotation at the forth-coming Annual General Meeting and being eligible offer themselves for re-appointment.

OTHER INFORMATION

The information required under Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder relating to particulars of employees is given in Annexure-ll to this Report.

The information pursuant to Section 217(1)(e) of the Companies Act on conservation of energy, technology absorption and foreign exchange earnings/ outgo is given in Annexure - III.

ACKNOWLEDGEMENT

The Directors acknowledge the continued co-operation and support received from the financial institutions, banks and various Government agencies, and all our business associates.

The Directors also place on record their appreciation of the contribution made by employees at all levels.

For and on behalf of the Board

CHAIRMAN

New Delhi

May 29, 2010

 
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