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Directors Report of DCW Ltd.

Mar 31, 2015

TO THE MEMBERS

The Directors present their 76th Annual Report and Audited Accounts for the Financial Year ended 31st March, 2015 -

1. Financial Results 31-03-2015 31-3-2014 (Rs. in lacs) (Rs. in lacs)

Net Sales 125446.82 132555.21

Gross Profit 4723.64 10321.29

Less : Provisions

Depreciation 5200.17 5101.92

Profit Before Tax/(Loss) (476.54) 5219.37

Tax: Current Period - 1107.81

Previous Period 26.09 (86.63)

MAT Credit available for set off / Utilized 211.73 (84.59)

(237.82) 936.59

Profit/(Loss)After Current Tax & Tax Adjustments (714.36) 4282.78

Deferred Tax (122.19) 494.84

Profit after Tax/(Loss) (592.17) 3787.94

Add: Balance brought forward 8301.36 7897.02

Profit available for Appropriation 7709.19 11684.96

Appropriations:

General Reserves - 2500.00

Proposed Dividend - 755.25

Dividend Distribution Tax - 128.35

Balance carried forward 7709.18 8301.36

2. Dividend:

Due to loss incurred on the operations of the company during the year your directors have not recommended any dividend for the year on the equity shares of the Company.

3. Operations:

The sales for the year are Rs.1254.46 crores compared to Rs.1325.55 crores in the previous year. The profit for the year (before depreciation) was Rs.47.24 crores against a profit of Rs.103.21 crores in the previous year. The loss before tax amounted to Rs.4.77 crores as against profit of Rs.52.19 crores in the previous year. The loss after provision of current tax / taxes for previous years is Rs. 7.14 crores against a profit of Rs.42.83 crores of last year and loss after deferred tax was Rs. 5.92 crores against profit of Rs.37.88 crores of last year.

Major factors like lower realization on export of Synthetic Rutile, slump in prices of PVC in the third quarter of the year and heavy rains during third quarter of the year affecting the production of company's products at its Sahupuram unit, have resulted in loss on the operations of the Company.

4. Exports:

The Company's exports were of Rs. 158.30 crores as compared to Rs. 224.59 crores in the previous year. This fall in Export Turnover is mainly on account of lower realization on Synthetic Rutile, coupled with lower sales during the year.

ULUI

5. Division wise Performance: ——

a) PVC Division:

The turnover of the division was Rs. 596.56 crores as compared to Rs. 600.23 crores in the previous year. The demand for PVC continues to show positive growth. The Government has identified irrigation, power and infrastructure, as thrust areas and increased activity in these sectors are likely to boost demand of PVC Resin.

b) Caustic Soda Division:

The turnover of the division was Rs. 450.18 crores as compared to Rs.534.14 crores in the previous year, a fall of 15.71%. The fall in turnover of the division is mainly on account of lower realization on Synthetic Rutile. Heavy rains during third quarter of the year have also adversely affected the operations of this division at company's Sahupuram unit.

c) Soda Ash Division:

The turnover of the division was Rs.192.84 crores as compared to Rs.177.25 crores in the previous year, an increase of 8.8%. The increase in turnover in the division was on account of increase in realization on the products coupled with higher quantity of sale.

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2014-15 and the date of this Report.

6. Projects Implemented And Under Implementation

6.1 Projects Implemented

6.1.1. SYNTHETIC IRON OXIDE PIGMENT CUM CALCIUM CHLORIDE PROJECT AT SAHUPURAM,

TAMILNADU.

The work on Synthetic Iron Oxide Pigment (SIOP) project was completed and the plant has commenced commercial production in the month of May, 2015.

Besides employing DCW's in-house technology in the manufacture of Yellow Iron Oxide Pigments, the technology provided by Rockwood Italia (Group Company of Rockwood Pigments' USA) has been used for manufacture of Red Iron Oxide Pigments.

6.1.2. Producer Gas Plant

The company has set-up Producer Gas Plant at its Sahupuram unit to produce gas from coal. This will help the company to replace high cost Furnace Oil, resulting in lower cost of heating in various manufacturing units of the company at its Sahupuram works.

6.1.3. Reverse Osmosis Plant (RO) :-

To meet ever increasing water requirement of Company's Sahupuram unit and to guard against water scarcity in case of scanty rains, the company has established a Reverse Osmosis (R.O) plant to recycle hard / used water back into the process. This project has been commissioned and will help the company to meet water requirement of its Sahupuram unit.

6.2. Projects Under Implementation

6.2.1 Chlorinated Poly Vinyl Chloride (C-PVC) Project.

The Company has signed Technology License agreement with Arkema of France for putting up Chlorinated Poly Vinyl Chloride (C-PVC) Plant at its Sahupuram Facility in Tamilnadu. The UHDE India, has been appointed to do detailed engineering for the project. The work on this project has started and the project is expected to go on stream in 2015-16 .

6.2.2 Calcium Chloride plant at Dhrangadhra

The Calcium Chloride project is being modified to produce edible salt.

7. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

7.1 PVC Division:

The Company, one of the country's five producers of PVC resin, has maintained its market share of nearly 7%. Anti-dumping duty imposed on PVC resin imports from China, USA, Mexico, European Union, Indonesia will protect the domestic industry against dumping of PVC resin from these countries. Automation being implemented in this unit will help the Company in reducing cost and increasing production of this division.

7.2 Caustic Soda Division:

The Company continues to be a major player in South India with a market share of approximately 20%. The demand for caustic soda is expected to grow at a steady rate, specially with increased demand from alumina manufacturers. The Company has captive use of HCL & Chlorine which helps to maintain Caustic Production at full level.

7.3 Soda Ash Division:

The Soda Ash Industry continues to grow at a compounded rate of 4% - 5% per annum and this trend is expected to continue. Antidumping duty imposed on import of Soda Ash from countries of Iran, Pakistan, China, Ukraine, Kenya, European Union and the US by Govt. of India will protect the industry against dumping of Soda Ash from these countries.

8 OUTLOOK :

The Company has diversified operations with three business segments viz. PVC, Chloro Alkali and Soda Ash. It is thus reasonably protected from the vagaries of individual business cycles of these products. By the commencement of commercial production at company's new Synthetic Iron Oxide Pigment plant, company is entering into specialty chemical segment and this will give more stability to the bottom line of the company.

9. Cautionary Note:

Statement in this report describing the company's objectives, projections, estimates, expectation and prediction may be "forward looking statements". Actual results could differ materially from those expressed or implied due to variations in prices of raw materials and realization of finished goods, changes in government regulation, tax regimes, economic developments and other incidental factors

10. Directors & Key Managerial Personnel

A. Retirement by rotation

In accordance with the provisions of Section 152 (6) Mr. Mudit Jain (DIN No.00647298) retires by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer himself for re-appointment. The Board recommends his re-appointment

B. Appointment of Independent Directors

With coming into force of the Companies Act, 2013 all the existing Independent Directors viz., Shri Sodhsal Singh Dev of Dhrangadhra (DIN No.00682550), Smt. Sujata Rangenekar (DIN No.06425371), Shri D. Ganapathy (DIN No.02707898) and Shri Salil Kapoor (DIN No.02256540) were appointed as Independent Directors by the members of the Company at the Annual General Meeting held on 13th August, 2014 under Section 149 and other applicable provisions of the Companies Act, 2013 for a term of 5 consecutive years upto the conclusion of the 80th Annual General Meeting in the calendar year 2019.

The Independent Directors have submitted the declaration of Independence, as required pursuant to section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in sub- section (6) and there has been no change in the circumstances which may affect their status as independent director during the year.

C) Performance Evaluation -

In compliance with the Companies Act, 2013 and clause 49 of the Listing Agreement, the Performance evaluation of the Board was carried out during the year under review and a structured questionnaire was prepared covering various aspects of the Board's functioning such as participation, adequate preparation, contribution to strategy and other areas, quality of decision making, high quality of debate with robust and probing discussions etc. The Nomination and Remuneration Committee evaluated the performance of the Directors. Independent Directors at a separate meeting held by them have evaluated the performance of the non-Independent Directors and the Board as a whole and also evaluated the performance of the chairman taking into consideration the views of Managing Directors. The performance evalution of the Independant Diectors was carried out by the entire Board excluding the Director being evaluated.

Mr P.K. Jain, Chairman & Managing Director, Mr Bakul Jain, Mr Mudit Jain, Mr Vivek Jain, Managing Directors and Mr Vimal Jain, Chief Financial Officer and Ms. Jigna Karnick, Company Secretory are Key Managerial Personnel under Section 203 of the Companies Act, 2013. Ms Chital Shah, Company Secretary has resigned w.e.f. 15th April, 2014 and Ms. Jigna Karnick has been appointed as Company Secretary with effect from the said date.

11. Particulars of employees

11.1 The information required under Section 197 of the Companies Act, 2013 and Rule 5 (2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure 'A'.

11.2 The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

a. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year;

Managing Directors Ratio to median remuneration

Shri P.K. Jain 36:1

Shri Bakul Jain 36:1

Shri Mudit Jain 36:1

Shri Vivek Jain 36:1

For this purpose, sitting fees paid to the Directors have not been considered as remuneration

b. The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the Financial Year.

Directors, Chief Executive Officer, Chief Financial % increase in remuneration Officer and Company Secretary in the financial Year

Shri P.K. Jain - Chairman & Managing Director 7.17

Shri Bakul Jain - Managing Director 7.17

Shri Mudit Jain - Managing Director 7.15

Shri Vivek Jain - Managing Director 113.76

Shri Vimal Jain - Chief Financial Officer 12.51

Ms. Jigna Karnick - Company Secretary Appointed on 15/4/2014.

during the financial year 2013-14 Mr Vivek Jain was Sr. President of the Company for 11 months and has been appointed as Managing Director effective from 1/3/2014. As Mr. Vivek Jain is paid remuneration as Managing Director, there was substantial increase in his remuneration as compared to the remuneration paid to him as Sr. President of the Company during the year 2013-14.

c. The percentage increase in the median remuneration of employees in the financial year : 7%

d. The number of permanent employees on the rolls of the Company : 1839

e. The explanation on the relationship between average increase in remuneration and Company performance:

There is no direct relationship between average increase in remuneration of employees and Company performance.

f. Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company:

Aggregate remuneration of key managerial 534.56 personnel (KMP) (Rs. in lakhs)

Revenue (Rs. in lakhs) 125081.36

Remuneration of KMPs (as % of revenue) 0.43

Profit before Tax (PBT) (Rs. in lakhs) (-) 476.53

Remuneration of KMP (as % of PBT) -

g. Variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year:

Particulars March 31, 2015 March 31, 2014 % Change

Market Capitalisation (Rs.in crores) 358.67 248.60 44%

Price Earnings Ratio - 6.55 -

h. Percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer

Market price as on 31st March, 2015 Rs. 16.80

Price at which the Rights Issue was made in 1988 Rs. 25.00 % increase of Market price over the price at which

the above Rights issue was made. 1008%

Adjustments made for (i) Bonus shares issued @1:1 in1988 & (ii) Bonus shares issued @ 3:5 in1991 & (iii) sub-division of shares from Rs. 10 to Rs. 2 in the year 2000.

I. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

The average increase in remuneration is 7% for employees other than Managerial Personnel and the increase in the Managerial remuneration was also to the same extent except of Mr. Vivek Jain, Managing Director. Mr. Vivek Jain was appointed as Managing Director with effect from 1/3/2014 prior to which he was Sr. President of the Company. As Mr. Vivek Jain is paid remuneration as Managing Director, there was substantial increase in his remuneration compared to the remuneration paid to him as Sr. President of the Company during the year 2013-14.

j.Comparison of each remuneration of the key managerial personnel against the performance of the Company:

Name Designation Remuneration % of increase in (Rs. in lakhs) Remuneration

Mr. P.K. Jain Chairman & 133.63 7.17 Managing Director

Mr.Bakul Jain Managing Director 133.63 7.17

Mr.Mudit Jain Managing Director 133.63 7.15

Mr.Vivek Jain Managing Director 133.63 113.78

Mr. Vimal Jain Chief Financial 51.05 12.51 Officer

Ms. Jigna Company Secretary 9.74 Appointed Karnick on 15/4/2014.

Name PAT % increase in (Rs. in lakhs) PAT

Mr. P.K. Jain (592.17) -

Mr.Bakul Jain (592.17) -

Mr.Mudit Jain (592.17) -

Mr.Vivek Jain (592.17) -

Mr. Vimal Jain (592.17) -

Ms. Jigna (592.17) - Karnick

k. The key parameters for any variable component of remuneration availed by the Directors:

Each of the Managing Director are entitled for commission @ 25% of the difference between 10% of the net profits as computed under Section 198 of the Companies Act, 2013, in a financial year and the aggregate of the salary and perquisites and benefits paid to all the Managing Directors in that year subject to the overall ceilings stipulated in Sections 197 of the Companies Act, 2013.

Each of the Non Executive Directors are entitled for commission aggregating not more than 1% of the net profits of the Company in a financial year subject to a maximum of Rs.3,00,000/- per Director as approved by the members of the Company at the Extra-Ordinary General Meeting held on December 19, 2013 besides the sitting fees for meetings of the Board and its committees attended by them.

l. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year. :

There are no employees of the Company who receive remuneration in excess of the highest paid Director of the Company.

m. Affirmation that the remuneration is as per the remuneration policy of the Company:

The Company affirm that remuneration is as per the remuneration policy of the Company.

12. Statutory Auditors

M/s. V. Sankar Aiyar & Co., Chartered Accountants, Statutory Auditors of the Company will hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment as per Section 139 of the Companies Act, 2013.

M/s. V. Sankar Aiyar & Co. have expressed their willingness to get re-appointed as the Statutory Auditors of the company and has furnished a certificate of their eligibility and consent under Section 141 of the Companies Act, 2013 and the Rules framed there under. In terms of the Listing Agreement, the Auditors have confirmed vide their letter dated 22nd January, 2015, that they hold a valid certificate issued by the Peer Review Board of the ICAI.

The members are requested to appoint M/s. V. Sankar Aiyar & Co., Chartered Accountants as Auditors from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting in 2016 on the terms and conditions as will be stated in the notice convening the forthcoming Annual General Meeting.

The Auditors' Report to the Shareholders for the year under review does not contain any qualification.

The Report given by the Statutory Auditors for the financial Statements for the year ended 31st March, 2015 read with explanatory notes thereon do not call for any explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

13. Cost Auditor And Cost Audit Report

Pursuant to Section 148 of the Companies Act, 2013 the Board of Directors on the recommendation of the Audit Committee appointed M/s. N.D. Birla & Co., Ahmadabad and M/s. R. Nanabhoy & Co., Mumbai for conducting cost audit of the company's Soda Ash and Caustic Soda divisions respectively for the financial year 2013-14. Their appointments were approved by Ministry of Corporate Affairs. They have conducted Cost Audit for the financial year 2013-14 of the respective divisions and have filed cost audit report with the Central Goverment. They have also been appointed to do the cost audit of the said respective divisions for the year 2015-16

14. Secretarial Auditor and Secretarial Audit Report.

M/s. S. K. Jain & Co., (Proprietor Dr. S. K. Jain) Practicing Company Secretary was appointed to conduct Secretarial Audit of the Company for financial year 2014-15 as required under section 204 of the Companies Act, 2013 and the Rules thereunder. The Secretarial Audit report for financial year 2014-15 forms part of the annual report as "Annexure B" to the Boards Report. The said report does not contain any observation or qualification requiring explanation or comments from the Board under Section 134 (3) of the Companies Act, 2013.

15. Conservation of Energy, Technology and Foreign Exchange.

Information on conservation of energy, technology absorption, foreign exchange earnings and out go, required to be given pursuant to provision of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 is annexed here to and marked as "Annexure C" and forms part of this report.

16. Share Capital

During the year your company has allotted 37,03,704 equity shares of Rs.2 each at a premium of Rs.25 per share on 12/9/2014 to promoters group on preferential basis. Consequently the equity share capital has increased from Rs.41,95,81,906/- divided into 20,97,90,953 equity shares of Rs.2 each to Rs.42,69,89,314/- divided into 21,34,94,657 equity shares of Rs. 2 each.

17. Extract of the Annual Return

Pursuant to the provisions of Section 134 (3) (a) of the Companies Act, 2013, Extract of the Annual Return for the financial year ended 31st March 2015 made under the provisions of Section 92 (3) of the Act in Form MGT-9 is annexed herewith as "Annexure D".

18. Public Deposits

The Company has not accepted renewed any amount falling within the purview of provisions of Section 73 of the Companies Act. 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Hence, the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Act is not applicable.

19. Internal Control Systems and their adequacy

The Company has adequate internal control procedure commensurate with the nature of its business and size of its operations. Internal Audit is conducted on a regular basis by a reputed firm of Chartered Accountants.

The reports of the internal audit along with comments from the management are placed for review before audit committee.

20. Committees of the Board.

The Board has constituted the following mandatory committees viz., Audit Committee, Stakeholders Relationship Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Risk Management Committee and Internal Compliance Committee. The terms of reference of these committees are as required under the provisions of the respective Acts / Listing Agreement with Stock Exchanges / as determined by the Board. Meeting of each of these committees are convened by the respective Chairman of the Committees and minutes of the meetings of these committees are placed at the Board Meetings. The details of these committees are stated in this Report / Annexures to this Report.

20.1 Corporate Social Responsibility (CSR)

Pursuant to Section 135 of the Companies Act, 2013 and the relevant Rules, the Board has constituted the Corporate Social Responsibility (CSR) Committee under the Chairmanship of the Board Chairman, Mr. P.K. Jain. The other members of the Committee are Mr. Bakul Jain, Managing Director and Mr. Sodhsal Singh Dev of Dhrangadhra, Independent Director. A detailed CSR Policy has also been framed which is placed on the company's website. Other details for the CSR activities as required under Section 135 of the Companies Act, 2013 are given in the CSR Report at "Annexure E".

20.2 Internal Compliance Committee.

In terms of the provisions of the Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013., the Company has formed Internal Compliance Committees at its Head Office at Mumbai, and its Works at Sahupuram, Tamilnadu and Dhrangadhra, Gujarat. The Board also has approved a policy for prevention of Sexual Harassment at Work place. There were no Complaints filed till date under the said policy.

20.3 Risk Management Committee

As required under Clause 49 of the Listing Agreement, the Board of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Risk Management Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

20.4 Audit Committee.

The Board has well-qualified Audit Committee comprising only. Independent Directors. They possess sound knowledge on Accounts, Audit, Finance, Taxation, Internal Controls etc. The details of the Composition of the Audit Committee are given in the Corporate Governance Report.

The Company Secretary of the Company acts as Secretary of the Committee.

During the year, there are no instances where the Board had not accepted the recommendation of Audit Committee.

20.5 Nomination & Remuneration Committee & Policy

The Company has duly constituted Nomination & Remuneration Committee to align with the requirements prescribed under the provisions of the Companies Act, 2013 and the revised Clause 49 of the Listing Agreement. The details of the Composition of the Nomination & Remuneration Committee are given in the Corporate Governance Report.

The Board has framed a policy for selection and appointment of Directors, Senior Management and their Remuneration. The policy provides for determining qualification, positive attributes, and independence of a Director.

21. Details in respect of adequacy of internal financial controls with reference to the financial statements.

A strong internal control culture is pervasive in the company. The Company has implemented a robust and comprehensive internal control system for all the major processes to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws and regulations, safeguarding of assets and economical and efficient use of resources. The internal audit department continuously monitors efficiency of internal controls with objective of providing to the audit committee and the board of directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organizations risk management, controls and governance processes.

Your Company operates in SAP, ERP environment and has its accounting records stored in an electronic form and backed up periodically. The ERP system is configured to ensure that all transactions are integrated seamlessly with the underlying books of account. Your Company has automated processes to ensure accurate and timely updation of various master data in the underlying ERP system.

22. Related Party Transactions:

All the related party transactions are entered on arms length basis and are in compliance with the applicable provisions of the Act and the Listing Agreement. All related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the audit committee on a quarterly basis specifying the nature value and terms and conditions of the transactions.

The Related Party Transactions Policy as approved by the Board is uploaded at the Company's website.

The details of transactions with Related Parties are provided in the accompanying financial statements.

23. Particulars of loans, guarantees and investments.

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

24. Vigil Mechanism / Whistle Blower Policy

In terms of the provisions of Section 177 (9) & (10) of the Companies Act, 2013 company has established a Vigil Mechanism for Directors and employees to report genuine concerns about unethical behavior or suspected fraud or violation of the Company's Code of Conduct by Directors / employees. The Audit Committee oversees the Vigil Mechanism. Vigil Mechanism has been disclosed by the Company on its website.

25. Corporate Governance Certificate

The report on Corporate Governance is annexed to this report as "Annexure F".

26. Directors' Responsibility Statement

In terms of section 134 (3) (c ) of the Companies Act, 2013, your Directors have:

(a) in the preparation of the annual accounts for the Financial Year ended March 31, 2015 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 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 at the end of the financial year and of the profit and 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; and

(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.

(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.

27. Significant/Material Orders passed by the Regulators

There are no significant/material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

28. Insurance

All the properties of the Company are adequately insured.

29. Industrial Relations:

The relations between the employees and the management were cordial and an atmosphere of understanding prevailed throughout the year.

30. Acknowledgements

The Board places on record their grateful appreciation for the assistance and co-operation received from the Financial Institutions and the Banks.

For and on behalf of the Board of Directors

P.K. Jain Chairman & Managing Director Place: Mumbai Date: 23rd May, 2015


Mar 31, 2014

TO THE MEMBERS

The Directors present their 75th Annual Report and Audited Accounts for the Financial Year ended 31st March, 2014 -

1. Financial Results

31-3-2014 31-3-2013 (Rs. in lacs) (Rs. in lacs)

Net Sales 132555.21 132779.96

Gross Profit 10321.29 21331.90

Less: Provisions

Depreciation 5101.92 5290.88

Profit Before Tax 5219.37 16041.02

Tax: Current Period 1107.81 3255.00

Previous Period (86.63) 12.67

MAT Credit (84.59) 371.00 available for set off / Utilized 936.59 3638.67

Profit After Current 4282.78 12402.35 Tax & Tax Adjust- ments

Deferred Tax 494.84 1913.50

Profit after Tax 3787.94 10488.85

Add: Balance 7897.02 2291.81 brought forward

Profit available for 11684.96 12780.66

Appropriation

Appropriations:

General Reserves 2500.00 4000.00

Proposed Dividend 755.25 755.25

Dividend 128.35 128.39

Distribution Tax

Balance carried for- 8301.36 7897.02 ward

2. Dividend:

Your Directors recommend payment of Dividend at Re.0.36 per equity share of Rs. 2 each.

3. Operations:

The sales for the year are Rs.1325.55 crores compared to Rs.1327.80 crores in the previous year. The Gross Profit for the year (before depreciation) is Rs.103.21 crores against Rs.213.32 crores in previous year. The profit before tax amounted to Rs.52.19 crores as against Rs.160.41 crores in the previous year. The profit after provision of current tax is Rs.42.83 crores against Rs.124.02 crores, of last year and profit after deferred tax is Rs.37.88 crores against Rs.104.89 crores of last year, Deferred Tax is only a provision as per accounting guidelines and not an outflow.

Lower realization on export of Synthetic Rutile has largely affected decline in profits

4. Exports:

The Company''s exports are Rs. 223.36 crores as compared to Rs. 417.61crores in the previous year. This reduction in Export Turnover is on account of decrease in realization on Synthetic Rutile.

5. Divisionwise Performance:

a) PVC Division:

The turnover of the division is Rs.533.04 crores as compared to Rs.431.29 crores in the previous year,an increase in turnover by 24%. The increase in turnover is on account of better realization on PVC. The demand for PVC continues to show positive growth. The Government has identified irrigation, power and infrastructure, as thrust areas and increased activity in these sectors are likely to boost demand of PVC Resin.

b) Caustic Soda Division:

The turnover of the division is Rs. 533.04 crores as compared to Rs.697.80 crores in the previous year, a decrease of 24%. The reduction in turnover of the division is mainly on account of decrease in realization on Synthethic Rutile.

c) Soda Ash Division:

The turnover of the division is Rs.177.66 crores as compared to Rs.183.55 crores in the previous year. The decrease in turnover in the division is due to reduction in quantity of the product sold manufactured by the devision.

6. PROJECTS IMPLEMENTED AND

UNDER IMPLEMENTATION 6.1 Projects Under Implementation

6.1.1. SYNTHETIC IRON OXIDE PIGMENT AND CALCIUM CHLORIDE PROJECT :-

The work on Synthetic Iron Oxide Pigment (SIOP) project is in advanced stage of completion. Trial runs for Synthetic Iron Oxide Pigment have started and the plant will stabilize soon. Technical and Engineering Services for the plant has been provided by UHDE India Ltd. The facility will enable the company to produce a commercially viable product utilise its waste. Calcium Chloride and Pure Water will be recovered from the effluent of Synthetic Iron Oxide Pigment Plant. Both Synthetic Iron Oxide Pigment and Calcium Chloride facility have been given 100% EOU status. Besides employing DCW''s in- house developed technology, the company has made an agreement with Rockwood Italia (Group Company of Rockwood Pigments'' USA) for manufacture of red iron oxide pigment.

An off take agreement has been signed with Rockwood Italia for purchase of 50% iron oxide pigment Balance 50% of the product can be sold at company''s option.

6.1.2. PVC Automation-Cum- Balancing Equipment Program

Under PVC Automation-Cum- Balancing Equipment program the company has commissioned VCM Stripping tower and Fluidised Bed Dryer (FBD) at its PVC unit in Sahupuram, Tamilnadu. This will help the company in reducing the cost of the product and increase in PVC production.

6.1.3. Chlorinated Poly Vinyl Chloride (C-PVC)

The Company has signed

Technology License agreement with Arkema of France for putting up Chlorinated Poly Vinyl Chloride (C-PVC) Plant at its Sahupuram Facility, in Tamilnadu. The UHDE India, has been appointed to do detailed engineering for the project. The work on this project has started and mechanical erection of the plant is estimated to be completed by fourth quarter of 2014-15.

6.1.4. Producer Gas Plant :-

The company has established Producer Gas Plant at its Sahupuram unit, in Tamilnadu, to produce gas from coal the trail runs of the same have started. This will help the company to replace high cost Furnace Oil, resulting in lower cost of heating in various manufacturing units of the company at its Sahupuram works.

6.1.5. Reverse Osmosis Plant (RO) :-

To meet ever increasing water requirement of company''s Shupuram unit, in Tamilnadu, and to guard against water scarcity in case of scanty rains, the company has established a Reverse Osmosis (R.O), plant to recycle hard / used water back into the process. This project has been commissioned and will help the company meet water requirement of its Sahupuram unit.

6.1.6. CALCIUM CHLORIDE PLANT, DHARAGHANDRA

The Calcium Chloride project is having technical problem. It may not be possible to produce calcium chloride in the plant and the equipments erected for this plant are being used in the soda ash plant.

7. Corporate Governance

The report on Corporate Governance is annexed to this report.

8. Conservation of Energy, Technology Absorption and 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 the Board of Directors) Rules 1988 is set out in the Annexure forming part of this Report.

9. Particulars of Employees:

Information in accordance with Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is set out in the Annexure forming part of this Report.

10. Environment and Safety Measures

The Company is committed to Industrial Safety and Environment Protection and these are on going processes at the Company''s various plants. The Sahupuram Unit has been granted ISO 14001 Certificate for complying with environment protection and safety.

11. Directors:

Shri. Bakul Jain, Director, retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer himselves for reappoint-ment.

Shir. Vivek Jain was appointed as an Additional Director and will hold office upto the date of forth coming Annual General Meeting. The company has received notice from Director signifying his intention to propose his appointment as Director retiring by rotation. Shri. Salil Kapoor was appointed as an Additional Director and will hold office upto the date of forth coming Annual General Meeting The Company has recveived notice from a member signifying his intension to proposr Shri. Salil kapoor as an Independent Director of period of five consecutive years. Resolutions have been incorporated in the notice of the forth comming Annual General Meeting for appointment of Shri. Vivek Jain as a Director retiring by rotation and Shri. Salil Kapoor, as an Independent Director for a period of 5 consecutive years In terms of Section 149 of the Companies Act, 2013, the present Directors Shri. Sodshal Singh Dev of Dhrangadhra, Ms.Sujata Rangenekar and Shir. D.Ganapathy are proposed to be appointed as Independent Directors for a Consequetive period of 5 years at the forthcoming Annual General Meeting and resolutions for the said purpose are incorporated in the notice of the said Annual General Meeting. During the year Dr.S.C.Jain, Managing Director since 44 years and also the Chairman of the Board since 30 years, has resigned as Managing Director and Director on 28th February, 2014. During his long tenure he made immense contributions for the growth of the Company and spearheaded many projects which are today the backbone of the Company. The Board places on record its appreciation for the outstanding contributions made by him over several decades and unanimously appointed him as Chairman Emeritus of the Company and also a permanent invitee for all Board Meetings. Also Shri.Berjis Desai, Shri. F.H.Tapia, Shri.S.K.Jalan and Shri. R.V.Ruia, have resigned from the Board during the year. The Board places on record its appreciation for the valuable services rendered by them during their tenure.

12. Auditors and Auditors'' Report:

M/s V. Sankar Aiyar & Co., Chartered Accountants - Statutory Auditors of the Company retire at the forthcoming Annual General Meeting and are eligible for reappointment.

13. Cost Audit:

In accordance with the directions received from the Department of Company Affairs, the company has appointed M/s. N.D.Birla & Company, Ahmedabad and M/s.R.Nanabhoy & Company, Mumbai for conducting the Cost Audit of the Company''s Soda Ash and Caustic Soda Divisions respectively for the financial year 2012-13. Their appointments were approved by the Ministry of Corporate Affairs. They have conducted the cost audit for the financial year 2012-13 of respective divisions and have filed the cost audit report with the central government.

14. MANAGEMENT DISCUSSION AND ANALYSIS REPORT OUTLOOK :

The Company has diversified operations with three business segments viz. PVC, Chloro Alkali and Soda Ash. It is thus reasonably protected from the vagaries of individual business cycles of these products.

PVC Division:

The Company, one of the country''s five producers of PVC resin, has maintained its market share of nearly 7%. Proposed implementation of Anti-dumping duty on PVC resin imports from China, USA, Mexico, European Union, Indonesia will protect the domestic industry against dumping of PVC resin from these countries. Also automation programme in this unit will help the company in reducing cost and increasing production on this division.

Caustic Soda Division:

The Company continues to be a major player in South India with a market share of approximately 20%. The demand for caustic soda is expected to grow at a steady rate, specially with increased demand from alumina manufacturers. The company has captive use of HCL & Chlorine which helps to maintain Caustic Production at full level.

Soda Ash Division:

The Soda Ash Industry continues to grow at a compounded rate of 4% - 5% per annum and this trend is expected to continue. Antidumping duty imposed on import of Soda Ash from countries like Iran, Pakistan, China, Ukraine, Kenya, European Union and the

US by Govt., of India, will protect the industry against dumping of Soda Ash from these countries.

15. Internal Control Systems:

The Company has an adequate internal control procedure commensurate with the nature of its business and size of its operations. Internal Audit is conducted on a regular basis by a reputed firm of Chartered Accountants. The reports of the internal audit along with comments from the management are placed for review before audit committee.

16. Human Resources:

The Company has been following procedure for recruitment of best personnel for all the departments and is making continuous efforts to retain and groom them to meet its present and future requirements. The Company sponsors employees for various seminars on finance, operations, marketing and human resource development to update their skills and develop close co- ordination with their counterparts in industries. This is basically done to enhance their skills in order to achieve an optimum output from them.

17. Cautionary Note:

Statement in this report describing the company''s objectives, projections, estimates, expectations and predictions may be "forward looking statements". Actual results could differ materially from those expressed or implied due to variation in prices of raw materials, demand and realization of finished goods, changes in Government regulations, tax regimes, economic developments and other incidental factors.

18. DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors have:

a) Followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures;

b) 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 your Company at the end of financial year and of the profit of your Company for that period;

c) 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 your Company and for preventing and detecting fraud and other irregularities and

d) Prepared the Annual Accounts on a going concern basis.

19. Insurance

All the properties of the Company are adequately insured.

20. Industrial Relations:

The relations between the employees and the management were cordial and an atmosphere of understanding prevailed throughout the year.

21. Acknowledgement:

The Board places on record their grateful appreciation for the assistance and co-operation received from the Financial Institutions and the Banks.

On behalf of the Board of Directors

Pramod Kumar Jain

Chairman and Managing Director Mumbai, 19th May''2014


Mar 31, 2013

TO THE MEMBERS

The Directors present their 74th Annual Report and Audited Accounts for the Financial Year ended 31st March, 2013

1. Financial Results

31-322013 31-3-2012 (Rs. in lacs) (Rs. in lacs)

Gross Sales 143730.66 128064.48

Gross Profit 21331.90 9663.18

Less : Provisions

Depreciation 5290.88 5097.29

Profit Before Tax 16041.02 4565.88

Tax: Current Period 3255.00 900.00

Previous Period 12.67

MAT Credit available for set off / Utilized 371.00 (900.00)

3638.67

Profit After 12402.35 4565.88

Current Tax & Tax Adjustments

Deferred Tax 1913.50 1499.00

Profit after Tax 10488.85 3066.88

Add: Balance 2291.81 2074.70 brought forward

Profit available for 12780.66 5141.58

Appropriation Appropriations:

General Reserves 4000.00 2000.00

Proposed Dividend 755.25 731.16

Dividend 128.39 118.61

Distribution Tax

Balance carried 7897.02 2291.81 forward

2. Dividend:

Your Directors recommend payment of Dividend at Re.0.36 per equity share of Rs. 2 each.

3. Operations:

The sales for the year are Rs.1437.31 crores during the year compared to Rs. 1280.64 crores in the previous year, registering an increase of 12%. The Gross Profit for the year (before depreciation) is Rs. 213.31 crores against Rs. 96.63 crores in previous year. The profit before tax amounted to Rs.160.41 crores as against Rs. 45.66 crores in the previous year. The profit after provision of current tax is Rs. 124.02 crores against Rs. 45.66 crores, of last year and profit after deferred tax is Rs.104.89 crores against Rs.30.67 crores of last year, Deferred Tax is only a provision as per accounting guidelines and not an outflow. Better realization on export of

Synthetic Rutile has largely helped in increase of profits

4. Exports:

The Company''s exports are Rs.419.50 crores as compared to Rs. 255.82 crores in the previous year. On account of better realisation on Synthetic Rutile value of exports has gone up.

5. Divisionwise Performance:

a) PVC Division:

The turnover of the division is Rs.486.28 crores as compared to Rs. 524.15 crores in the previous year. The demand for PVC continues to show positive growth. The Government has identified irrigation, power and infrastructure, as thrust areas and increased activity in these sectors are likely to boost demand of PVC Resin.

b) Caustic Soda Division:

The turnover of the division is Rs. 725.34 crores as compared to Rs. 552.30 crores in the previous year, an increase of 31%. The turnover of the division has gone due to better relisation.

c) Soda Ash Division:

The turnover of the division is Rs.208.12 crores as compared to Rs. 194.79 crores in the previous year registering an increase of 7%. The increase in turnover is due to better realization and increase in sale of both Soda Ash and Soda bicarbonate.

6. PROJECTS UNDER

IMPLEMENTATION 6.1.1Projects Under Implementation 6.1.1.1CALCIUM CHLORIDE PLANT

The Calcium Chloride project is having technical problem. It may not be possible to produce calcium chloride , the plant and the equipment erected for this plant will be used in the soda ash manufacture.

6.1.2 SYNTHETIC IRON OXIDE PIGMENT AND CALCIUM CHLORIDE PROJECT :–

The work on Synthetic Iron Oxide Pigment (SIOP) project is in advanced stage of implementation. The company has appointed UDHE India ltd., to provide engineering services. The mechanical completion of the plant is expected to be completed by the third quarter of 2013–14. The facility once established will enable the company to utilise its waste and produce a commercially viable product. This plant is expected to start commercial production by fourth quarter of 2013–14. Calcium Chloride will be produced from the effluent of Synthetic Iron Oxide Pigment Plant. Both Synthetic Iron Oxide Pigment and Calcium Chloride facility have been given 100% EOU status. Besides employing DCW''s in– house developed technology, the company has made an agreement with Rockwood Italia (Group Company of Rockwood Pigments'' USA) for manufacture of both yellow and red iron oxide pigment. Waste stream of Iron Oxide plant will produce Calcium Chloride and Pure Water. An off take agreement has been signed with Rockwood Italia for sale of 50% Iron Oxide Pigment to them. Balance 50% of the product can be sold at company''s option.

6.1.4PVC Automation–Cum– Balancing Equipment Program

The company''s PVC Automation– Cum–Balancing Equipment program is under progress, which will increase PVC capacity from existing 90000 TPA to 140000 TPA. The expansion is expected to be completed by Third Quarter of 2013–14.

7. Corporate Governance

The report on Corporate Governance is annexed to this report.

8. Conservation of Energy, Technology Absorption and 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 the Board of Directors) Rules 1988 is set out in the Annexure forming part of this Report.

9. Particulars of Employees: Information in accordance with Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is set out in the Annexure forming part of this Report.

10. Environment and Safety Measures

The Company is committed to Industrial Safety and Environment Protection and these are on going processes at the Company''s various plants. The Sahupuram Unit has been granted ISO 14001 Certificate for complying with environment protection and safety.

11. Directors:

Shri. P. K. Jain, Shri. S. K. Jalan and Shri R. V. Ruia, Directors, retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer themselves for reappointment. Smt. Vandana Jain, Executive Director of the Company, has resigned from the Board with effect from 6th August, 2012. Dr. V. H. Joshi, Director of the Company, has resigned from the Board with effect from 16th October, 2012. Smt. Vandana Jain has been with the Company since 2006 and Dr. V. H. Joshi has been with the Company since 1990. The Board has put on record its appreciation for the valuable service rendered by them during their tenure. Mr. Mudit Jain has been appointed as an Additional Director and also as Whole Time Director designated as ''Executive Director'' with effect from 6th August, 2012. Smt. Sujata Ranganekar and Shri. D.Ganapathy, were appointed as Additional Directors with effect from 31st October, 2012 and 7th November, 2012 respectively and will hold office upto the date of forth coming AGM. The company has received notices from members signifying their intention to propose their appointment as Directors.

Resolutions have been incorporated in the Notice convening the forthcoming Annual general Meeting for the appointment of Smt. Sujata Rangnekar and Shri D. Ganapathy.

12. Auditors and Auditors'' Report: M/s V. Sankar Aiyar & Co., Chartered Accountants – Statutory Auditors of the Company retire at the forthcoming Annual General Meeting and are eligible for reappointment.

13. Cost Audit:

In accordance with the directions received from the Department of Company Affairs, the company has appointed M/s. N. D. Birla & Company, Ahmedabad and M/s. R. Nanabhoy & Company, Mumbai for conducting the Cost Audit of the Company''s Soda Ash and Caustic Soda Divisions respectively for the financial year 2011–12. Their appointments were approved by the Ministry of Corporate Affairs. They have conducted the cost audit for the financial year 2011–12 of respective divisions.

The due date for filing of consolidated cost audit report was 28th February, 2013 and the same has been filed on 14th June, 2013. The Company has reappointed M/s. N. D. Birla & Company, Ahmedabad and M/s. R. Nanabhoy & Company, Mumbai for conducting the cost audit of the Company''s Soda Ash and Caustic Soda Divisions respectively for the financial year 2012 – 2013. Their appointments were approved by the Ministry of Corporate Affairs. They have conducted the cost audit for the financial year 2012 – 2013 of respective divisions and would file the cost audit reports with the Central Government before the due date. The due date for filing of cost audit report is 27th September, 2013.

14. ISSUE OF CONVERTIBLE WARRANTS TO PROMOTER GROUP ON PREFERENTIAL BASIS:

Pursuant to the approval granted by the shareholders of the Company at their Annual General Meeting held on November 24, 2011, the Company had allotted on January 9, 2012, 1,36,36,363 convertible warrants on preferential basis to Promoter Group; each warrant convertible into one Equity Share of Rs. 2 each, at a premium of Rs. 9 per share, in one or more tranches, within a period of 18 months from the date of allotment of warrants. Out of these warrants 69,45,455 warrants were converted into Equity shares on January 31, 2012. 39,23,393 warrants were converted into Equity Shares on 23rd April, 2012. 12,36,363 warrants were converted into Equity Shares on 22nd October, 2012 and 15,31,152 warrants were converted into Equity Shares on 24th December, 2012. None of the warrants are now pending for conversion into Equity Shares.

15 PROPOSED PROJECT 16.1Chlorinated Poly Vinyl Chloride (C–PVC)

The Company has signed Technology License agreement with Arkema of France for putting up Chlorinated Poly Vinyl Chloride (C–PVC) Plant at its Sahupuram Facility, in Tamilnadu. The UHDE India ltd., will do detailed engineering for the project. This project is estimated to take 12–15 months for implementation.

15.2 Producer Gas Plant :–

The Producer Gas Plant to produce gas from coal is expected to be operational by June''2013. This will replace high cost Furnace Oil resulting in lower cost of heating in various units of the company.

17. Internal Control Systems:

The Company has an adequate internal control procedure commensurate with the nature of its business and size of its operations. Internal Audit is conducted on a regular basis by a reputed firm of Chartered Accountants. The reports of the internal audit along with comments from the management are placed for review before audit committee, to consider its adequacy.

18. Human Resources:

The Company has been following a standard procedure for recruitment of best personnel for all the departments and is making continuous efforts to retain and groom them to meet its present and future requirements. The current strength is 2174 employees. The Company sponsors employees for various seminars on finance, operations, marketing and human resource development to update their skills and develop close co– ordination with their counterparts in industries. This is basically done to enhance their skills in order to achieve an optimum output from them.

19. Cautionary Note:

Statement in this report describing the company''s objectives, projections, estimates, expectations and predictions may be "forward looking statements". Actual results could differ materially from those expressed or implied due to variation in prices of raw materials, demand and realization of finished goods, changes in Government regulations, tax regimes, economic developments and other incidental factors.

20. DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors have:

(a) Followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures;

(b) 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 your Company at the end of financial year and of the profit of your Company for that period;

c) 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 your Company and for preventing and detecting fraud and other irregularities and

d) Prepared the Annual Accounts on a going concern basis.

21. Insurance

All the properties of the Company are adequately insured.

22. Industrial Relations:

The relations between the employees and the management were cordial and an atmosphere of understanding prevailed throughout the year.

23. Acknowledgement:

The Board places on record their grateful appreciation for the assistance and co–operation received from the Financial Institutions and the Banks.

On behalf of the Board of Directors

Dr. Shashi Chand Jain

Chairman and Managing Director

Mumbai, 14th May, 2013.

 
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