Directors Report of Deepak Nitrite Ltd.
Mar 31, 2023
Your Directors have pleasure in presenting the Fifty Second (52nd) Annual Report and the third Integrated Report of Deepak Nitrite Limited (âDNLâ or âyour Companyâ or âthe Companyâ) along with the Audited Financial Statements for the Financial Year (âFYâ) ended March 31, 2023. The Directorsâ Report has been prepared on a standalone basis and the consolidated performance of the Company and its subsidiaries has been referred to wherever required.
Your Companyâs financial performance for the year ended March 31, 2023 is summarized below:
|
Particulars |
Standalone Results |
(7 in Crores) Consolidated Results |
||
|
2022-23 |
2021-22 |
2022-23 |
2021-22 |
|
|
Total Revenue (Gross) |
3,135.13 |
2,581.85 |
8,019.64 |
6,844.80 |
|
Operating Profit Before Depreciation, Finance Cost, Exceptional Item and Tax (EBITDA) |
687.57 |
716.15 |
1,336.96 |
1,646.19 |
|
Less: Depreciation and Amortization expenses |
76.16 |
72.54 |
166.30 |
177.70 |
|
Less: Finance Costs |
1.57 |
1.60 |
24.78 |
34.04 |
|
Profit before Tax |
609.84 |
642.01 |
1,145.88 |
1,434.45 |
|
Less: Tax expenses |
140.45 |
155.80 |
293.88 |
367.81 |
|
Net Profit for the Year |
469.39 |
486.21 |
852.00 |
1,066.64 |
|
Other Comprehensive Income |
(4.85) |
0.06 |
(5.00) |
0.17 |
|
Total Comprehensive income for the Year |
464.54 |
486.27 |
847.00 |
1,066.81 |
|
Surplus brought forward from previous year |
1,694.52 |
1,288.07 |
2,776.96 |
1,789.97 |
|
Balance available for Appropriation |
2,158.89 |
1,774.54 |
3,623.80 |
2,856.98 |
FY 2022-23 commenced in the backdrop of the Russia-Ukraine War. The resultant disruption in trade routes and the implementation of sanctions by the western countries caused a recalibration in global supply chains. The situation was exacerbated by stringent restrictions in China at the start of the fiscal year, which constrained the ability of Chinese chemical companies to respond to the global disruption. This has led to shortages of chemicals and raw materials; and resulted in a spike in prices of certain products as global customers scrambled to secure supply of critical inputs, largely commodities.
Against this backdrop, your Company focused on reliable and consistent supply to ensure that its customers could truly âDepend on Deepakâ. The emphasis was on maintaining elevated levels of production across all its manufacturing facilities while adhering to stringent regulatory mandates, rules and safety requirements.
Further, your Company continues to make progress in its initiatives to de-risk its business model. The Company has faced several operational and macro-economic challenges during the year that have tested its business model but it has emerged stronger and self-assured due to the all-round enhancement of its strategic positioning.
The performance during the FY 2022-23 should be viewed against the backdrop of the highly dynamic macro-economic environment. The sanctions on Russia combined with stringent COVID-19 protocols in China severely disrupted traditional global supply chains. This was accompanied by an increase in input and energy expenses, highly volatile foreign exchange rates, sharp rise in prices of crude oil and resultant petrochemical derivatives as well as inbound and outbound logistical challenges during the year.
Consequently, the supply and demand of key intermediates was impacted. However, your Companyâs manufacturing expertise, global-scale facilities and nimble operations supported by a strong financial position have ensured an efficient performance. Your Company has demonstrated notable agility in seizing opportunities arising from the upheavals across the chemical value chain. Strong customer relationships and global competitiveness have enabled it to be a preferred partner of choice for domestic and global customers alike, while a focus on operational efficiency has ensured that plants operate consistently at high utilization levels. As a result, your Company
has achieved new production and sales benchmarks for several key products, showcasing the richness of years of experience and expertise in critical chemistries.
The business was also impacted due to the fire incident at the Nandesari plant in Gujarat in June 2022, which resulted in damage to some assets and inventory, as well as disruptions to business. Costs were incurred for about 40 days without corresponding revenue.
The Company, inspite of above challenges has demonstrated strong business performance with year-on-year growth reported across several product lines. In FY 2022-23, the total revenue, including other income, increased by 21% to 7 3,135.13 Crores from 7 2,581.85 Crores in FY 2021-22, sustaining the performance momentum.
EBITDA for FY 2022-23 was at 7 687.57 Crores, down 4% from 7 716.15 Crores in the previous year. Cost of Goods Sold increased by 37% to 7 1,669.68 Crores in FY 2022-23, as compared to 7 1,221.34 Crores in the preceding year. In FY 2022-23, profit before tax (PBT) was at 7 609.84 Crores, compared to 7 642.01 Crores in FY2021-22, registering a 5% decrease. Profit After Tax (PAT) was at 7 469.39 Crores in FY 2022-23, down by 3% from 7 486.21 Crores in the previous year.
Your Company emerged from the situation stronger than before. Following a month-long production shutdown, operations gradually resumed from early July and reached full production capacity by October 2022. The Company has estimated and recognised an initial loss of 7 47.20 Crores on account of damage to certain property, plant and equipment & inventory and has recognised insurance claim receivable to the extent of aforesaid losses. The Company has received an interim relief from the insurance companies towards assets and inventories aggregating of 7 25.00 Crores, out of which 7 11.23 Crores has been received in the month of March 2023 which has been adjusted against the claims receivable and balance 7 13.77 Crores received in the month of April 2023. As a measure to further elevate safety standards, a fire readiness audit was conducted and systems and safety measures were further upgraded during the fiscal year.
Your Company has shown significant progress across the business segments, which has contributed to strong revenue growth. It is important to note that the chemical industry also experienced substantial fluctuations in raw material and utility costs during the year, which had an impact on the pricing of the final products. Despite several challenges, your Company has been able to achieve a resilient performance by leveraging the diverse product portfolio to better meet its customersâ needs and maintain its market share. Your Company has also actively engaged customers to adjust prices in response to higher raw material costs and other utilities. Additionally, uninterrupted supply of critical raw materials was ensured to optimize high operational efficiency. Through these measures, your Company has been able to deliver a credible performance.
During the year, depreciation and finance costs amounted to 7 76.16 Crores and 7 1.57 Crores, respectively. Your Company is debt-free as of March 31, 2023 and its operational surplus of 7 368.87 Crores is invested in liquid mutual funds, which offer liquidity, stability and greater yields.
In the FY 2022-23, the domestic revenues of your Company increased by 18% to 7 1,718.90 Crores compared to 7 1,454.16 Crores recorded in the previous year. This decline was due to softer demand from key industries, which was countered by the targeted initiatives undertaken by your Company. On the other hand, export revenue increased to 7 1,314.58 Crores from the 7 1,056.89 Crores in the previous year. driven by focused approach in targeting countries experiencing faster recovery and positive demand. Your Companyâs wide range of intermediates also benefits from the strategic shift of international customers from âjust in timeâ to âjust in caseâ supply chain philosophy.
As a part of its growth strategy, your Company recently made an announcement regarding an investment in chemical manufacturing plant in the Sultanate of Oman. The investment is envisaged due to various advantages for setting up a chemical plant in Oman such as lower price of power, availability of natural gas for energy, availability of attractive priced ammonia through pipeline, Free Trade Agreement with USA, availability of caustic soda locally. Your Company is investing 51% in the equity of a the Company the Company.
Moreover, the teams have demonstrated remarkable adaptability and client focus even in the face of significant challenges leading to credible outcomes. Your Company is committed to becoming a diversified chemical company while maintaining leadership in crucial products and processes and generating new value through innovation. To achieve volume scalability, it plans to establish stronger relationships with key customers, while continuing to prioritize process improvement and operational excellence. DNL is well-positioned to take advantage of this opportunity with its unique product mix and manufacturing experience, making it a strong contender to lead Indiaâs chemical manufacturing growth. DNLâs existing expansions and greenfield projects will enhance its competitiveness and market share, creating value for all stakeholders.
Deepak Phenolics Limited (âDPLâ), is a wholly owned material subsidiary of your Company. DPL is engaged in the business of manufacture of Phenol, Acetone and Iso Propyl Alcohol (âIPAâ).
Phenol is a versatile industrial organic chemical and is used for manufacture of various chemical intermediates. Phenol is consumed in a broad spectrum of end-user segments, including ply, laminates, foundry, paints, rubber, surfactants, pharmaceuticals and agro-chemicals. Acetone and IPA are mainly used in
pharmaceutical end use and also in paints, adhesives and thinners amongst many others.
DPL entered the FY 2022-23 amidst a robust business environment as global recovery took root after the Covid-19 related concerns and restrictions were slowly withdrawn globally, including in India. At the same time, events in Europe and Ukraine caused a major spike in energy prices, including for household use, which resulted in a marked shift in consumer spends towards basic essentials like food and energy. An unusual pull from transport fuels caused Benzene prices to spike to unprecedented levels in the middle of the year. However, the market witnessed a steady decline thereafter as global consumption declined, new capacities of Phenol came on-stream in China and downstream BisPhenol-A and Polycarbonates lost their luster. A continuous bear phase in Phenol caused chain margins to shed nearly 25% from the previous year.
DPL stabilised its operations of second Boiler as well as the captive power plant in the initial months of the year and consequently, improved the operational reliability significantly. DPL could avoid at least ten to twelve power disturbances related plant stoppages thanks to operating the power plant on an islanded mode. Despite the challenges and while the Asian producers were struggling to keep operating rates above 75%, DPL created new benchmark in terms of volumes of production and sales. DPL was awarded the prestigious Responsible Care certification by ICC during the year. DPLâs IPA product was also certified to be meeting the quality requirement of Indian, British and American (US) Pharmacopeia, reflecting the commitment to produce world class quality products. DPL also commenced debottlenecking its Phenol production capacity by 10% over and above the current level of production, which is expected to be operational by the end of H1 of FY 2023-24.
DPL also started trials of using bio fuels in its boilers to reduce its usage of fossil fuels and it is planned to further scale it up during the FY 2023-24.
During FY 2022-23, DPL achieved robust sales growth despite external headwinds, aided by the Phenol plant operating at high utilisation levels. Average capacity utilization for the year stood at more than 120% which is meaningfully higher than the rated capacity. Revenues increased to R 4,986 Crores in FY 2022-23 from R 4,318 Crores in FY 2021-22. Revenue growth was linked to enhanced volumes of production and sales. Despite the improved top line performance, EBITDA margin compressed compared to the previous year. Profit After Tax reduced to R 445 Crores in FY 2022-23 as against R 624 Crores in FY 2021-22 which was largely due to drop in chain margins.
DPL continued to remain the largest producer of Phenol and Acetone in India with a market share of ~56%. Further with expanded capacity of IPA Plant, your company is able to reduce import dependency of IPA. During the year under review, your
Company successfully placed its volumes in the domestic market to reflect its commitment towards Aatmanirbhar Bharat.
The Group aims at growing through organic route, through its 100% subsidiary company, Deepak Chem Tech Limited (âDCTLâ). With its Registered Office at Vadodara in the State of Gujarat, DCTL is in the process of implementing various projects to produce intermediate chemicals for various applications leveraging existing competencies and product portfolio of the Group. DNL has invested R 9.50 Crores as equity and R 395.50 Crores as Compulsorily Convertible Debentures (CCD) into DCTL towards part funding the on-going projects.
As of now, DCTL is incorporating projects across two sites in Gujarat under both the business segments - Advanced Intermediates (AI) and Phenolics. To start with, DCTL is implementing several projects for an overall capital outlay of approximately R 2,000-2,200 Crores across new products, upstream and downstream products. DCTL has acquired big-parcel of land at Dahej, Gujarat, where it is implementing most of the projects.
DCTL has already created a very strong project implementation team, which works closely with the R&D and Technical Services toward licenses and technical know-how and executing projects for the Group. DCTL has an existing employee strength of 135 which largely comprise of project team. It puts special emphasis on timelines and cost of projects while simultaneously looking deeply into various aspects such as health, safety, environment and compliances. In line with the Groupâs philosophy, it walks extra mile towards ensuring sustainable processes and easy scalability so that, in future, the Groupâs ability to expand is much more at less costs so to achieve better efficiency, green processes and reducing carbon footprints.
Alongside project implementation, DCTL is also creating a full capability operations team to ensure smooth take over and running the gamut of operations across all plants at various locations.
In a recent event, DCTL has signed an MOU with the Government of Gujarat, whereby it announced its intent of implementing another Phenol and Bisphenol A capacity. It is worth mentioning that, Phenol is a pre-cursor of Bisphenol A, while Bisphenol A is a pre-cursor of Polycarbonate. DCTL is already in the process of implementing a project of Polycarbonate compounding (i.e. down stream products of Polycarbonate).
During FY 2022-23, DCTL generated a total revenue of R 1.41 Crores and a net loss of R 0.56 Crores.
Your Companyâs total revenue, including other income stood at R 8,019.64 Crores in FY 2022-23, growing by 17% from R 6,844.80 Crores in the previous year. Higher volumes across key business
segments, particularly Phenolics, led to strong and sustainable revenue growth. Utilization levels remained consistently high throughout the year, with ongoing improvements. Although prices for certain inputs have cooled off, they remain higher than the previous year. These elevated costs are being passed on to the customers, albeit with a slight delay.
EBITDA was at T 1,336.96 Crores, down by 19% from T 1,646.19 Crores in FY 2021-22. The normalisation of product realisations compared to the base year as well as non-availability of Nandesari plant for about 40 days due to fire impacted the EBITDA performance. EBITDA margin contracted by 700 bps on a Y-o-Y basis at 17% in FY 2022-23 due to challenging macro environment. Cost of Goods Sold were T 5,347.51 Crores in FY 2022-23, up by 30% from T 4,114.35 Crores in the previous year. The normalization of certain product margins this year has resulted in margin compression, after being exceptionally high last year. To protect profitability, your Company is implementing measures to pass on the increased input costs, while also driving cost optimization efforts.
During the year, Depreciation amounted to T 166.30 Crores, while Finance costs were at T 24.78 Crores.
In the fiscal year under review, the Profit Before Tax (PBT) amounted to T 1,145.88 Crores, in contrast to T 1,434.45 Crores in FY 2021-22. Profit After Tax (PAT) was T 852 Crores, lower by 20% in comparison to T 1,066.64 Crores in FY 2021-22. The performance of PAT has been in line with the EBITDA. Despite the reduction in finance costs and depreciation, the overall rise in costs impacted the performance.
In terms of geographical break-up, Domestic Revenues for FY 2022-23 reached T 6,410.31 Crores, a 22% increase from the T 5,272.15 Crores in the previous year. Additionally, Revenue from Exports grew by 2% to reach T 1561.75 Crores, up from T 1,530.04 Crores in the previous year, demonstrating the Companyâs resilience and strong engagement with global customers. Despite global instability, Deepak has maintained a consistent customer base and your Company has been successfully able to sustain or grow its market share in various key products. This aligns with the âDepend on Deepakâ initiative, which strives to develop a robust organization through efficient processes and systems, while emphasizing ethical and transparent practices. Deepak also boasts a highly skilled and motivated team capable of assuming leadership roles, along with extensive capabilities to fulfil customer requirements.
On the expansion initiatives, the SAC plantâs capacity installation is scheduled to be commissioned soon. The Company has embarked into further growth plans with an expected outlay of approximately T 2,500 Crores over various facilities. These facilities are being commissioned in a phased manner across new products, upstream and downstream facilities including downstream of Polycarbonates which is called Polycarbonate Compounding. Your Company will manufacture compounding products to meet the growing demand
in India for new-age applications such as 5G boxes, EV batteries, medical devices and others.
The future appears promising for the Indian chemicals sector, as most of the industries are returning to their pre-COVID levels of production and there is a growing demand due to a shift in the global supply chain from China to India. By leveraging the upcoming brownfield and greenfield expansions and integrating value-added forward and backward operations, your Company is enhancing competitiveness and positioning itself not only to compete on a global level but also to lead in respective business segments, thereby expanding market share.
Based on your Companyâs healthy performance, the Board of Directors of your Company is pleased to recommend a Dividend of T 7.50 (Rupees Seven and Paise Fifty only) per Equity Share for the year ended March 31, 2023 as against T 7.00 (Rupees Seven only) per Equity Share in the previous year. The total Dividend as above on 13,63,93,041 Equity Shares of face value of T 2.00 (Rupees Two only) each, if approved by the Members at the ensuing Annual General Meeting, would involve a total outgo amount of T 102.29 Crores, resulting in a Dividend Payout of 22% of the standalone Profit After Tax of the Company.
The Companyâs Register of Members and Share Transfer Books will be closed from Friday, July 28, 2023 to Friday, August 4, 2023 (both days inclusive) for the purpose of Dividend for the Financial Year ended March 31, 2023 and 52nd Annual General Meeting of the Company. It is important to note that, as per the Finance Act of 2020, payment of Dividend is now subject to taxation and the Company is required to deduct tax at source from the Dividend paid to Members, as per the rates prescribed in the Income Tax Act of 1961.
Under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the top 1,000 listed entities (by market capitalisation, calculated as of March, 31 of each Financial Year), are required to formulate a Dividend Distribution Policy and make it available on their website, with a link also provided in their Annual Reports. In accordance with this requirement, the Company has adopted the Dividend Distribution Policy and the same can be accessed using the following link: https://www.godeepak.com/wp-content/uploads/2021/05/1-DNL-Dividend-Distribution-Policy.pdf.
The issued, subscribed and paid-up Equity Share Capital as on March 31, 2023, is T 27.28 Crores, comprising of 13,63,93,041 Equity Shares of face value of T 2.00 (Rupees Two only) each. The Company has not issued any Equity Shares during FY 2022-23. Accordingly, there is no change in the Equity Share Capital of the Company during FY 2022-23.
The Board of Directors has decided to retain entire amount of Profit during FY 2022-23 appearing in the Statement of Profit and Loss and no amount is proposed to be transferred to Reserves. The closing balance of the retained earnings of the Company for FY 2022-23 was T 2,063.41 Crores.
Your Companyâs goal is to maintain a prudent capital structure at a consolidated level by managing its working capital requirements efficiently, while adhering to strict criteria and maintaining a balanced debt equity ratio. By implementing improved working capital management practices, your Company was able to report zero total debt during the year under review.
DNLâs strong credit rating has proven advantageous in its financial activities, resulting in reduced charges. Additionally, the Companyâs depreciation increased after acquiring certain Property, Plant and Equipment. With a team of specialized professionals monitoring Foreign Exchange exposure, the Company effectively mitigates associated risks. Owing to its dynamic and proactive management, the team has successfully managed the Companyâs cash flow position. As of March 31, 2023, the Companyâs standalone Net Debt: Equity remains at Nil, same as the previous year.
Overall, your Company is in a strong position in the industry, delivering high-quality products guided by a robust product mix. ICRA has reaffirmed the long-term credit rating at âICRA AA/Positiveâ while the short-term rating of the Company remains at the highest level at A1 . This is primarily owing to the Companyâs sustainable business performance, ability to cater to varied end use segments, diversified product portfolio, constant improvement and efficient operations.
For the Companyâs wholly owned subsidiary, Deepak Phenolics Limited (âDPLâ), ICRA has reaffirmed the long-term credit rating at âICRA AA/Positiveâ and while the short term credit rating remains at âICRA A1 â which is the highest rating in short term category.
During the year, DPL has pre-paid a substantial part of its borrowing apart from honouring committed repayments. Pursuant to this, the consolidated Net Debt / Equity ratio continues to remain Nil as of March 31, 2023.
In accordance with the provisions of Section 152 of the Companies Act, 2013 (âthe Actâ), Shri Maulik D. Mehta (DIN: 05227290) retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, has offered himself for re-appointment.
Shri Sandesh Kumar Anand (DIN:00001792) who is also retiring by rotation at the ensuing Annual General Meeting of the Company, has not offered himself for re-appointment. Accordingly, he shall cease to be Director of the Company with effect from August 4,
2023. The Board of Directors, at their meeting held on May 11, 2023, while placing on record their sincere appreciation for the valuable contribution of Shri Sandesh Kumar Anand during his tenure as the Director of the Company, have recommended the appointment of Shri Girish Satarkar (DIN: 00340116) as Director liable to retire by rotation w.e.f. August 4, 2023, in place of Shri Sandesh Kumar Anand, for approval by Members of the Company at the ensuing Annual General Meeting.
Upon recommendation of Nomination and Remuneration Committee, the Board of Directors, at the said meeting, have also recommended the appointment of Shri Girish Satarkar (DIN: 00340116) as Whole-time Director designated as Executive Director of the Company for a period of three (3) years w.e.f. August 4, 2023, for approval by the Members at the ensuing Annual General Meeting on the terms and conditions as provided in the Explanatory Statement to the Notice convening 52nd Annual General Meeting.
Shri Sudhir Mankad (DIN:00086077), Dr. Richard H. Rupp (DIN:02205790) and Dr. Swaminathan Sivaram (DIN:00009900) ceased to be Independent Directors upon completion of their second term on August 7, 2022.
During the year, the Members of the Company, through Postal Ballot by way of e-voting on June 22, 2022, approved:
⢠Re-appointment of Shri Sanjay Upadhyay (DIN:01776546) as a Director (Finance) & CFO for a period from April 28, 2022 to July 31, 2026.
⢠Re-appointment of Shri Sanjay Asher (DIN:00008221) and Smt. Purvi Sheth (DIN:06449636) as Independent Directors of the Company for the second term of three (3) consecutive years with effect from June 28, 2022.
⢠Appointment of Shri Meghav D. Mehta (DIN:05229853) as a Non-Executive Director of the Company, liable to retire by rotation, with effect from May 4, 2022.
⢠Appointment of Shri Punit Lalbhai (DIN: 05125502), Shri Vipul Shah (DIN: 00174680) and Shri Prakash Samudra (DIN: 00062355) as Independent Directors of the Company for a term of three (3) consecutive years with effect from August 8, 2022.
Shri Dileep Choksi was appointed as an Independent Director at the 49th Annual General Meeting of the Company held on August 7, 2020 for a term of three (3) consecutive years. Accordingly, the first term of Shri Dileep Choksi as an Independent Director is upto August 6, 2023. The Board of Directors at their meeting held on May 11, 2023, upon recommendation of Nomination and Remuneration Committee and based on evaluation of performance of Shri Dileep Choksi, which was completely satisfactory, have recommended the re-appointment of Shri Dileep Choksi for approval by the Members at the ensuing Annual General Meeting of the Company, for a second term of three (3) consecutive years with effect from August 7, 2023.
The Members at the 48th Annual General Meeting of the Company held on June 28, 2019 approved the re-appointment of Shri Deepak C. Mehta as the Chairman & Managing Director of the Company for further period of five (5) years w.e.f. December 14, 2018. Accordingly, the present term of Shri Deepak C. Mehta as the Chairman & Managing Director of the Company is upto December 13, 2023.
The Board of Directors, at their meeting held on May 11, 2023 approved the re-appointment of Shri Deepak C. Mehta as the Chairman and Managing Director of the Company for further period of five (5) years w.e.f. December 14, 2023, subject to approval by the Members. Further, since Shri Deepak C. Mehta will attain the age of 70 years during the proposed term of his re-appointment, approval of Members is being sought for his re-appointment by way of Special Resolution at the ensuing Annual General Meeting.
INDEPENDENT DIRECTORS
All the Independent Directors of the Company have given their declarations to the Company under Section 149(7) of the Act that they meet the criteria of independence as provided under Section 149(6) of the Act read with Regulation 16(1) (b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulationsâ). There has been no change in the circumstances affecting their status as Independent Directors of the Company.
During the year under review, the Company did not have any pecuniary relationship or transactions with any of its Directors, other than payment of sitting fees and re-imbursement of expenses for attending meetings of Board and Committee thereof and also Commission on Net Profits of the Company as approved by the Members of the Company, in accordance with the provisions of Act and Listing Regulations.
As per requirements of the Act, a separate meeting of Independent Directors, without presence of members of management of the Company, was held on March 10, 2023 to evaluate the performance of the Chairman, Non-Independent Directors and the Board as a whole and also to assess the quality, quantity and timeliness of flow of information between the management of the Company and the Board.
All Independent Directors were present at the said meeting.
KEY MANAGERIAL PERSONNEL
As required under Section 2(51) and Section 203 of the Act read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following persons are the Key Managerial Personnel of your Company:
1. Shri Deepak C. Mehta, Chairman & Managing Director
2. Shri Maulik D. Mehta, Executive Director & CEO
3. Shri Sanjay Upadhyay, Director (Finance) & Group CFO
4. Shri Somsekhar Nanda, Chief Financial Officer
5. Shri Arvind Bajpai, Company Secretary
During the year under review, Shri Sanjay Upadhyay was elevated as Director (Finance) & Group CFO and Shri Somsekhar Nanda was appointed as the Chief Financial Officer of the Company in place of Shri Sanjay Upadhyay with effect from August 3, 2022.
There were no other changes in Key Managerial Personal during the year.
NUMBER OF MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
During FY 2022-23, five (5) meetings of the Board of Directors were held. The details of the meetings of the Board of Directors and Committees of the Board of Directors of the Company held and attended by the Directors are given in the Corporate Governance Report forming part of this Annual Report.
The maximum interval between any two meetings did not exceed 120 days, as prescribed under the Act and the Listing Regulations.
Pursuant to the requirement of the Act and the Listing Regulations and upon recommendation of the Nomination and Remuneration Committee, the Board has adopted a Performance Evaluation Policy specifying the criteria for effective evaluation of Board, its Committees and individual Directors. The performance evaluation criteria for Independent Directors are also provided in the Performance Evaluation Policy as adopted by the Board.
The process of performance evaluation is in line with the provisions of the Act and the Listing Regulations and the Board has carried out an annual evaluation of its own performance, its Committees and individual Directors, based on the criteria as provided in the Performance Evaluation Policy.
The performance of the Independent Directors was evaluated by the entire Board without the presence of Independent Director being evaluated at their meeting held on May 11, 2023. Based on such evaluation, the Board is of the view that all Independent Directors are having thorough knowledge, expertise and experience in their respective areas. They also have very good understanding of the Companyâs business and the general economic environment it operates. They devote quality time and full attention to understand key issues relating to business of the Company and advising on the same. Their valuable contribution has certainly improved the governance standards within the Company.
The criteria for evaluation of performance of Independent Directors are:
⢠Relevant Knowledge, Expertise and Experience.
⢠Devotion of time and attention to the Companyâs long term strategic issues.
⢠Addressing the most relevant issues for the Company.
⢠Discussing and endorsing the Companyâs strategy.
⢠Professional Conduct, Ethics and Integrity.
⢠Understanding of Duties, Roles and Function as Independent Director.
The performance of the respective Committees was also evaluated by the Board after seeking inputs from the Committee members. Based on such evaluation, the Board is of the view that various Committee of Directors are well constituted by way of having optimum number of Independent Directors with precise Terms of Reference / Charter. The respective Committees actively discussed various matters and effective suggestions were made concerning business, operations and governance of the Company.
Your Directors have expressed their satisfaction to the evaluation process.
Based on the declarations received from the Independent Directors, the Board of Directors of your Company confirms the integrity, expertise and experience (including the proficiency) of the Independent Directors of the Company appointed during the year.
A duly constituted Audit Committee is in place having majority of Independent Directors with Shri Dileep Choksi, Independent Director, as the Chairman of the Committee. The other members of the Audit Committee are Shri Sanjay Asher, Independent Director and Shri Sandesh Kumar Anand, Non-Executive Non-Independent Director. The Committeeâs purpose is to oversee the accounting and financial reporting process of the Company, the audits of the Companyâs Financial Statements, the appointment, independence and performance of the Statutory Auditors and the Internal Auditors. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members of the Audit Committee are set out in the Corporate Governance Report, which forms part of the Annual Report.
During the year under review, all the recommendations made by the Audit Committee were accepted by the Board.
At the 51st Annual General Meeting of the Company held on August 3, 2022, the Members approved re-appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/ W-100018) as Statutory Auditors of the Company to hold office as the Atatutory Auditors for a further period of five (5) years from the conclusion of the 51st Annual General Meeting till the conclusion of the 56th Annual General Meeting of the Company. During the year, the Statutory Auditors have confirmed that they satisfy the independence criteria required under the Act.
The observations made in the Auditorsâ Report of Deloitte Haskins & Sells LLP, Chartered Accountants, for the year ended March 31, 2023, read together with relevant notes thereon, are self-explanatory
and hence do not call for any comments. There is no qualification, reservation, adverse remark, or disclaimer by the Statutory Auditors in their Report.
There were no instances of frauds identified by the Statutory Auditors during FY 2022-23.
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2023 was carried out by the Secretarial Auditors, KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has re-appointed KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2023-24.
SECRETARIAL AUDITORâS REPORT
The Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune, for the year ended March 31, 2023 in Form MR-3 is annexed as Annexure - A, which forms part of this Report.
The Secretarial Audit Report for FY 2022-23, does not contain any qualification, reservation, adverse remark or disclaimer by the Secretarial Auditor.
The secretarial Audit of Deepak Phenolics Limited (âDPLâ), a material unlisted subsidiary, was undertaken by Samdani Shah & Kabra, Company Secretaries, Vadodara for FY 2022-23. The said Secretarial Audit Report confirms that DPL has complied with the provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances. The Secretarial Audit Report of DPL is annexed to this Report as Annexure-B as per the requirement of Act and the Listing Regulations.
The Company is required to maintain cost records under Companies (Cost Records and Audit) Rules, 2014. Accordingly, cost records have been maintained by your Company.
Pursuant to provisions of Section 148 of the Act, the Board of Directors, upon recommendation of the Audit Committee, re-appointed B. M. Sharma & Co., Cost Accountants, to conduct audit of the Companyâs cost records for FY 2023-24 at a remuneration of t 8,00,000 (Rupees Eight Lakhs only) plus applicable taxes and out of pocket expenses. The Cost Auditors have confirmed that they are free from disqualification specified under Section 148(5) read with Section 141(3) of the Act and that the appointment meets the requirements of the Act. They have further confirmed their independent status and an armâs length relationship with the Company.
As required under the provisions of the Act, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the Members at the ensuing Annual General Meeting.
An Ordinary Resolution for the ratification of remuneration of Cost Auditors for FY 2023-24 is provided in the Notice convening 52nd Annual General Meeting for approval by the Members. Your Directors recommend the same for approval by the Members.
The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year. The Cost Audit Report for FY 2022-23 does not contain any qualification, reservation or adverse remark.
On the recommendation of the Audit Committee, the Board of Directors of the Company has re-appointed Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct the Internal Audit for FY 2023-24.
The Internal Audit function reports its findings and status thereof to the Audit Committee on a quarterly basis.
REPORTING OF FRAUD BY AUDITORS
During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditors have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143(12) of the Act and the Rules made thereunder, details of which needs to be mentioned in this Report.
The Company recognises that risk is an integral and inevitable part of business and that the Company is fully committed to manage the risks in a proactive and efficient manner.
Towards this, the Company has adopted a comprehensive Enterprise Risk Management Framework and Policy, duly approved by the Board of Directors, which is aligned with the requirements of ISO 31000 and COSO and articulates the approach to address the uncertainties in its endeavour to achieve stated and implicit objectives. The Enterprise Risk Management Framework ensures sustainable business growth with stability and encompasses establishment of structured and intelligent approach to Risk Management at the Company. The Company is having a disciplined process for continuously assessing risks, in the internal and external environment along with minimising the impact of risks. The Company incorporates the risk mitigation steps in all its strategy and operating plans.
The objective of Risk Management process in the Company is to enable value creation in an uncertain environment, promote good governance, address stakeholder expectations proactively and improve organisational resilience and sustainable growth.
In compliance with the requirement of Regulation 21 of the Listing Regulations, your Company is having a duly constituted
Risk Management Committee. The Risk Management Committee of the Company has been entrusted by the Board with the responsibility of reviewing the risk management process in the Company and to ensure that key strategic and business risks are identified and addressed by the management. The Committee evaluates the performance of the Company against perceived risks, develops methods to classify potential and evolving risk that may adversely impact overall risk exposure of the Company and determines the strategic plan and framework of Risk Management. Further, the Risk Management Committee has designated Chief Financial Officer of the Company also as a Chief Risk Officer who is responsible for identifying, measuring, monitoring, mitigating and reporting on risk exposures to the Risk Management Committee. The details about the Risk Management Committee have been provided in the Report on Corporate Governance which forms part of this Annual Report.
The Board of Directors regularly assess the processes for Risk Identification and Risk Mitigation to ensure that relevant risks are appropriately identified and effective mitigation mechanisms are in place by updating and assessing Risk Register regularly. This approach provides a constructive and value-added analysis mechanism that helps to maintain an appropriate level of risk profile in a rapidly evolving environment.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company places great importance on Internal Controls including Internal Financial Controls, which plays a critical role in the smooth functioning of any organization. The Internal Control framework is sufficient and implemented through written policies, rules and protocols to ensure compliance with laws, regulations, processes and guidelines. This framework ensures that all resources are protected against unlawful use or disposal and that transactions are appropriately permitted, registered and documented.
In FY 2022-23, the Internal Auditor conducted comprehensive assessments across all functional departments and locations. The Internal Audit provides independent and reasonable assurance about the adequacy and operating effectiveness of the Internal Controls to the Audit Committee. The Audit Committee regularly reviewed the Internal Audit findings and corrective measures are taken to ensure the effectiveness of the Internal Control systems and processes. The system of Internal Control is designed to verify the accuracy of financial and other documents for compiling financial reports and maintaining transparency for individuals.
The Statutory Auditors have confirmed the adequacy of the Internal Financial Control system over Financial Reporting and Statutory Auditorâs Report on Internal Financial Controls, as required under Clause (i) of Sub-section 3 of Section 143 of the Act, is attached to the Independent Auditorsâ Report.
Some of the key initiatives during the year are:
Data Privacy, Protection & Retention of Critical Data/ Documents
With an aim of maintaining data secrecy & confidentiality of critical information/ documents across all Functions & Sites, an assessment of data life cycle was carried out through an external agency wherein assessment of current posture of the data security practices around critical information was identified and measures were recommended to strengthen the control posture to plug-in potential leakage points. In addition, it covered the areas relating to IT landscape for current data security practices and third-party risk management aspects.
Upgradation of CCTV cameras:
The Company upgraded its existing CCTV (close circuit television) system with edge-based analytics having security Artificial Intelligence (AI) features like line crossing, intrusion area, etc. the objective being enhancing safety within premises, reduced employee, or staff incidents, preventing & investigating a crime, etc. Old systems were replaced with upgraded technology as well as installation of new cameras at critical locations within site.
Turnstile Systems
Security is a rising concern in the world today i.e., hackers accessing valuable information to intruders threatening the safety of people and property. With an aim of controlling access to premises by contract workers, visitors, etc. turnstile systems were installed & implemented across all sites. Turnstiles provide superior access control by both detecting and deterring unauthorized entries & exits. In addition, contractors billing is done directly through the records generated from turnstile system.
Pursuant to provisions of Section 177(9) of the Act, read with Regulation 22(1) of the Listing Regulations, your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behaviour, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of the Companyâs Code of Conduct or ethics policy.
The Policy 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 certain cases. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.
The Whistle Blower Policy is available on the Companyâs website at https://www.godeepak.com/wp-content/uploads/2021/05/2-DNL-Whistle-Blower-Policy.pdf.
DEPOSITS FROM PUBLIC
During FY 2022-23, the Company has not accepted or renewed any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2023.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
The details on transfer of unclaimed/unpaid amount/shares to Investor Education and Protection Fund (IEPF) are provided in the Corporate Governance Report under para âTransfer of unclaimed / unpaid amounts / shares to the Investor Education and Protection Fund (IEPF)â.
RELATED PARTY TRANSACTIONS
There are no material related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large.
All transactions with related parties were on armâs length basis and approved by the members of the Audit Committee who are Independent Directors. The transactions with related parties which are not in the ordinary course of business were also approved by the Board of Directors. During FY 2022-23, there were no transaction entered into with related party requiring approval of Members of the Company. Accordingly, the disclosure of related party transactions, as required under Section 134(3)(h) of the Act, in Form No. AOC-2 is not applicable to the Company.
Prior omnibus approval of the Audit Committee is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on armâs length basis. While placing transactions with related parties, the necessary details required to be placed before the Audit Committee / Board of Directors under the provisions of the Act and Listing Regulations were circulated along with Agenda papers. Further, a statement containing details of all related party transactions is being placed before the Audit Committee and the Board of Directors on a quarterly basis.
All related party transactions are subjected to independent review by the Internal Auditors of the Company to establish compliance with the requirement of related party transactions under the Act and Listing Regulations.
Your Company has in place a Policy on related party transactions formulated in line with the provisions of the Act and Listing Regulations. The said Policy is duly approved by the Board of Directors and can be accessed on the website of the Company at www. godeepak.com.
None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.
As required under the provisions of Listing Regulations, the Company submits details of all related party transactions in the prescribed format to the Stock Exchanges on a half-yearly basis.
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Boardâs Report has been prepared on a Standalone basis.
Pursuant to requirement of Section 136 of the Act, which has exempted companies from attaching the financial statements of the subsidiary companies along with the Annual Report of the company, your Company will make available the Annual Financial Statements of subsidiary companies and the related detailed information to any Member of the Company on receipt of a written request from them at the Registered Office of the Company. The Annual Financial Statements of subsidiary companies will also be kept open for inspection at the Registered Office of the Company on any working day during business hours. These are also available on the website of your Company at www.godeepak.com.
The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (âInd ASâ), forms part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company.
The Consolidated Financial Statements include the operations of following subsidiaries:
⢠Deepak Phenolics Limited
⢠Deepak Chem Tech Limited (Formerly known as Deepak Clean Tech Limited)
⢠Deepak Nitrite Corporation Inc.
During FY 2022-23, there is no company which has become or ceased to be subsidiary or associate of the Company. Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the Listing Regulations duly approved by the Board of Directors and can be accessed on the Companyâs website at www.godeepak.com.
PERFORMANCE OF SUBSIDIARIES(a) Deepak Phenolics Limited
Deepak Phenolics Limited (âDPLâ), is a wholly owned material subsidiary of your Company. DPL is engaged in the business of manufacture of Phenol, Acetone and Iso Propyl Alcohol (âIPAâ) at its state-of-the-art facility in Dahej, Gujarat. The detailed performance of DPL is provided under the section Performance Review of this Report.
(b) Deepak Chem Tech Limited (DCTL)
Deepak Chem Tech Limited (âDCTLâ) (formerly known as Deepak Clean Tech Limited), a wholly owned subsidiary of the Company is implementing projects for manufacturing various intermediate chemical products. The detailed performance of DCTL is provided under the section Performance Review of this Report.
The Audited Consolidated Financial Statements of the Company for the year ended March 31, 2023 together with the Auditorâs Report, constitute part of this Annual Report in compliance with the provisions of the Act, Regulation 33 of the Listing Regulations and relevant Accounting Standards. Additionally, Form No. AOC-1, detailing the salient features of the Companyâs subsidiaries, associates and joint venture companies, is attached to the Financial Statements.
(c) Deepak Nitrite Corporation Inc. (USA)
Deepak Nitrite Corporation Inc. (âDNCâ) is a wholly owned subsidiary based in the United States. This Company was established to support your Companyâs marketing needs in North and South America. During FY 2022-23, DNC generated total revenue of USD 17,966.90 and achieved a net income of USD 273.56.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
The particulars of loans given, investments made, guarantees given and securities provided in accordance with the provisions of Section 186 of the Act are provided in the standalone Financial Statements.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY
There have been no material changes and commitments affecting the financial position of your Company since the close of Financial Year i.e. since March 31, 2023 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of your Company.
COMPLIANCE MANAGEMENT
The Company has in place a comprehensive and robust legal compliance management online tool, which is devised to ensure compliance with all applicable laws which impact the Companyâs business. Automated alerts are sent to compliance owners to ensure compliances within stipulated timelines.
The compliance owners certify the compliance status which is reviewed by compliance approvers and a consolidated dashboard is presented to the respective functional heads and Compliance Officer. A certificate of compliance of all applicable laws and regulations along with corrective and preventive action, if any, is placed before the Audit Committee and Board of Directors on a quarterly basis.
DIRECTORSâ RESPONSIBILITY STATEMENT
Based on the framework of Internal Financial Controls established and maintained by the Company, work performed by the Internal, Statutory, Secretarial and Cost Auditors and external agencies including audit of Internal Financial Controls over Financial Reporting by the Statutory Auditors and reviews performed by the management and relevant Board Committees, including Audit Committee, the Board is of the opinion that your Companyâs Internal Financial Controls were adequate and effective during FY 2022-23. Accordingly, pursuant to Section 134(5) of Act, the Board of Directors, to the best of their knowledge and ability confirm that:
(a) In the preparation of the Annual Accounts for the Financial Year ended March 31, 2023, the applicable accounting standards have been followed and there are no material departures;
(b) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year ended March 31, 2023 and of the profit of the Company for the year ended on that date;
(c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(d) They have prepared the Annual Accounts on a going concern basis;
(e) They have laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and are operating effectively; and
(f) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirement set out by Securities and Exchange Board of India (SEBI). The Report on Corporate Governance under Regulation 34 of the Listing Regulations read with Schedule V of the said Regulations forms an integral part of the Annual Report. The requisite Certificate from a Practising Company Secretary, KANJ & Co., LLP, Company Secretaries, Pune, confirming compliance with the conditions of the Corporate Governance is attached to the Corporate Governance Report.
BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT
Pursuant to Regulation 34(2)(f) of the Listing Regulations and SEBI circular no. SEBI/LAD-NRO/ GN/2021/2 dated May 5, 2021, your Company provides the prescribed disclosures in new reporting requirements on Environmental, Social and Governance (âESGâ)
parameters called the Business Responsibility and Sustainability Report (âBRSRâ) which includes performance against the nine principles of the National Guidelines on Responsible Business Conduct and the report under each principle which is divided into essential and leadership indicators. The BRSR is attached to Report as Annexure - C.
Your Company believes that sustainable development calls for concerted efforts towards building an inclusive, sustainable and resilient future for people and planet through harmonising economic growth, social inclusion and environment protection. In furtherance to this commitment, the Company had taken paradigm shift from compliance-based reporting to governance based reporting and accordingly, in the interest of its stakeholders, the Company, on voluntary basis adopted the Integrated Reporting (IR) framework of the Value Reporting Foundation (Earlier known as International Integrated Reporting Council) International Integrated Reporting Council to report on all the six capitals that the Company uses to create long term stakeholder value and this is the third consecutive year in which your Company has published its Integrated Report. The Integrated Report is a part of this Annual Report, which provides a clear, concise and comprehensive vision of business model.
MANAGEMENT DISCUSSION AND ANALYSIS
In terms of Regulation 34(2)(e) of Listing Regulations, read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
Deepak Foundation, which is the Groupâs Corporate Social Responsibility (âCSRâ) arm, carries out the Companyâs CSR initiatives focusing on social interventions in areas like education, health and livelihood. Through the years, the Company has worked closely with the communities surrounding their facilities and even beyond to improve their livelihood and society. The Company has a positive impact on society, particularly in capacity development, healthcare and womenâs empowerment. The Company has organized several campaigns, such as mobile health units that provide healthcare services at peopleâs homes. Additionally, the Companyâs CSR arm is working on improving the last-mile presence of Government programs in day-care centres, delivering books to children through mobile library services and other initiatives.
Your Company has undertaken a major CSR Project for construction of new building and renovation of existing buildings of Kashiben Gordhandas Patel Children Hospital situated at Vadodara, Gujarat, conceived by Medical Care Centre Trust as a service for the children with focus on the poor and the deprived section of the society. The Childrenâs Hospital is a tertiary care pediatric hospital
serving the poor & needy people of Vadodara, Central Gujarat and neighboring states of Madhya Pradesh, Rajasthan & Maharashtra, focussing poor and sick child. More than 2.5 million children have been served by Kashiben Gordhandas Patel Children Hospital since its inception in 1984. The field of activities of the organization is to provide excellent medical care and treatment to nearly 30% of the cases free and to the remaining at very reasonable cost.
The CSR Project was undertaken through Medical Care Centre Trust (CSR Registration No.: CSR00003940).
During FY 2022-23, your Company has spent Y 11.94 Crores on CSR activities, against the requirement of Y 12.64 Crores, being 2% of average of the net profits for the preceding three years, as per the requirement of Section 135(5) of the Act. The shortfall in spending Y 0.70 Crores was towards renovation of existing buildings and construction of new building of Kashiben Gordhandas Patel Children Hospital which was due to delay in obtaining various government approvals for commencement of renovation and construction of hospital building. Since the said CSR project was classified as the ongoing project by the Board of Directors, the unspent amount of Y 0.70 Crores towards the said ongoing project is transferred to a separate Bank Account on April 25, 2023 as required under the provisions of the Act and the rules made thereunder which shall be spent in the subsequent Financial Year.
The Company is having a duly constituted CSR Committee, details of which such as composition, Terms of Reference, meetings held and attendance thereat are provided in the Corporate Governance Report. There have been no instances during the year when recommendations of the CSR Committee were not accepted by the Board.
The Company is also having a CSR policy duly approved by the Board of Directors that provides guidelines for conducting its CSR activities and can be accessed at Companyâs website at https:// www.godeepak.com/wp-content/uploads/2021/05/3-DNL-Corporate-Social-Responsibility-Policy.pdf.
Annexure - D, which is part of this Report, contains the Report on the Companyâs CSR activities, complying with the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014.
NOMINATION AND REMUNERATION POLICY
Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Act and the Listing Regulations. The Nomination and Remuneration Policy of your Company is annexed as Annexure - E and is also available on the Companyâs website on www.godeepak.com.
Disclosures pertaining to remuneration and other details as required under Section 197 of the Act, read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure - F.
Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. However, in accordance with the provisions of the second proviso to Section 136(1) of the Act, the Annual Report is being sent to the Members of the Company excluding the aforesaid information. The aforesaid information is available for inspection by the members upto the date of the ensuing Annual General Meeting on all working days, except Saturdays, during working hours at the Registered Office of the Company. Any Member interested in obtaining such information may write to the Company Secretary.
Pursuant to Section 134(3)(a) and 92(3) of the Act, the Annual Return of the Company has been placed on the website of the Company at www.godeepak.com.
In terms of Rules 11 and 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return shall be filed with the Registrar of Companies, within the prescribed timelines.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure - G to this Report.
The state of your Companyâs affairs is given under the heading âPerformance Reviewâ and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.
SIGNIFICANT OR MATERIAL ORDERS PASSED AGAINST THE COMPANY
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.
During the year under review, your Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India, with respect to Meetings of Board and its Committees and General Meetings, respectively. The Company has devised necessary systems to ensure compliance with the applicable provisions of Secretarial Standards.
Your Directors state that no disclosure or reporting is required in respect of the following matters as there is no transaction on these items during the year under review:
i. Issue of equity shares with differential rights as to dividend, voting or otherwise.
ii. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.
iii. The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.
iv. There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.
Our innovation infrastructure consists of centralised research facility, Deepak Research and Development Centre (DRDC) at Nandesari, Gujarat. Recognised by the Department of Scientific & Industrial Research, Government of India, it is equipped with the modern instruments and equipment for developing cutting edge technology. Your Companyâs R&D team comprises of very highly qualified and experienced team members who bring in the best practises in the industry.
DRDC also houses a state-of-the-art process engineering Lab, Kilo lab and process intensification lab. Mentioned setups help in generating scale-up related data for all the products which are developed in R&D Centre. The speed of lab scale development is increased with the application of Design of Experiments methodology using a specialised software for screening as well as optimisation mode.
To aid in new technology platform and continuous process development, your Company has invested in flow reactor, flow meters etc. under Process Engineering Research & Innovation (PERI).
Analytical Team plays a crucial role in supporting synthetic chemistry, hence the analytical capabilities for additional requirements are also enhanced by purchasing various new analytical tools such as Gas Chromatography (GC), Gas Chromatography/Mass Spectrometry (GCMS), High Performance Liquid Chromatography (HPLC), Liquid Chromatography/Mass Spectrometry (LCMS), Ultra Performance Liquid Chromatography (UPLC) and Ion Chromatography (IC). Analytical Lab has also been expanded to accommodate these additional instruments.
Our R&D remain focussed on:
⢠New product development
⢠New technology platform development to serve the niche requirements of our customers
⢠Improvement of productivity as well as yield in existing products
⢠Reduction of our resource consumption particularly water, energy and using green technology
DRDC has a dedicated process safety team which analyses the chemical processes for their safe operations based on in-house ARC- Accelerated Reaction Calorimeter, DSC- Differential Scanning Calorimeter, RC- Reaction Calorimeter (with gas evolution analysis). Also, the team takes help from third party labs for other safety data generation e.g. powder safety data.
Your Companyâs R&D team is working on various new technology platform developments such as fluorination as well as photo chlorination chemistry, high pressure oxidation reaction for adipic acid formation and gas solid reaction for salicylic acid formation. A pilot facility for Vapor phase process has also been installed.
Lab scale CSTR - Continuous Stir Tank Reactor set-ups are used for converting batch mode reactions into continuous mode to achieve better yield and quality with overall reduction in the cost of operations.
Your Company is havinig two state-of-the-art pilot facilities, one each situated at Roha, in Maharashtra and Nandesari, in Gujarat. The Pilots act as catalysts between R&D and commercial production of intermediates for Agrochemicals, Dyes, Pharmaceuticals etc., thereby allowing your Company to deliver quality products seamlessly. The Pilot facility boasts of stainless steel and glass lined reactors along with distillation columns for gas and liquid raw materials fully-equipped with advanced instruments, DCS (Distributed Control system) and utilities like chilled brine, low pressure steam, cooling water, temper water and more.
Development of idea to plant process (ITP)
The Technical Organisation is responsible for generating ideas, developing sustainable processes and moving them to manufacturing plant. With this in mind, a team conducts a critical review of the process from idea generation to technical development to production plant (ITP process). The activities are mapped and relevant documents are formalised. The ITP project is targeted to define technical process, the infrastructure required and supporting the document system. This also include in-depth safety reports for the chemicals and processes.
The overall ITP concept includes:
1. Process flow:
⢠Idea collection and assessment (ICA)
⢠R & D process
⢠Technology transfer
2. Responsible team identification
3. Responsibility matrix
A highly secure web-based suite of tools have been deployed to manage all data from ideas to commercial trials.
The system stores data in a structured format making it searchable, preventing knowledge loss while controlling information flow.
Benefits of ideas to plant trials
⢠Documentation of the Lab Records are all digilized and in on-line mode.
- Formats designed to extract data/information.
- Reports and presentations are created by the system through aggregation.
- Ensures data integrity, data security and data traceability.
- Reduce the time spent by scientists in making management reports, significantly.
⢠Open and transparent R&D team availability.
⢠Using fortnightly reports and reduce the time of technical reviews.
⢠No orphan data points and complete audit trail and tracebacks.
Two workshops on process safety and process scale up were organised. Participants were across functions of Deepak Group. These workshops introduced the salient feature of the Process Safety pertaining to Deepak Group competency.
The complete aspects of process safety and process scaleup were explained in detail during the workshop. This will help the teams in developing processes where the emphasis on scalability and safety starts from the lab itself.
Your Company is dedicated in ensuring Safety, Health and Environment (SHE) in relation to all its manufacturing processes, products and services. It consistently takes various measures to develop and adopt safer process technologies, unit operations and sustainable systems from conceptualization stage.
Investments are being made in various areas considering benefits of all stakeholders such as Process Automation to enhance safety and minimize human error, extensive training on process and behavior-based safety, implementation of safe and environment friendly production processes, upgrades to effluent treatment facilities, Reverse Osmosis plants, Multiple Effect Evaporators etc., to reduce effluent discharge. Waste Heat recovery systems are being commissioned to promote the reduction, recovery and reuse of effluents and other utilities.
A systematic and well-documented scale-up procedure is in place for the development of products, starting from Research & Development to Pilot to Commercial scale. This includes risk assessment and process safety studies at each stage to ensure inherently safe processes.
Your Company has established policies and systems to adhere internationally recognized guidelines, such as the principles of the United Nations Global Compact, the International Labour Organization (ILO) conventions and the Responsible Care Initiative. Measures are taken to ensure social compliance regarding human rights, labour and social standards, anti-discrimination, conflict of interest and anti-corruption. Health and safety remain a significant focus for your Company, aiming to achieve an accident-free workplace. Your Company firmly believes that all injuries, occupational illnesses, as well as safety and environmental incidents, can be prevented. This mindset encourages all employees to strive for personal safety excellence and the safety of others, including employees, contractors, customers and the surrounding communities.
Your Company follows a systematic incident reporting system, where all incidents, including near misses, are logged into the safety Management Information System (MIS). Corrective and preventive actions are tracked through internally developed software based on these reports. Each incident is investigated by a cross functional team to determine its root causes and necessary precautions are taken to prevent their recurrence. Before implementation, all technological changes and projects undergo various safety study such as Facility Siting, HAZOP Assessment and Quantitative Risk Assessment. Additionally, all changes in plant settings are approved through the Management of Change procedure and undergo pre-startup safety reviews. Your Company continuously strengthen workplace safety and Process Safety Management through employee engagement initiatives.
The Group has embarked on the safety and sustainability journey with a vision of âZero Incidentâ. Towards safety transformation and with the aim of driving safety upgradation with respect to systems, processes and continuous culture improvement across all the sites, safety diagnostic assessment was carried out through an external agency and their findings enable the leadership to take decisions on the transformation roadmap. Safety assessment report included observations highlighting strengths and opportunities on the defined areas of focus and prioritized recommendation. All manufacturing units, including the Corporate Office, are certified with the latest standards of ISO 9001, ISO 14001 and ISO 45001. Scheduled safety awareness programs are carried out across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioural transformation.
Logistic Safety Management System
Together with its peers, your Company has established Nicer Globe, an independent platform that enables real-time monitoring of the
movement of hazardous materials throughout India. This platform helps monitor any deviations in speed, route, or driving time restrictions, thereby minimizing transport-related incidents. Transportation of raw materials and products are ensured within its supply chain framework, utilizing GPS for real-time monitoring to ensure the safety of its customers, carriers, suppliers, distributors and contractors.
Our commitment to environmental protection goes beyond fulfilling legal requirements. Your Company has implemented the chemical industryâs Responsible Care system and has established fundamental principles fully aligned with the UN Sustainable Development Goals.
Various initiatives have been undertaken to conserve resources, reduce energy consumption, promote recycling and reuse and minimize pollution. Constant efforts are being made to reduce the environmental footprint and find innovative solutions that benefit the environment.
KEY INITIATIVES DURING FY 2022-23 Emission management
DNL is strategically increasing its energy efficiencies by equipping its plants with modern and energy efficient equipment and technology. These measures are enabling to minimize emissions and energy consumption while improving the plantâs efficiency. DNLâs R&D team is continuously working to improve product yield. DNL is also working on carbon offsetting for the carbon generated, by planting trees and by installing various new-age equipments while working towards carbon neutrality to make them more efficient.
DNL is taking a holistic approach to water management by adopting water conservation philosophy based on the principles of reduce, reuse and recycle. This approach assists in achieving future goal of water positivity. DNLâs intent is to make its operations water efficient and reduce its reliance on fresh water at the same time aiming to reach zero-liquid discharge for its facilities. A Zero Liquid Discharge system (ZLD) was implemented at the Hyderabad unit.
In Roha and Dahej units, approximately 60% of treated water was recovered from total wastewater generated by the installation of Reverse Osmosis system.
Natural resource management and decreasing environmental impact of production is crucial to DNL. DNL utilizes resources efficiently and reduce waste generation. The waste generated during manufacturing processes is disposed of responsibly and in accordance with regulatory requirements under Hazardous and Other Waste (Management and Transboundary Movement) Rules, 2016. DNL adheres to the Pollution Control Boardâs air emission standards and do not use any ozone-depleting substances
(ODS) in its operations. All plastic wastes are recycled through CPCB-registered plastic waste processor (PWP) and post-consumer waste are addressed through EPR management. 100% Fly ash is handed over to the brick and tiles manufacturer as per fly ash notification.
DNL is committed to embedding sustainability in its processes and this commitment has been acknowledged by EcoVadis through its comprehensive Together for Sustainability (TfS) audit. In this audit, DNLâs Dahej plant achieved a perfect score of 100 out of 100 on the first attempt. This accomplishment showcases DNLâs unwavering efforts towards promoting sustainable development.
HUMAN RESOURCES
During the FY 2022-23, the HR & IR Department has been actively engaged in various activities to ensure the smooth functioning of the Companyâs Human Resource Management system. This has an objective of ensuring a strong, skilful & trained workforce availability for the Company all the time. The Company continues its endeavour of investing in Human Talent and Talent Management process through its various interventions and Programmes to improve and enhance competencies, capabilities, skills and potentials of its workforce. During the year, recognising the significance of identifying high-potential employees to ensure a robust talent pipeline, the Company carried out competency assessment through a renowned agency to identify training needs of high potential performing teams for career development. The Companyâs Human Resources initiatives and engagement activities have enabled the Company not only to sail through the challenging times, witnessed recently, but has helped Company in attracting, developing, nurturing & retaining right talent and keeping them motivated. Virtual Town Halls were organised wherein Executive Director & CEO, Director (Finance) & Group CFO address all the employees thereby have established a strong sense of bonding between the Companyâs Management and employees.
INSURANCE
All the insurable interests of your Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
The Company has in place Directors, Officers, Liability Insurance (D&O) for all its Directors (including Independent Directors) and members of the Senior Management Team for such quantum and risks as determined by the Board in line with the requirement of Regulation 25(10) of the Listing Regulations.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
Your Company is committed to creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation.
To empower women and protect women against sexual harassment and as per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, a policy for prevention of sexual harassment is already in place and Internal Complaints Committee had been set up at all major locations of the Company. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair enquiry process with clear timelines. To build awareness in this regard, the Company has been conducting various programme on a continuous basis.
No complaints were pending at the beginning of the year and no complaints were received during FY 2022-23 from any employee and accordingly, no complaint were pending as on March 31, 2023, for redressal.
Climate change has become an established fact and is intertwined with human activities and industrial operations. Taking well-informed, decisive actions to help address climate change is a priority for the Company. DNL has set bold targets for reducing greenhouse gas (GHG) emissions and building resilience in its business, value chain and local communities.
DNL is continuously working towards reducing GHG emission through acquiring power from renewal energy sources, engaging new-age equipments to augment energy efficient systems and engaging AI powered solutions for sustainable reduced energy consumption in its operations.
Other notable environment protection activities include installation of online continuous monitoring system (OCEMS) for air emission monitoring and control. DNL also successfully converted canteen waste to biofertiliser and the same is used for green belt development. ETP sludge and agro waste will be used as fuel in the boiler along with coal which is under trial. This will help in utilizing the waste generated and reducing coal consumption.
DNL has undertaken a massive tree plantation drive with the help of the Forest Department in Village Shelavali, Taluka: Shahapur Dist.: Thane, State: Maharashtra. Around 55,000 trees of local species are planted on 50 hectares of land which has helped in bringing positive impact to the environment such as carbon offset, biodiversity conservation, improved air quality, soil erosion prevention and water management. It also provides employment opportunities to the local persons and results in afforestation.
In compliance with the provisions of Section 20 of the Act and as a continuing endeavour towards the âGo Greenâ initiative, electronic copy of the Notice of 52nd Annual General Meeting of the Company including the Annual Report for FY 2022-23 are being sent to all Members whose address are registered with the Company/ Depository Participant(s).
In a bid to keep ensuring its relentless quest for growth and excellence, the Company continues to be committed towards maintaining the highest standards of corporate governance and sustainable practices. As a recognition for our unconventional innovations and focussed drive to achieve best-in-class operations, the Company has been winning a multitude of accolades at various forums while acquiring plaudits as the recipient of numerous prestigious awards for demonstrating its business ethos.
These embellishments to Deepakâs cognizant candidature deliver a testament to the progress made by the Company and honor its diligent efforts towards delivering value for the welfare of all stakeholders and the society as a whole.
The details of the key recognitions secured by the Company have been highlighted in a separate section in the Annual Report.
The Board of Directors highly regards the commitment, dedication and engagement exhibited by all employees at every level and hierarchical. Additionally, the Board extends its appreciation to investors, bankers, financial corporations, consumers, corporate partners, regulatory and Government agencies and other stakeholders for their unwavering cooperation and support throughout the year.
Lastly, we express our gratitude to the Central and State Governments, statutory authorities and other Government agencies for their consistent backing and anticipate their continued encouragement in the future.
For and on behalf of the Board Deepak C. Mehta
Place: Vadodara Chairman & Managing Director
Date: May 11, 2023 (DIN: 00028377)
Mar 31, 2022
Your Directors have pleasure in presenting the Fifty First (51st) Annual Report and the second Integrated Report of Deepak Nitrite Limited (âyour Companyâ or âthe Companyâ) along with the Audited Financial Statements for the Financial Year (âFYâ) ended March 31, 2022. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
FINANCIAL RESULTS
Your Companyâs financial performance for the year ended March 31, 2022 is summarised below:
|
(R in Crores) |
||||
|
Particulars |
Standalone |
Consolidated |
||
|
2021-22 |
2020-21 |
2021-22 |
2020-21 |
|
|
Total Revenue (Gross) |
2,581.85 |
1,822.68 |
6,844.80 |
4,381.27 |
|
Operating Profit Before Depreciation, Finance Cost, Exceptional Item and Tax (EBITDA) |
716.15 |
549.61 |
1,646.19 |
1,268.55 |
|
1 ess: Depreciation and Amortisation expenses |
72.54 |
66.88 |
177.70 |
152.63 |
|
1 ess: linanc e Costs |
1.60 |
4.12 |
34.04 |
74.20 |
|
Profit before Tax |
642.01 |
478.61 |
1,434.45 |
1,041.72 |
|
Less: Tax expenses |
155.80 |
123.89 |
367.81 |
265.91 |
|
Net Profit for the Year |
486.21 |
354.72 |
1,066.64 |
775.81 |
|
Other OompMehensi e Inc ome |
0.06 |
(1.30) |
0.17 |
(1.07) |
|
Total Comprehensive Income for the Year |
486.27 |
353.42 |
1,066.81 |
774.74 |
|
Surplus brought forward from previous year |
1,288.07 |
934.73 |
1,789.97 |
1,015.31 |
|
Balance available for Appropriation |
1,774.54 |
1,288.07 |
2,856.98 |
1,789.97 |
Your Company continues to take precautions at all facilities and offices and has complied with all prescribed norms while operating its facilities during the Financial Year to ensure safety and well-being of employees. Deepak Nitrite continues to prioritise the health and well-being of its associates and the communities it serves and has strived to ensure that all of its employees and their families are completely vaccinated. The Company is proud to claim a 100% vaccination record across its operations.
Without doubt, your Companyâs business model has been put to test by the ongoing global pandemic. The fundamental characteristics of placing the customer first, focusing on high quality of product and efficient execution, diversified operations as well as committed and motivated manpower have enabled the Company to navigate the uncertainties and emerge stronger through the unprecedented challenges.
PERFORMANCE REVIEW Standalone
Your Company performed well amid a challenging macro environment, maintaining its performance momentum during the Financial Year 2021-22. Aside from the instability induced by the second wave of Covid-19 in India, the operational performance was marked with rising input and energy costs, fluctuating foreign exchange rates, inbound and outward logistic constraints coupled with higher logistics costs, owing to various macroeconomic and geo-political reasons. Your Company has leveraged its manufacturing expertise, large facilities and nimble operations to ensure efficient performance backed up with a strong financial
position. Further, your Company has undertaken several Project investments to accelerate its growth momentum going forward.
The economic ramifications of the Ukraine-Russia conflict are being felt around the world. Every commodity, from oil to cereals to chemicals, is facing a price increase owing to disrupted supply chains. Chemical sector had just turned around after gaining ground from Covid-19 induced disruptions. However, the Russia-Ukraine stand-off has emerged as a cause of concern for the sector, as availability of several key building blocks is constrained leading to impact on margins for key industry participants in the near future. Substantial impact is arising on account of the sharp rise in the prices of crude oil which is a key raw material for many players. Sanctions on commodities formerly exported from Russia, voluntary export limits, and measures to reduce oil and gas imports will all have an impact on global trade. If the war persists, established trade channels may be significantly destabilised leading to trade flows getting significantly reshaped.
Notwithstanding these challenges, Deepak Nitriteâs business performance has been strong, with Y-o-Y growth in all its Strategic Business Units (âSBUsâ) towards the end of the year. In FY 2021-22, total revenue, including other income, was R 2,581.85 Crores, up from R 1,822.68 Crores in FY 2020-21, a 42% increase. EBITDA for FY 2021-22 was R 716.15 Crores, up 30% from R 549.61 Crores in the previous year. In FY 2021-22, Profit Before Tax (âPBTâ) was R 642.01 Crores, up from R 478.61 Crores in FY 2020-21, a 34% increase. Profit After Tax (âPATâ) was R 486.21 Crores in FY 2021-22, up 37% from R 354.72 Crores the previous year.
The first half of FY 2021-22 witnessed contrasting business challenges, with strong demand at the outset succumbing to sharp rises in raw material, utility, and logistics costs. Within this backdrop, the Companyâs efforts to focus on cost management and operational excellence enabled to alleviate the worst of the volatility. Across all businesses, your Company has endeavored to maintain and grow its market share while sustaining or increasing its profitability. During the year, depreciation and finance costs amounted to R 72.54 Crores and R 1.60 Crores, respectively. Your Company is net debt-free as of March 31, 2022, and its operational surplus of R 436.79 Crores is invested in liquid mutual funds, which offer liquidity, stability, and greater yields.
Domestic revenues grew by 52% to R 1,454.16 Crores in FY 2021-22, from R 954.25 Crores in FY 2020-21, owing to consistent demand from key end-user industries, also bolstered by targeted initiatives on the product-mix front. Domestic requirements for chemical intermediates are on an upswing, presenting new opportunities for companies like yours. While Export revenue came in at R 1,056.89 Crores, up from R 854.89 Crores recorded in the previous year. Export performance was driven by focused approach while several countries where customers are located, were experiencing faster return to normalcy with positive demand trajectory. Moreover, international customers are reinforcing their supply chains and are seeking a strategic shift from a philosophy of âjust in timeâ to âjust in caseâ - a move that benefits your Companyâs wide portfolio of key intermediates.
Your Company has the potential to take advantage of the situation and accelerate in the medium term to long term. With its unique product mix and several decades of manufacturing experience, Deepak Nitrite is an outstanding candidate to lead the India''s chemical manufacturing trend. This, combined with contributions from existing brownfield expansions and upcoming greenfield projects with value added forward integration, will strengthen the competitiveness and places your Company aptly to grow its market share, thereby generating value for all stakeholders.
Deepak Phenolics Limited
Deepak Phenolics Limited (âDPLâ), is a wholly owned material subsidiary of your Company, engaged in business of manufacture of Phenol, Acetone, Cumene and Isopropyl Alcohol (''I PA'').
FY 2021-22 started with very good demand for Phenol and Acetone, and prices remained buoyant on the back of regional manufacturing disruptions and at the same time strong demand in global markets. Though, global markets suffered by trade conflicts, unavailability of vessels, political uncertainties, heightened volatility in commodity prices, demand for chemical and petrochemical products witnessed significant increase, especially in Indian sub-continent, with crude oil prices started climbing to new levels and by start of third quarter of the Financial Year, crude oil prices crossed hundred US dollar mark. Other commodity prices in non-ferrous and ferrous metals segments climbed to highest ever levels mainly due to Russia and Ukraine war followed by plethora of sanctions imposed by US and EU on Russia.
With healthy demand across all applications for all products of DPL and highest ever prices of Phenol and Acetone, DPL has demonstrated encouraging performance on sustained basis in FY 2021-22, despite the challenges pertaining to feedstocks as well Covid-19. In FY 2021-22, DPL reported Revenues of R 4303.42 Crores as against R 2563.48 Crores in FY 2020-21 with Profit After Tax of R 624.36 Crores in FY 2021-22 as against R 421.16 Crores in FY 2020-21, registering a growth of 68% and 48%, respectively. Phenol business demonstrated encouraging performance on a sustained basis, largely attributable to strong demand in India and excellent operations carried out by the team. DPL also exported smaller quantities to high-demand markets. Inspite of steep challenge posed by peak of second wave of Covid-19, especially in availability of logistics and manpower, the facility continued to operate at high utilisation level.
As the next phase of growth is undertaken with deployment of R 700 Crores, the Groupâs product mix is expected to change to more specialised products, both upstream and downstream, with higher captive consumption of both Phenol and Acetone. The value chain integration of chemical intermediates is expected to result in increased value addition.
In a key development, the brownfield expansion of IPA has been successfully completed in December, 2021. As a result, the capacity for IPA has doubled to 60,000 MTPA. DPL is on the right track of becoming a diversified chemical major, where the business trajectory will continue to endure, with focus on innovation. DPL aims to become a world-class supplier of solvents, which are well integrated with its wide product basket and process competencies.
Consolidated
Your Companyâs total revenue, including other income, was recorded at R 6,844.80 Crores in the Financial Year 2021-22, gaining 56% from R 4,381.27 Crores in the previous year. This was attributable to recovery in standalone operations, across all segments, which was aided by DPLâs significantly improved performance. Even though several end-user industries were yet to recover to pre-Covid levels of activity, the Company and DPL have actively catered to both domestic and overseas markets to drive higher volumes and capitalise on favourable realisation trends. Against this backdrop, your Company has implemented its operational plan effectively and efficiently, as well as met its supply commitments, ensuring reliable and predictable deliveries to customers. Overall, the Group has been responsive to maximise the benefits of improved operating environment.
In FY 2021-22, EBITDA was R 1,646.19 Crores, up 30% from R 1,268.55 Crores in FY 2020-21. The improved operating performance in the current year-to-date has driven EBITDA.
Profit Before Tax (âPBTâ) stood at R 1,434.45 Crores as compared to R 1,041.72 Crores in FY 2020-21, while Profit After Tax (âPATâ) came in at R 1,066.64 Crores as compared to R 775.81 Crores in FY 2020-21, representing a strong growth of 38% and 37% respectively. Even though the economy is still recovering from the effects of
various macro-economic and geo-political factors including the pandemic, the Company was able to report accelerated PAT performance. Depreciation and Finance costs during the year stood at 7 177.70 Crores and 7 34.04 Crores, respectively.
Domestic Revenues stood at 7 5,272.15 Crores from 7 3,088.06 Crores in FY 2020-21, up by 71%, while Revenue from Exports grew by 20% to 7 1,530.04 Crores as compared to 7 1,271.69 Crores last year. Overall, the demand outlook appears to be robust, with most industries returning to pre-COVID production levels and incremental demand resulting from a strategic shift in the global supply chain from China and Russia to other countries, including India. As a result of increasing dependence on India, your Company is optimistic about manifold opportunities that have emerged and is well poised to capitalise these prospects.
DIVIDEND
Based on the Companyâs healthy performance, the Board of Directors of your Company is pleased to recommend a Dividend of 7 7/- (Rupees Seven only) per Equity Share of 7 2/- (Rupees Two only) each for the year ended March 31, 2022. The total Dividend outgo amounts to 7 95.48 Crores.
The Register of Members and Share Transfer Books of the Company will remain closed from Wednesday, July 27, 2022 to Wednesday, August 3, 2022 (both days inclusive) for the purpose of payment of the Dividend for the Financial Year ended March 31, 2022 and 51st Annual General Meeting of the Company.
Pursuant to the Finance Act, 2020, Dividend income is taxable in the hands of the shareholders effective from April 1, 2020 and the Company is required to deduct tax at source from Dividend paid to the Members at prescribed rates as per the Income Tax Act, 1961.
According to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulationsâ), top 1,000 listed entities based on market capitalisation, calculated as on March, 31 of every Financial Year are required to formulate a Dividend Distribution Policy which shall be disclosed on the website of the listed entity and a weblink shall also be provided in their Annual Reports. Accordingly, your Company has adopted the Dividend Distribution Policy and the same can be accessed using the following link: https://www.godeepak.com/investor-compliances/.
TRANSFER TO RESERVES
The Board of Directors has decided to retain the entire amount of profit for FY 2021-22 appearing in the statement of profit and loss.
SHARE CAPITAL
The issued, subscribed and paid-up Equity Share Capital of the Company as on March 31, 2022 was 7 27.28 Crores comprising of 13,63,93,041 Equity Shares of 7 2/- each. The Company has not issued any Equity Shares during FY 2021-22. There was no change in Share Capital during the year under review.
Your Company aims to maintain a reasonable amount of debt while balancing its capital structure on a consolidated level while adhering to strict criteria to efficiently manage its working capital requirements.
Though the Company has remained net debt free, sound credit rating has helped the Company in its activities like sourcing, bank charges etc. Owing to additions of certain Property, Plant, and Equipment, there has been increase in depreciation during the year under review. Your Company has a specialised professional team that monitors foreign exchange exposure and dynamically reduces the risk associated with it. Your Company has been able to manage its cash flow position effectively, thanks to the teamâs dynamic and proactive management. On a Standalone basis, Net Debt: Equity as on March 31, 2022, has been nil same as last year.
Your Company is well placed in the industry, delivering quality guided by a robust product mix. Thus, on the back of steady performance during the year, ICRA has reaffirmed the long-term credit rating at âICRA AA/Positiveâ (from âICRA AA/Stableâ) while the short-term rating of the Company remains at the highest level at A1 . This is primarily owing to the Companyâs sustainable business performance, ability to cater to varied end use segments, diversified product portfolio, constant improvement and efficient operations.
During FY 2021-22, the Company had obtained approval from the shareholders by passing Special Resolution through Postal Ballot on January 27, 2022, for raising of funds in one or more tranches, by issue and allotment of equity shares and/or eligible securities by way of Qualified Institutions Placement (âQIPâ) for an aggregate amount upto 7 2,000 Crores. Considering the volatile capital market and since the Special Resolution is valid for one year, your Company will launch the QIP at an appropriate time for raising funds.
In case of the Companyâs wholly owned subsidiary, Deepak Phenolics Limited, ICRA has upgraded the long-term credit rating by one notch i.e. from âICRA AA-/Stableâ to âICRA AA/Positiveâ and reaffirmed the short term credit rating at âICRA A1 â which is the highest rating in short term category.
During the year, DPL has pre-paid substantial part of its borrowing apart from honouring committed repayments. Pursuant to this, consolidated Net Debt / Equity ratio is nil as of March 31, 2022 compared to 0.15x as of March 31, 2021.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with the provisions of Section 152 of the Act, Shri Ajay C. Mehta (DIN: 00028405) and Shri Sanjay Upadhyay (DIN: 01776546) retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offered themselves for re-appointment. The Board recommends their re-appointment.
The Members of the Company at their 50th Annual General Meeting held on July 30, 2021, approved:
(a) re-appointment of Shri Maulik Mehta (DIN: 05227290) as the Executive Director & Chief Executive Officer of your Company for further period of five (5) years with effect from May 9, 2021.
(b) continuation of directorship of Dr. Richard H. Rupp (DIN: 02205790) as an Independent Director of the Company beyond the age of seventy five (75) years in terms of Regulation 17 (1A) of the Listing Regulations.
During the year under review, Shri Sanjay Upadhyay (DIN: 01776546) has been re-appointed as the Director (Finance) & Chief Financial Officer of the Company, for further period from April 28, 2022 up to July 31, 2026, subject to approval of Members of the Company.
The Board of Directors at their meeting held on May 4, 2022 considered and approved the appointment of Shri Meghav Mehta (DIN: 05229853) as an Additional Director (Non-Executive Non-Independent) of the Company with effect from May 4, 2022.
Independent Directors
Based on the recommendations of Nomination and Remuneration Committee, the Board of Directors, at their meeting held on May 4, 2022, recommended to the Members of the Company for their approval, by way of Special Resolution through Postal Ballot, re-appointment of Shri Sanjay Asher (DIN: 00008221) and Smt. Purvi Sheth (DIN: 06449636) as Independent Directors of the Company for the second term of three (3) consecutive years with effect from June 28, 2022.
The Board of Directors at their meeting held on May 4, 2022 and based on recommendations of Nomination and Remuneration Committee also recommended to the Members of the Company for their approval, by way of Special Resolution through Postal Ballot, appointment of Shri Punit Lalbhai (DIN: 05125502), Shri Vipul Shah (DIN: 00174680) and Shri Prakash Samudra (DIN: 00062355) as Independent Directors of the Company for a term of three (3) consecutive years with effect from August 8, 2022.
Pursuant to the provisions of Section 149 of the Companies Act, 2013 (âthe Actâ) Independent Directors of the Company have submitted declarations that each of them meets the criteria of independence as provided in Section 149 (6) of the Act along with Rules framed thereunder and Regulation 16 (1) (b) of the Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company during the year ended March 31, 2022.
During the year under review, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with your Company, other than receipt of sitting fees for attending meetings of Board or Committees thereof, commission on net profits as approved by the Members of the Company and reimbursement
of expenses incurred by them for attending meetings of Board or Committees thereof.
Shri Deepak C. Mehta is also the Chairman & Managing Director of the Companyâs wholly owned subsidiary, DPL. As per the terms of his appointment, he is entitled to receive remuneration from DPL by way of commission on net profits of DPL calculated in accordance with the provisions of Section 198 of the Act. The aggregate remuneration of Shri Deepak C. Mehta from the Company and its wholly owned subsidiary shall always be in accordance with Section V of Part II of Schedule V to the Act.
KEY MANAGERIAL PERSONNEL
Pursuant to provisions of Section 203 of the Act, Shri Deepak C. Mehta, Chairman & Managing Director, Shri Maulik Mehta, Executive Director & CEO, Shri Sanjay Upadhyay, Director (Finance) & CFO and Shri Arvind Bajpai, Company Secretary & Compliance Officer are the Key Managerial Personnel of the Company as on March 31, 2022. There has been no change in the Key Managerial Personnel of the Company during the year ended March 31, 2022.
NUMBER OF MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
During FY 2021-22, five (5) meetings of Board of Directors of the Company were held. The maximum time gap between any two meetings was not more than 120 days, as prescribed by the Act and Listing Regulations. For details of meetings of the Board of Directors and Committees with regard to the dates and attendance of each of the Directors thereat, please refer to the Corporate Governance Report, which is a part of this Annual Report.
BOARD EVALUATION
Pursuant to the requirement of the Act and the Listing Regulations and upon recommendation of the Nomination and Remuneration Committee, the Board has adopted a Performance Evaluation Policy specifying the criteria for effective evaluation of Board, its Committees and individual Directors. The performance evaluation criteria for Independent Directors are also provided in the Performance Evaluation Policy as adopted by the Board.
The process of performance evaluation is in line with the provisions of the Act and the Listing Regulations, and the Board has carried out an annual evaluation of its own performance, its Committees and individual Directors, based on the criteria as provided in the Performance Evaluation Policy.
The performance of the Independent Directors was evaluated by the entire Board without the presence of Independent Director being evaluated at their meeting held on May 4, 2022. Based on such evaluation, the Board is of the view that all Independent Directors are having thorough knowledge, expertise and experience in their
During the year under review, all the recommendations of the Audit Committee were accepted by the Board.
STATUTORY AUDITORS
In line with the requirements of the Companies Act, 2013, Statutory Auditors, Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firm Registration Number 117366W/ W-100018) was appointed as Statutory Auditor of the Company at the 46th Annual General Meeting (âAGMâ) to hold office from the conclusion of the said AGM till the conclusion of the 51st AGM of the Company. Accordingly, the first term of office of Deloitte Haskins & Sells LLP, as Statutory Auditors of the Company is upto the conclusion of 51st AGM.
The Board of Directors, based on the recommendations of the Audit Committee, at its meeting held on May 4, 2022, approved and has recommended to the Members of the Company for their approval at the ensuing AGM, the re-appointment of Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firm Registration Number 117366W/ W-100018) as the Statutory Auditors of the Company for further term of five (5) consecutive years, to hold office from the conclusion of 51st AGM till the conclusion of the 56th AGM of the Company.
During the year, the Statutory Auditors have confirmed that they satisfy the independence criteria required under the Act.
STATUTORY AUDITORSâ REPORT
The observations made in the Auditorâs Report of Deloitte Haskins & Sells LLP, Chartered Accountants, Statutory Auditors, for the year ended March 31, 2022, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report. There were no instances of frauds identified by the Statutory Auditors during the FY 2021-22.
The Standalone and Consolidated Financial Statements of the Company have been prepared in accordance with Ind AS notified under Section 133 of the Act.
SECRETARIAL AUDITORS
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2022 was carried out by the Secretarial Auditors, KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has appointed KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2022-23.
SECRETARIAL AUDITORSâ REPORT
The Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune, for the year ended March 31, 2022 in Form No. MR-3 is annexed as Annexure - A, which forms part of this Report.
respective areas. They also have very good understanding of the Companyâs business and the general economic environment it operates. They devote quality time and full attention to understand key issues relating to business of the Company and advising on the same. Their valuable contribution has certainly improved the governance standards within the Company.
The criteria for evaluation of performance of Independent Directors are:
⢠Relevant Knowledge, Expertise and Experience.
⢠Devotion of time and attention to the Companyâs long term strategic issues.
⢠Addressing the most relevant issues for the Company.
⢠Discussing and endorsing the Companyâs strategy
⢠Professional Conduct, Ethics and Integrity.
⢠Understanding of Duties, Roles and Function as Independent Director.
The performance of the Committees was also evaluated by the Board after seeking inputs from the Committee members. Based on such evaluation, the Board is of the view that various Committee of Directors are well constituted by way of having optimum number of Independent Directors with precise Terms of Reference/Charter. The respective Committees actively discussed various matters and effective suggestions were made concerning business, operations and governance of the Company.
Your Directors have expressed their satisfaction to the evaluation process.
As required under the provisions of the Act and the Listing Regulations, a separate meeting of the Independent Directors of the Company was held on March 10, 2022 to evaluate the performance of the Chairman, Non- Independent Directors and the Board as a whole and also to assess the quality, quantity and timeliness of flow of information between the management of the Company and the Board.
A duly constituted Audit Committee consists of majority of Independent Directors with Shri Dileep Choksi, Independent Director, as the Chairman of the Committee. The other members of the Audit Committee are Shri Sudhir Mankad and Shri Sanjay Asher, Independent Directors and Shri S. K. Anand, Non-Executive NonIndependent Director. The Committeeâs purpose is to oversee the accounting and financial reporting process of the Company, the audits of the Companyâs financial statements, the appointment, independence and performance of the Statutory Auditors and the Internal Auditors. The Terms of Reference of the Audit Committee, details of meetings held during the year and attendance of members of the Audit Committee are set out in the Report on Corporate Governance, which forms part of this Report.
The observations made in the Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune for the year ended March 31, 2022 are self- explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors in their Report.
As per the requirement of Act and the Listing Regulations, Secretarial Audit of DPL, a material unlisted subsidiary was undertaken by Samdani Shah & Kabra, Company Secretaries, Vadodara for the Financial Year 2021-22. The said Secretarial Audit Report confirms that DPL has complied with the provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances. The Secretarial Audit Report of DPL is annexed to this Annual Report as Annexure-B.
The Company is required to maintain cost records under Companies (Cost Records and Audit) Rules, 2014, as amended from time to time. Accordingly, cost records have been maintained by the Company.
The Board of Directors, on the recommendation of the Audit Committee, appointed B. M. Sharma & Co., Cost Accountants, as Cost Auditors to conduct audit of the Companyâs cost records for FY 2022-23 at a remuneration of R 8,00,000/- (Rupees Eight Lakhs only) plus applicable taxes, traveling and out of pocket expenses. The Cost Auditors, B. M. Sharma & Co., Cost Accountants, have confirmed that they are free from disqualification specified under Section 141 (3) and Section 148 (3) read with Section 141 (4) of the Act and that the appointment meets the requirements of the Act. They have further confirmed their independent status and an armâs length relationship with the Company. As required under the provisions of the Act, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the Members at the ensuing Annual General Meeting. An Ordinary Resolution for the ratification of remuneration of Cost Auditors for FY 2022-23 is provided in the Notice under Special Businesses.
Your Directors recommend the same for approval by the Members of the Company.
The Cost Auditorâs Report will be filed within the prescribed period of 180 days from the close of the Financial Year. The Cost Auditorâs Report for FY 2021-22 does not contain any qualifications, reservations, adverse remarks or disclaimers.
On the recommendation of the Audit Committee, the Board of Directors of the Company has appointed Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct the Internal Audit for FY 2022-23.
The Internal Audit function reports its findings and status thereof to the Audit Committee on a quarterly basis.
During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143 (12) of the Act and the Rules made thereunder.
Risk Management is important to define, assess and track business threats and obstacles throughout the organisation. Towards this, your Company has adequate measures in place and has adopted a comprehensive Enterprise Risk Management Framework and Policy duly approved by the Board of Directors which is aligned with the requirement of ISO 31000 and COSO. The Risk Management Framework and Policy ensures sustainable business growth with stability and encompasses establishment of structured and intelligent approach to Risk Management at the Company.
In compliance with the requirement of Regulation 21 of the Listing Regulations, your Company is having a duly constituted Risk Management Committee. The Committee evaluates the performance of your Company against perceived risks, develops methods to classify potential and evolving risks that may adversely impact the overall risk exposure of the Company, and determines the strategic plan and framework of Risk Management. The details about the Risk Management Committee have been provided in the Report on Corporate Governance which forms part of this Annual Report.
The Board of Directors periodically evaluates the processes for Risk Identification and Risk Mitigation. The Risk Register is regularly assessed and updated to make sure that the relevant risks are suitably identified, and mitigation mechanisms are effective to control them. This provides a constructive and value-added analysis mechanism that helps to maintain an appropriate level of risk profile in a rapidly evolving ecosystem.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
Internal control plays a pivotal role in any organisation and your Company has sufficient Internal Control mechanisms in place including Internal Financial Controls. The Internal Control Framework is implemented by written policies, rules, and protocols to maintain adherence with laws and regulations, processes, and legislation, and that all resources are secured and protected against loss from unlawful use or disposal, and that such transactions are appropriately permitted, registered, and documented.
During FY 2021-22, the Internal Auditor performed comprehensive assessments at all locations and across all functional departments. The internal audit function provides independent and reasonable assurance about the adequacy and operating effectiveness of the internal controls to the Audit Committee. The Audit Committee
All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approval of the Audit Committee is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on armâs length basis. A statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors on a quarterly basis.
None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.
In line with the requirements of the Act and the Listing Regulations, the Company has formulated a policy on Related Party Transactions.
During the year under review, the Policy has been amended to incorporate the regulatory amendments in the Listing Regulations.
The updated Policy can be accessed on the Companyâs website at www.godeepak.com.
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
As required under Rule 8 (1) of the Companies (Accounts) Rules, 2014, the Boardâs Report has been prepared on a Standalone basis.
Pursuant to requirement of Section 136 of the Act, which has exempted companies from attaching the financial statements of the subsidiary companies along with the Annual Report of the company, your Company will make available the Annual Financial Statements of the subsidiary companies and the related detailed information to any Member of the Company on receipt of a written request from them at the Registered Office of the Company. The Annual Financial Statements of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company on any working day during business hours. These are also available on the website of your Company at www.godeepak.com.
The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (âInd ASâ), forms part of the Annual Report.
The Consolidated Financial Statements include the financial performance of following subsidiaries:
⢠Deepak Phenolics Limited
⢠Deepak Nitrite Corporation Inc.
⢠Deepak Chem Tech Limited (formerly known as Deepak Clean Tech Limited)
Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16 (1) (c) of the Listing Regulations. The Policy, as approved by the Board, is uploaded on the Companyâs website www.godeepak.com.
regularly reviews the internal audit findings and corrective measures are undertaken to ensure the efficiency of the Internal Control system and processes.
The system of Internal Control is structured to verify that financial and other documents are correct in compiling financial reports and other data, and in maintaining transparency for individuals.
The Statutory Auditors have confirmed the adequacy of the Internal Financial Control systems over Financial Reporting and Statutory Auditorsâ Report on Internal Financial Controls as required under Clause (i) of Sub-section 3 of Section 143 of the Act, is annexed with the Independent Auditorsâ Report.
The Company encourages open and transparent system of working and dealing among its stakeholders. Pursuant to provisions of Section 177 (9) of the Act, read with Regulation 22 (1) of the Listing Regulations, your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behavior, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of the Companyâs Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimisation of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in certain cases. It is affirmed that no personnel of the Company was denied access to the Audit Committee.
The Whistle Blower Policy is available on the Companyâs website at https://www.godeepak.com/wp-content/themes/twentysixteen/ companyfiles/corporate_governance_report/Whistle_Blower_ Policy.pdf.
During FY 2021-22, the Company has not accepted or renewed any Deposits covered under Chapter V of the Act. As on March 31, 2022, 35 warrants aggregating to 7 7,23,507 and interest of 7 409 issued by the Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Act remained uncleared. The said amount, having become due for transfer to Investor Education and Protection Fund (âIEPFâ), have been transferred to IEPF on May 4, 2022. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2022.
There are no material related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other related parties, which may have a potential conflict with the interest of the Company at large. Accordingly, the disclosure of related party transactions, as required under Section 134 (3) (h) of the Act, in Form No. AOC-2 is not applicable to the Company.
(a) Deepak Phenolics Limited
Deepak Phenolics Limited, a wholly owned subsidiary, is in the business of manufacturing Phenol, Acetone and their downstream products. Phenol and Acetone are manufactured at DPLâs state-of-the-art facility in Dahej, Gujarat.
DPLâs Revenue from operations came in at 7 4,303.42 Crores and Profit After Tax stood at 7 624.36 Crores as of March 31, 2022.
(b) Deepak Nitrite Corporation Inc. (USA)
Deepak Nitrite Corporation Inc. (âDNCâ) is a wholly owned subsidiary based in the United States. This Company was formed to support your Companyâs marketing needs in North and South America. DNCâs Total Revenue stood at USD 19,490, with a net income of USD 509 during FY 2021-22.
(c) Deepak Chem Tech Limited (formerly known as Deepak Clean Tech Limited)
Your Company has incorporated a wholly owned subsidiary company viz. Deepak Chem Tech Limited (âDCTLâ) (formerly known as Deepak Clean Tech Limited). This subsidiary was incorporated to carry out business of manufacturing of chemical intermediates and is yet to start production. During FY 2021-22, DCTLâs Total Income stood at 7 1,27,481 and the Net Loss was 7 2,60,79,323.
The Audited Consolidated Financial Statements of the Company for FY 2021-22, together with the Auditorâs Report, constitute part of this Annual Report in compliance with the terms of the Act, Regulation 33 of the Listing Regulations, and applicable Accounting Standards. A declaration in the specified Form No. AOC-1, detailing the salient features of the Companyâs subsidiaries, associates, and joint venture companies, is appended to the Financial Statements.
PARTICULARSOF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the Notes to the Financial Statements.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF YOUR COMPANY
There have been no material changes and commitments affecting the financial position of the Company since the close of Financial Year i.e. since March 31, 2022 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of the Company.
DIRECTORSâ RESPONSIBILITY STATEMENT
Based on the framework of Internal Financial Controls established and maintained by the Company, work performed by the Internal, Statutory, Secretarial and Cost Auditors and external agencies
including audit of Internal Financial Controls over Financial Reporting by the Statutory Auditors and reviews performed by the management and relevant Board Committees, including the Audit Committee, the Board is of the opinion that your Companyâs Internal Financial Controls were adequate and effective during FY 2021-22.
Accordingly, pursuant to Section 134 (5) of Act, the Board of Directors, to the best of their knowledge and ability confirm that:
(a) in the preparation of the Annual Accounts for the Financial Year ended March 31, 2022, the applicable accounting standards have been followed and there are no material departures;
(b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the Financial Year ended March 31, 2022 and of the profit of your Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down Internal Financial Controls to be followed by your Company and that such Internal Financial Controls are adequate and are operating effectively; and
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirement set out by Securities and Exchange Board of India (SEBI). The Report on Corporate Governance under Regulation 34 of the Listing Regulations read with Schedule V of the said Listing Regulations forms an integral part of the Annual Report. The requisite Certificate from a Practicing Company Secretary, KANJ & Co., LLP, Company Secretaries, Pune, confirming compliance with the conditions of the Corporate Governance is attached to the Report on Corporate Governance.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report (âBRRâ) is one of the avenues to communicate the Companyâs obligations and performance to all its stakeholders.
The BRR forms part of this Report and is annexed as Annexure - C.
We at Deepak, are committed to transparency in our stakeholder communications. Your Company started the journey of Integrated Reporting
MANAGEMENT DISCUSSION AND ANALYSIS
In terms of Regulation 34 (2) (e) of Listing Regulations, read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has pioneered various CSR initiatives since decades and it continues to remain committed to serve the society. During the year under review, the Company, alongwith its wholly owned subsidiary, Deepak Phenolics Limited, through the CSR programmes, have impacted the lives of many people from some of the most weakest sections of society, including a sustained and significant response to the COVID-19 pandemic during severe second wave in the year 2021. The Company implements its CSR programmes primarily through Deepak Groupâs CSR arm viz. Deepak Foundation and Deepak Medical Foundation, which works in close collaboration with public systems and partners.
The Companyâs signature CSR programmes are primarily aimed to bring positive change addressing critical development issues in healthcare, education, skill building and Community Development. The Company also focuses on development imperatives of communities proximate to its operations through multiple initiatives including improving health through Mobile Health Units, de-addiction drives, enhancing household livelihoods, empowering women and youth.
The Company has constituted a CSR Committee, chaired by Shri Sudhir Mankad, as Chairman, and Dr. Swaminathan Sivaram, Shri Deepak C. Mehta, Shri Sanjay Upadhyay as members. The composition of the CSR Committee is in accordance with Section 135 of the Act.
During the year under review, the Company has spent R 9.92 Crores on CSR activities, against the requirement of R 9.87 Crores, being more than 2% of average Net Profits for the preceding three years. The Annual Report on CSR activities, in terms of Section 135 of the Companies Act, 2013 (âthe Actâ) and the Rules framed thereunder, is annexed to this Report as Annexure-D.
The Company has in place a CSR Policy based on the activities permitted under Schedule VII of the Act which provides guidelines to conduct its CSR activities.
The CSR Policy has been posted on the website of the Company at https://www.godeepak.com/wp-content/uploads/2021/05/DNL-CSR-Policy.pdf.
NOMINATION AND REMUNERATION POLICY
Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Act and the Listing Regulations. The Nomination and Remuneration Policy of your Company is annexed as Annexure - E and is also available on the Companyâs website at www.godeepak.com.
The statement pertaining to particulars of employees pursuant to Section 197 of the Companies Act, 2013 (the âActâ) read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including amendments thereof), forms part of this Report. However, the above mentioned statement is not being sent to the Members along with the Annual Report in accordance with the provisions of Section 136 of the Act.
The aforesaid information is available for inspection by the Members up to the date of the ensuing Annual General Meeting (âAGMâ), on all working days, during business hours, at the Registered Office of the Company. Members who are interested in obtaining the said particulars may please write to the Company Secretary.
The details of remuneration of Directors and Employees as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including amendments thereof), are given as an Annexure-F and forms part of this Report.
Pursuant to Section 134 (3) (a) and 92 (3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 (including amendments thereof) notified by Ministry of Corporate Affairs, the Annual Return of the Company for the Financial Year ended March 31, 2022 has been placed on the website of the Company at www.godeepak.com.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information pertaining to Conservation of Energy & Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134 (3) (m) of the Act, read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 is attached as Annexure - G to this Report.
The state of your Companyâs affairs is given under the heading âPerformance Reviewâ and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.
SIGNIFICANT AND MATERIAL ORDERS PASSED AGAINST THE COMPANY
Pursuant to the requirement of Section 134 (3) (q) of the Act, read with Rule 8 (5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during FY 2021-22 there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Companyâs operations in future.
There was no application made or proceeding pending against the Company under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.
During the year under review, the Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India (âICSIâ) as approved by the Central Government.
Your Directors state that no disclosure or reporting is required in respect of the following matters as there is no transaction on these items during the year under review:
(i) Issue of equity shares with differential rights as to dividend, voting or otherwise.
(ii) Issue of shares (including sweat equity shares) to employees of the Company under any scheme.
(iii) The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.
(iv) There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.
Your Company has a well-equipped Research and Development Centre (âDRDCâ) at Nandesari, Gujarat.
DRDC is crucial to your Companyâs success with its ability to develop advanced intermediates which requires complex chemistry and engineering. This drives its portfolio expansion with a time-bound product development and scale-up process.
DRDC is recognised by Department of Scientific and Industrial Research (âDSIRâ), New Delhi, on behalf of the Government of India and the recognition has been extended from time to time. DSIR has vide letter October 14, 2020, has extended the recognition of DRDC for a further period up to March 31, 2023.
State-of-the-art pilot plants with kilo scale laboratory
Your Company also has two state-of-the-art pilot facilities, one each situated at Roha, in Maharashtra and Nandesari, in Gujarat. The Pilots act as catalysts between R&D and commercial production of intermediates for Agrochemicals, Dyes, Pharmaceuticals etc., thereby allowing your Company to deliver quality product seamlessly. The Pilot facility boasts of stainless steel and glass lined reactors along with distillation columns for gas and liquid raw materials and is fully-equipped with advanced instruments, DCS (Distributed Control system) and utilities like chilled brine, low pressure steam, cooling water, temper water and more.
SAFETY, HEALTH & ENVIRONMENT
Your Company is committed to ensure a sound Safety, Health and Environment (âSHEâ) performance related to its manufacturing processes, products and services. It is continuously taking various steps to develop and adopt safer process technologies, unit operations and sustainable systems
The Company is investing in areas such as Process Automation for increased safety and reduction of human error element, enhanced level of training on process and behaviour based safety, adoption of safe & environmental friendly production processes, upgrading effluent treatment facilities, Reverse Osmosis plants, Multiple Effect Evaporator etc to reduce the discharge of effluents, commissioning of Waste Heat recovery systems, and so on to ensure the reduction, recovery and reuse of effluents & other utilities. SHE management system is monitored and reviewed periodically. Structured & regular safety meetings are carried out to review existing process safety parameters.
Systematic and well documented scale up procedure is in place for the development of product from Research & Development to Pilot to Commercial scale. It includes risk assessment and process safety study at each stage to ensure inherently safe processes.
The Company has policy and system in place to deploy internationally recognised guidelines, such as the principles of the United Nationsâ Global Compact, the International Labour Organisation (âILOâ) conventions and Responsible Care® Initiative. It has system in place to ensure social compliances related to human rights, labour & social standards, anti-discrimination, conflict of interest and anti-corruption.
As per materiality analysis Health and Safety remained a core area of importance for the Company with an aim to achieve accident-free workplace. Your Company believes that all injuries, occupational
assessment score in the next review from silver to gold medal. It has also started assessing Green House Gas (GHG) emissions and taken initiatives to reduce the same.
HUMAN RESOURCES
Strong, skilful and trained workforce is the most valuable resource for the Company. Your Company continues its endeavour of investing in Human Talent and Talent Management Processes through its various interventions to improve competencies, capabilities, skills and potential of its workforce. This is essential to withstand the challenges posed by the everchanging business environment. The Companyâs Human Resource initiatives and engagement activities have enabled the Company not only sail through the challenging times witnessed recently, but has helped your Company in attracting, developing, nurturing, and retaining right talent and keeping them motivated. In view of the growth plans of the Company, an important strategic focus continues to not only nurture the workforce, but also to train and encourage them to take up the challenges of the future.
INSURANCE
All the insurable interests of the Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
The Company has in place Directors & Officers Liability Insurance (D&O) for all its Directors (including Independent Directors) and members of the Senior Management Team for such quantum and risks as determined by the Board in line with the requirement of Regulation 25 (10) of the Listing Regulations.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The Company has Zero tolerance towards sexual Harassment and is committed to creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation.
To empower women and protect women against sexual harassment, and as per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, a policy for prevention of sexual harassment is already in place and Internal Complaints Committee is duly Constituted all locations of the Company.
This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair enquiry process with clear timelines. To build awareness in this
continued support during the year. We place on record our appreciation of the commitment and contribution made by the employees at all levels. Our resilience to meet challenges was made possible by their hard work, solidarity, cooperation and support.
We thank the Government of India, the State Governments and statutory authorities and other government agencies for their support and look forward to their continued support in the future.
For and on behalf of the Board
Deepak C. Mehta
Chairman & Managing Director (DIN: 00028377)
Place: Vadodara Date: May 4, 2022
illnesses as well as safety and environmental incidents are preventable. This ensures that all employees strive for excellence in their own personal safety and the safety of others including employees, contractors, customers, and the communities within which the Company operates.
The Company follows a systematic incident reporting system. All incidents including near misses are also logged into the safety MIS and corrective and preventive actions based on that are tracked through internally developed software. Each incident is analyzed for their root-causes and required precautions are taken to prevent the recurrences. Each technological change and projects undertaken by the Company are made to undergo HAZOP studies before implementation. All plant-setting changes are first approved through Management of Change procedure before implementation followed by pre-start up safety reviews. Workplace safety and Process Safety Management through employee engagement initiatives are continuously being strengthened. Your Company has a system of Internal and external Safety Audits and actions based on audit findings are implemented. All Manufacturing Units including Corporate Office are certified with the latest standard of ISO 9001, ISO 14001 and ISO 45001. Scheduled safety awareness programs are conducted across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioral transformation.
Logistic safety Management system
The Company has, along with its peers, founded Nicer Globe, an independent platform which provides real-time monitoring of the movement of hazardous materials across the length and breadth of India. This helps in monitoring any deviations in speed or route or driving time restrictions, which results in minimising transport related incidents. Almost all raw materials and products within supply chain framework of the Company are transported in a secure manner, with GPS for real-time monitoring for the safety of its customers, carriers, suppliers, distributors, and contractors.
Environment
The Companyâs commitment to environmental protection extends beyond the scope of legal requirements. It has implemented chemical industryâs Responsible Care® system and have set out the basic principles fully aligned with UN Sustainable Development Goals. The Company has taken various initiatives for resource conservation, and reduction in energy consumption It has focused on recycle and reuse and reduction of pollution load and constantly working on to reduce environmental footprint and find innovative solutions that benefit the environment.
Your Company has carried out Sustainability assessment through EcoVadis, a globally recognised organisation and have received silver medal with 60% score. The Company has target for even better regard, the Company has been conducting various programme on a continuous basis across its all locations.
During FY 2021-22, no complaint was received from any employee and hence no complaint is outstanding as on March 31, 2022 for redressal.
In commitment to keep in line with the Green Initiatives and going beyond it, electronic copy of the Notice of 51st Annual General Meeting of the Company including the Annual Report for FY 2021-22 are being sent to all Members whose address are registered with the Company/Depository Participant(s).
Your Directors express their gratitude to customers, vendors, dealers, investors, business associates and bankers for their
Mar 31, 2021
Your Directors have pleasure in presenting the Fiftieth Annual Report and maiden Integrated Report of Deepak Nitrite Limited (''your Company'' or ''the Company'') along with the Audited Financial Statements for the Financial Year (''FY'') ended March 31, 2021. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
FINANCIAL RESULTS
Your Company''s financial performance for the year ended March 31, 2021 is summarized below:
|
(T in Crores) |
||||
|
Particulars |
Standalone |
Consolidated |
||
|
2020-21 |
2019-20 |
2020-21 |
2019-20 |
|
|
Total Revenue (Gross) |
1,822.68 |
2,237.24 |
4,381.27 |
4,264.91 |
|
Operating Profit Before Depreciation, Finance Cost, Exceptional Item and Tax (EBITDA) |
549.61 |
804.28 |
1,268.55 |
1,061.00 |
|
Less: Depreciation and Amortization expenses |
66.88 |
77.93 |
152.63 |
139.73 |
|
Less: Finance Costs |
4.12 |
20.32 |
74.20 |
114.87 |
|
Profit Before Tax |
478.61 |
706.03 |
1,041.72 |
806.40 |
|
Less: Tax Expenses |
123.89 |
161.99 |
265.91 |
195.37 |
|
Net Profit for the Year |
354.72 |
544.04 |
775.81 |
611.03 |
|
Other Comprehensive Income |
(1.30) |
(3.66) |
(1.07) |
(3.80) |
|
Total Comprehensive income for the year |
353.42 |
540.38 |
774.74 |
607.23 |
|
Surplus brought forward from previous year |
934.73 |
511.26 |
1,015.31 |
525.01 |
|
Balance available for Appropriation |
1,288.07 |
1,051.62 |
1,789.97 |
1,184.97 |
The year started with COVID-19 pandemic as a global challenge, creating disruption across the world. The physical and emotional wellbeing of employees continues to be a top priority for the Company, with several initiatives to support employees and their families during the pandemic. In April, 2020, the Company decided that it would prioritize both lives and livelihoods and ensured that all its locations operated with the highest attention to man and material safety. The Company also has taken up the responsibility of vaccinating all its employees and spouses and will continue to look for opportunities to provide succour to the families that depend on it. Your Company, in partnership with Deepak Foundation has strengthened Covid care centres at three locations and supported in setting up 130 beds dedicated for Covid, purchased oxygen PSA plants to be deployed at nearby facilities and has taken other appropriate measures. The Company also expanded COVID medical and life insurance coverage for all its employees.
PERFORMANCE REVIEW Standalone
During FY 2020-21 the Company delivered a solid performance in the backdrop of a challenging macro-economic environment, despite losing one month of production during the year due to nationwide lockdown. The Company''s diverse product line and operational excellence continues to be stronghold against
widespread uncertainties. Amidst the severity of the second wave, the Company continues to function at a high level of efficiency and make progress on various growth initiatives, while adhering to Government directives, local guidelines and safety protocols across all its facilities. The Company has either maintained or increased market share across products. Your Company has demonstrated resilience in its business performance to close the year with y-o-y growth in its Strategic Business Units (''SBUs'').
Total Revenue, including Other Income, in FY 2020-21 was T 1,822.68 Crores compared to T 2,237.24 Crores in FY 2019-20 and EBITDA in FY 2020-21 was at T 549.61 Crores as against T 804.28 Crores reported in the previous year. Profit Before Tax (''PBT'') came in at T 478.61 Crores as compared to T 706.03 Crores in FY 2019-20. Profit After Tax (''PAT'') stood at T 354.72 Crores as compared to T 544.04 Crores in FY 2019-20.
Due to the uncertainties in external environments, the best option for the Company was to become more nimble-footed. The Company paid very close attention to internal processes of people management, supply chain and operations and worked to maximize productivity wherever possible. The Company gained value from these focused efforts in terms of optimizing product mix particularly in the Fine & Speciality Chemicals SBU. As always, the wide range of your Company''s products helped it to overcome some businesses
whose demand were affected by COVID / oil crisis such as fuel additives and paper chemicals. The robust performance during the year was an outcome of the diverse product range built up over five decades, guidance of the able and competent leadership, commitment and dedication of all associates.
During FY 2020-21, Domestic Revenues were 7 954.25 Crores compared to 7 1292.94 Crores in FY 2019-20 and Export Revenues were 7 854.89 Crores as against 7 936.72 Crores in the previous year.
India has become an important and a high potential market for the chemical industry, and your Company is well placed to capitalize on this trend, due to its varied product offerings and decades of manufacturing excellence. There has also been a noticeable rise in demand from global consumers across key product categories. Interventions to de-risk supply chain from China have contributed to mitigate the supply chain challenges for Indian chemical majors. The China plus one strategy has meaningfully impacted demand, which is likely to steadily accelerate in the quarters and years ahead. This is expected to benefit the industry including the Company which is well equipped, globally, and domestically, with established infrastructure and proven track record, alongside a high level of forward and backward integration, in an improving demand scenario.
Your Company''s wholly owned material subsidiary, Deepak Phenolics Limited (''DPL''), entered FY 2020-21 amidst a nation-wide lock down imposed by the authorities as a precautionary step to contain the spread of COVID-19. Domestic demand dropped to unprecedented low levels. Global markets also witnessed significant correction in terms of demand. Further, global markets suffered by Trade conflicts, political uncertainties, heightened volatility in commodity prices with some never before seen developments with respect to sharp fall in crude oil price at beginning of year and sharp rise in metal prices at the end of financial year.
DPL had its I PA plant ready for start but faced inevitable consequence of lack of licensor support for start-up and stabilisation due to the then COVID related restrictions on travelling of licensors. Despite the restrictions faced, DPL commissioned the IPA plant on its own during April-2020 in the midst of the lockdown and nothing could have been timelier in addressing the pressing need of sanitiser alcohol in India.
Further, as India and the global markets opened up towards middle of the first quarter, both Phenol and Acetone started to regain their rightful positions in the global markets. With the judicious mix of domestic sales and exports, DPL achieved around 115% capacity utilization in FY 2020-21 despite remaining offline for the entire month of April-2020. Higher production reflected ability to work on operating leverage to report above 100% of capacity utilisation
in the second complete year of operations from a plant of this magnitude indicates the level of preparedness of the organisation supported by reliable management of complex material logistics.
Despite the nationwide lockdown and slowdown in the economic activity in India, the domestic market for Phenol exhibited a modest growth of 5-6% compared to the previous year indicating the intrinsic resilience of the market DPL operates in. Acetone market in India however declined around 6% compared to the previous year largely due to slowdown in derivatives and other surface coating segments comprising paints, inks and other coatings.
DPL has created new benchmark in revenues and profitability marking this as a milestone year for Deepak Group. DPL managed to achieve its targets in the backdrop of volatility in prices of raw materials and finished goods thereby demonstrating resilience. DPL reported elevated growth in revenues and profitability combined with opening up of new avenues of growth prospects. DPL reported Revenues of 7 2,563 Crores in FY 2020-21 as against 7 2,010 Crores in FY 2019-20 with Profit After Tax of 7 421 Crores in FY 2020-21 as against 7 67 Crores in FY 2019-20, registering growth of 28% and 528% respectively.
DPL continued to remain the largest producer of Phenol and Acetone in India with a market share of much above 50%. During the year under review, DPL was successfully placing its products in the highly competitive global market across multiple continents (Far East Asia, South America, Europe). Your Company is glad to report that DPL''s products were well received in the international market.
Phenol is a versatile industrial organic chemical and is used for manufacture of various chemical intermediates. This is consumed in a broad spectrum of end-user segments, including ply, laminates, foundry, paints, rubber, surfactants, pharmaceuticals, and agrochemicals. Acetone and IPA are mainly used in pharmaceutical manufacturing aside from its significant applications in paints, adhesives, and thinners amongst many others. Acetone is a coproduct of the production process for Phenol and IPA is on-purpose produced from Acetone.
During FY 2020-21, the Company surpassed a remarkable milestone of 7 1,000 Crores in PBT as it clocked 7 1,041.72 Crores. Total Revenue including Other Income during FY 2020-21 was 7 4,381.27 Crores, growing 3% as compared to 7 4,264.91 Crores last year. The accretive performance of the Phenolics business and that of the Fine & Speciality Chemicals segment has driven the performance. The current year''s performance is even more resilient given the fact that, there was one month of production loss due to nationwide lockdown. This was achieved due to the exemplary dedication of the teams in the backdrop of the pandemic related curbs and localised lockdowns imposed by relevant authorities.
EBITDA came in at R 1,268.55 Crores in FY 2020-21, higher by 20% TRANSFER TO RESERVES
as compared to R 1,06L°° Crores in FY 2019-20. Raw material costs The Company proposed to transfer an amount of R 5 Crores to the
stood at R 2,264.26 Crores as against R 2,373.50 Crores in FY 2019-20, General Reserves out of the amount available for appropriation
lower by 5%. The Company''s integrated manufacturing model which (Previous Year R 10 Crores). The closing balance of the retained
encompasses basic building blocks to complex, speciality chemical earnings of the Company for FY 2020-21 was R 1,288.07 Crores.
intermediates has enabled it to capitalize on the opportunities from the global disruption in a remunerative manner. FINANCE
The Company endeavours to maintain an optimal capital structure Profit Before Tax (pBT) stood at R 1,041.72 Crores as compared from time to time; however, during the year the Company has
to R 806.40 Crores in FY 2019-20. The Profit After Tax (pAT) came generated cash profit out of its operations thereby maintaining debt
in at R 775.81 Crores as compared to R 611.03 Crores in FY 2019- at a lower level. During the year under review, the total debt of the
20, representing a strong growth of 27%. Better profitability was Company declined given the scheduled repayments & prepayments
achieved by operational improvements in the phenolics market and made and better working capital management.
incremental contribution from IPA products, that was supported by
efficient logistics management. The Company''s performance has Reduction in total debt resulted in lower interest costs for the
been highly influenced by the breadth and depth of its products Company. Depreciation increased due to change in estimated useful
and process competency. This resilience has been instrumental in life of certain Property, Plant and Equipment. The Company has a
delivering consistent returns regardless of the myriad challenges dedicated team monitoring the exposure of foreign exchange and
faced during the period. dynamically minimizing the risk arising therefrom. Due to judicious
management, the Company has been able to manage its cash flow Domestic Revenues stood at R 3,088.06 Crores from R 3,157.88 Crores position in an efficient manner. On a Standalone basis, Total Debt:
in FY 2019-20, lower by 2%, while Revenue from Exports improved Equity as on March 31, 2021 reduced to Nil compared to 0.14 times
by 19% to R 1,271.69 Crores as compared to R 1,071.83 Crores last as on March 31 2020
year. Consistent performance during the fiscal year reflects the
Company''s deeply rooted resilience, and attributed to exemplary The Company is well placed in the industry, delivering quality guided teamwork, enhanced operations and better marketing and logistics by a robust product mix. Thus, on the back of steady performance
capabilities. Overall, your Company remains optimistic about the over the years, both ICRA and CRISIL has upgraded long term credit
numerous opportunities that have emerged because of increased rating, from AA- to AA while the short term rating of the Company
focus on India''s potential. remains at the highest level at A1 . This is primarily owing to the
Company''s sustainable business performance, commercial viability D|V|DEND across most segments of its products, diversified product portfolio,
Based on your Company''s healthy performance, the Board of constant innovation, and efficient operations.
Directors are pleased to recommend a final dividend of R 4.50
(Rupees Four and Paise Fifty only), being 225%, per equity share In case of _ the Company''s wholly owned Deepak
of face value of R 2.00 (Rupees Two only) each for the year ended Phenolics Limited ( DPL) ICRA has upgraded the l°ng term credit
March 31, 2021. Also, to commemorate the Golden Jubilee year of rating by two notches from âICRA A/Stableâ to''''ICRA AA-/Stableâ the Company, the Directors have recommended a special dividend and also upgraded short term credit rating from |CRA A1 to |CRA
of R 1.00 (Rupee One only), being 50%, per equity share of face value A1 which is the highest rating in short term category.
of R 2.00 (Rupees Two only) each to be paid to the Members of the
During the year, DPL has pre-paid substantial part of its borrowing
Company. Accordingly, the total dividend (final and special) as
apart from honouring committed repayments. Pursuant to this,
recommended for the year ended March 31, 2021 is R 5.50 (Rupees
consolidated Net Debt / Equity ratio is 0.15x as of March 31, 2021
Five and Paise Fifty only), being 275%, per equity share as against the
compared to 0.67x as of March 31, 2020. interim dividend of R 4.50 (Rupees Four and Paise Fifty only), being r
225%, per equity share, paid during the financial year ended March
K y ^ o, DIRECTORS AND KEY MANAGERIAL PERSONNEL
31, 2020. The total dividend as above on 13,63,93,041 Equity Shares
of R 2.00 (Rupees Two only) each, if approved by the Members, would Shri Umesh Asaikar [DIN: 06595059] completed his term of
involve a total cash outflow of R 75.02 Crores, resulting in a dividend appointment as Executive Director & CEO of the Company on May 31,
Payout of 21.15% of the standalone profits of the Company. 202a Accordingly Shri Umesh Asaikar retired as Executive Director &
CEO of the Company from close of business hours on May 31, 2020.
Shri Maulik D. Mehta [DIN: 05227290] retires by rotation at the The issued, subscribed and paid-up Equity Share Capital of the ensuing Annual General Meeting of the Company and being eligible,
Company as on March 31, 2021 was R 27.28 Crores comprising of offers himself for re-appointment
13,63,93,041 Equity Shares of R 2.00 each. The Company has not
issued any Equity Shares during FY 2020-21. There was no change in The Board of Directors at their meeting held on May 5, 2021, upon Share Capital during the year under review. the recommendation of Nomination and Remuneration Committee,
approved the re-appointment of Shri Maulik D. Mehta as an Executive Director & Chief Executive Officer of your Company for further period of five (5) years with effect from May 9, 2021, subject to approval by Members. A resolution seeking Members'' approval for his re-appointment along with other required details forms part of the Notice.
Dr. Richard H. Rupp [DIN: 02205790], who was appointed as an Independent Director at the 48th Annual General Meeting of the Company held on June 28, 2019 for a second term of three (3) consecutive years i.e. upto August 7, 2022, will attain the age of seventy five (75) years during the second term of his appointment. An approval of Members of the Company by way of Special Resolution is required in terms of Regulation 17(1A) of SEBI Listing Regulations, for Dr. Richard H. Rupp to continue as an Independent Director of the Company beyond the age of seventy five (75) years. A Special Resolution seeking Members'' approval for the same along with other required details forms part of the Notice.
During FY 2020-21, Shri Sandesh Kumar Anand [DIN: 00001792] ceased to be an Independent Director of the Company with effect from November 1, 2020. However, he continues to be a Non-Executive Non-Independent Director of the Company, liable to retire by rotation.
Pursuant to the provisions of Section 149 of the Companies Act, 2013 (''the Act'') Independent Directors of the Company have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company.
During the year under review, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with your Company, other than sitting fees, commission and reimbursement of expenses, if any.
Pursuant to the provisions of Section 203 of the Act, Shri Deepak C. Mehta, Chairman & Managing Director, Shri Maulik D. Mehta, Executive Director & CEO, Shri Sanjay Upadhyay, Director - Finance & CFO and Shri Arvind Bajpai, Company Secretary & Compliance Officer are the Key Managerial Personnel of the Company as on March 31, 2021. Except retirement of Shri Umesh Asaikar from the position of Executive Director & CEO as mentioned above, there has been no change in the Key Managerial Personnel of the Company during the year ended March 31, 2021.
Shri Deepak C. Mehta is also the Chairman & Managing Director of the Company''s wholly owned subsidiary, Deepak Phenolics Limited (''DPL''). As per the terms of his appointment, he is entitled to receive remuneration from DPL by way of commission on net profits of DPL calculated in accordance with the provisions of Section 198 of the Act. The aggregate remuneration of Shri Deepak C. Mehta from the Company and its wholly owned subsidiary shall always be in
NUMBER OF MEETINGS OF THE BOARD
During FY 2020-21, four (4) meetings of Board of Directors of the Company were held. For details of meetings of the Board of Directors with regard to the dates and attendance of each of the Directors thereat, please refer to the Corporate Governance Report, which is a part of this Report.
BOARD EVALUATION
The Board of Directors has carried out an annual evaluation of its own performance that of, Board Committees, and of individual Directors pursuant to the provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations'').
The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc.
The performance of the respective Committees were evaluated by the Board after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.
The above criteria are as per the Performance Evaluation Policy of the Company approved by the Board of Directors upon the recommendation of Nomination and Remuneration Committee.
As required under Regulation 25 of the Listing Regulations, a separate meeting of the Independent Directors of the Company was also held on March 16, 2021 to evaluate the performance of the Chairman, NonIndependent Directors and the Board as a whole and also to assess the quality, quantity and timeliness of flow of information between the management of the Company and the Board.
The Board and the Nomination and Remuneration Committee reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual Director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.
Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated, on the basis of following evaluation criteria:
⢠Relevant Knowledge, Expertise and Experience.
⢠Devotion of time and attention to the Company''s long term strategic issues.
⢠Addressing the most relevant issues for the Company.
⢠Discussing and endorsing the Company''s strategy
⢠Professional Conduct, Ethics and Integrity.
⢠Understanding of Duties, Roles and Function as Independent Director.
Your Directors have expressed their satisfaction to the evaluation process.
AUDIT COMMITTEE
A duly constituted Audit Committee consists of majority of Independent Directors with Shri Dileep Choksi, Independent Director, as the Chairman of the Committee. The other members of the Audit Committee are Shri Sudhir Mankad and Shri Sanjay Asher, Independent Directors and Shri Sandesh Kumar Anand, Non-Executive Non-Independent Director. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members of the Audit Committee are set out in the Report on Corporate Governance, which forms part of this Report.
During the year under review, all the recommendations of the Audit Committee were accepted by the Board.
STATUTORY AUDITORS
At the 46th Annual General Meeting of the Company held on June 26, 2017 the Members approved appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/ W-100018) as Statutory Auditors of the Company to hold office for a period of five (5) years from the conclusion of that Annual General Meeting till the conclusion of the 51st Annual General Meeting.
STATUTORY AUDITORSâ REPORT
The observations made in the Auditors'' Report of Deloitte Haskins & Sells LLP, Chartered Accountants for the year ended March 31, 2021, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report.
SECRETARIAL AUDITORS
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2021 was carried out by the Secretarial Auditors, KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has appointed KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2021-22.
SECRETARIAL AUDITORâS REPORT
The Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune, for the year ended March 31, 2021 in Form No. MR-3 is annexed as Annexure - A, which forms part of this Report.
The observations made in the Secretarial Audit Report of KANJ & Co. LLP Company Secretaries, Pune for the year ended March 31, 2021 are self- explanatory and hence do not call for any comments. There
is no qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors in their Report.
COST AUDITORS
The Company is required to maintain cost records under Companies (Cost Records and Audit) Rules, 2014. Accordingly, cost records have been maintained by your Company.
The Board of Directors, on the recommendation of the Audit Committee, appointed B. M. Sharma & Co., Cost Accountants, to conduct audit of the Company''s cost records for FY 2021-22 at a remuneration of 7 8,00,000/- (Rupees Eight Lakhs only) plus applicable taxes and out of pocket expenses. As required under the provisions of the Act, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the Members at the ensuing Annual General Meeting. A Resolution for the ratification of remuneration of Cost Auditors for FY 2021-22 is provided in the Notice. Your Directors recommend the same for approval by the Members.
The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year.
INTERNAL AUDITORS
On the recommendation of the Audit Committee, the Board of Directors of the Company has appointed Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct the Internal Audit for FY 2021-22 and 2022-23.
REPORTING OF FRAUD BY AUDITORS
During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143(12) of the Act details of which needs to be mentioned in this Report.
RISK MANAGEMENT
The Company has in place a Risk Management framework to identify, evaluate and monitor business risks and challenges across the Company. The Risk Management Policy, pursuant to Section 134 of the Act, has been adopted based on this framework. The Risk Management Policy provides for creation of a Risk Register, identification of risks and formulating mitigation plans.
The Board of Directors of your Company has formed a Risk Management Committee to frame, implement and monitor the Risk Management plan for the Company. The Committee is responsible for monitoring and reviewing the Risk Management plan and ensuring its effectiveness. The details about the Risk Management Committee have been provided in the Corporate Governance section of the Annual Report.
The enterprise risks for the Company are identified by the respective Risk Managers and presented to the Risk Management Committee
for review. The Committee evaluates the performance of the Company against perceived risks, develops approaches to classify potential and evolving challenges that may adversely impact the overall risk exposure of the Company. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.
The Risk Register gets updated periodically, to ensure that the risks remain relevant at any point in time and corresponding mitigation measures are effective. This provides a proactive and value adding review process which enables maintaining the risk profile at an acceptable level in a rapidly changing environment.
The Audit Committee has additional oversight in the area of financial risks and controls.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company remains committed to ensuring an effective Internal Control environment that, inter alia, provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds / errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information.
The Company has an independent Internal Audit function with well-established Risk Management processes both at the business and corporate levels and provide assurance on the adequacy and effectiveness of Internal Controls, compliance with operating systems, internal policies and regulatory requirements.
The Audit Committee regularly reviews the major findings of the Internal Audits and corrective measures taken thereon to ensure the efficacy of the Internal Control process. These reviews are done with respect to different locations and functions to help take effective steps for ensuring compliance.
The system of Internal Control is structured to verify that financial and other documents are accurate in compiling financial reports and other data, and in maintaining transparency for individuals.
Statutory Auditors'' Report on Internal Financial Controls as required under Clause (i) of Sub-section 3 of Section 143 of the Act, is annexed with the Independent Auditors'' Report.
VIGIL MECHANISM
Pursuant to provisions of Section 177 (9) of the Act, read with Regulation 22(1) of the SEBI Listing Regulations, your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behavior, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of the Company''s Code of Conduct or ethics policy. The Policy 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 certain cases. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.
The Whistle Blower Policy is available on the Company''s website at https://www.godeepak.com/wpcontent/themes/twentysixteen/ companyfiles/corporate governance report/Whistle Blower Policy.pdf.
DEPOSITS FROM PUBLIC
During FY 2020-21, the Company has not accepted or renewed any Fixed Deposits. As on March 31, 2021, 35 warrants aggregating to T 7,23,507 issued by the Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Act, remained uncleared. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2021.
RELATED Party TRANSACTIONS
There are no material related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large. Accordingly, the disclosure of related party transactions, as required under Section 134(3)(h) of the Act, in Form No. AOC-2 is not applicable to the Company. All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approval of the Audit Committee is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on arm''s length basis. A statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors on a quarterly basis.
The policy on Related Party Transactions as approved by the Board of Directors is uploaded on the website of the Company www. godeepak.com. None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.
subsidiary / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board''s Report has been prepared on a Standalone basis.
Pursuant to requirement of Section 136 of the Act, which has exempted companies from attaching the financial statements of the subsidiary companies along with the Annual Report of the company, your Company will make available the Annual Financial Statements of the subsidiary companies and the related detailed information to any Member of the Company on receipt of a written request from them at the Registered Office of the Company. The Annual Financial Statements of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company on any working
day during business hours. These are also available on the website of your Company www.godeepak.com.
The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (''Ind AS''), forms part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company.
The Consolidated Financial Statements include the operations of following subsidiaries:
⢠Deepak Phenolics Limited
⢠Deepak Nitrite Corporation Inc.
⢠Deepak Clean Tech Limited
During FY 2020-21, Deepak Clean Tech Limited was incorporated on October 9, 2020 as a wholly owned subsidiary of the Company. There is no other company which has become or ceased to be subsidiary or associate of the Company during the year ended March 31, 2021.
Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the SEBIListing Regulations. The Policy, as approved by the Board, is uploaded on the Company''s website www.godeepak.com.
(a) Deepak Phenolics Limited
The Company''s wholly owned subsidiary, Deepak Phenolics Limited (''DPL''), is in the business manufacturing of Phenol, Acetone and their downstream products.
During FY 2020-21, the Revenue from Operations of DPL was T 2,563 Crores and Profit After Tax for the period was T 421 Crores.
(b) Deepak Nitrite Corporation Inc. (usA)
Deepak Nitrite Corporation Inc. (âDNCâ) is a wholly owned subsidiary incorporated in the United States of America to cater to the marketing requirements of the Company in North and South American region. During FY 2020-21 the total revenue of DNC was USD 21,667 and the Net Income for the period was USD 625.
(c) Deepak Clean Tech Limited
Deepak Clean Tech Limited is a newly incorporated wholly owned subsidiary of the Company and it is yet to commence commercial operations.
In accordance with the provisions of the Act, Regulation 33 of the SEBI Listing Regulations and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for
FY 2020-21, together with the Auditor''s Report, forms part of this Annual Report. A statement containing the salient features of the Company''s subsidiaries, associate and joint venture company in the prescribed Form No. AOC-1, is attached to the Financial Statements.
particulars of loans, guarantees and investments under section 186 OF THE COMPANIEs ACT, 2013
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are given in the notes to the Financial Statements.
MATERIAL CHANGEs AND COMMITMENTs AFFECTING FINANCIAL POsiTION OF YOuR COMPANY
There have been no material changes and commitments affecting the financial position of the Company since the close of Financial Year i.e. since March 31, 2021 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of the Company.
directorsâ responsibility statement
Based on the framework of Internal Financial Controls established and maintained by the Company, work performed by the Internal, Statutory, Secretarial and Cost Auditors and external agencies including audit of Internal Financial Controls over Financial Reporting by the Statutory Auditors and reviews performed by the management and relevant Board Committees, including the Audit Committee, the Board is of the opinion that your Company''s Internal Financial Controls were adequate and effective during FY 2020-21. Accordingly, pursuant to Section 134(5) of Act, the Board of Directors, to the best of their knowledge and ability confirm that:
(a) in the preparation of the Annual Accounts for the Financial Year ended March 31, 2021, the applicable accounting standards have been followed and there are no material departures;
(b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year ended March 31, 2021 and of the profit of the Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and are operating effectively; and
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirement set out by Securities and Exchange Board of India (SEBI). The Report on Corporate Governance under Regulation 34 of the SEBIListing Regulations read with Schedule V of the said Regulations forms an integral part of the Annual Report. The requisite Certificate from a Practising Company Secretary, KANJ & Co., LLP, Company Secretaries, Pune, confirming compliance with the conditions of the Corporate Governance is attached to the Report on Corporate Governance.
BUSINESS RESPONSIBILITY REPORT
The Securities and Exchange Board of India under Regulation 34(2) (f) of SEBIListing Regulations read with National Guidelines on Responsible Business Conduct issued by Ministry of Corporate Affairs Government of India on March 13, 2019, requires top one thousand listed companies to prepare and present a Business Responsibility Report (''BRR'') to its stakeholders in the prescribed format describing the initiatives taken by the company on Environmental, Social and Governance perspective. As on March 31, 2021, your Company is at 164th position on the basis of capitalization at NSE and at 167th position at BSE.
The Business Responsibility Report, covering initiatives on Environmental, Social and Governance aspects forming part of this Report is annexed as Annexure - B.
Your Company believes that sustainable development calls for concerted efforts towards building an inclusive, sustainable and resilient future for people and planet through harmonising economic growth, social inclusion and environment protection. In furtherance to this commitment, the Company had taken paradigm shift from compliance based reporting to governance based reporting and accordingly, in the interest of its stakeholders, the Company, on voluntary basis adopted for the first time the Integrated Reporting (IR) framework of the International Integrated Reporting Council to report on all the six capitals that the Company uses to create long term stakeholder value. The Integrated Report is a part of this Annual Report, which provides a clear, concise, and comprehensive vision of business model.
MANAGEMENT DISCUSSION AND ANALYSIS
In terms of Regulation 34 (2) (e) of SEBI Listing Regulations, read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for overall development and welfare of the society. The Company''s commitment to the development of weaker and underprivileged sections of society is continuing for four decades now. Through the group''s charitable trust âDeepak Foundationâ, the Company has upgraded its Corporate Social Responsibility (''CSR'') activities to cover a larger section of the society encompassing social interventions in various developmental domains such as Health, Education, Livelihood, etc. in order to support the downtrodden, needy and marginalized citizens and also to create social infrastructure for their sustenance.
During the year under review, the Company has spent 7 7.44 Crores on CSR activities, against the requirement of 7 7.44 Crores, being 2% of average of the Net Profits for the preceding three years.
The Company has in place a CSR Policy which provides guidelines to conduct its CSR activities.
The CSR Policy has been posted on the website of the Company at https://www.godeepak.com/wp-content/themes/twentysixteen/ companyfiles/corporate governance report/DNL Corporate%20 Social%20Responsibility%20Policy.pdf
The Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure - C, which forms part of this Report.
NOMINATION AND REMUNERATION POLICY
Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Act and the Listing Regulations. The Nomination and Remuneration Policy of your Company is annexed as Annexure - D and is also available on the Company''s website on www.godeepak.com
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure-E.
Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. Having regard to the provisions of the second proviso to Section 136(1) of the Act, the Annual Report is being sent to the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such information may write to the Company Secretary.
Pursuant to Section 134(3)(a) and 92(3) of the Act, the Annual Return has been placed on the website of the Company www.godeepak.com.
The R&D center at Nandesari focuses on the innovation of new compounds to substitute imports of pharmaceutical and agrochemical intermediates, innovation and development of speciality chemicals and personal care intermediates and value-added products from by-products.
The Company''s R&D efforts are focused on process development of new and existing molecules. It is your Company''s constant endeavor to develop cost effective sustainable, cutting edge technologies for manufacturing of chemicals. Considerable attention is also paid to develop processes which will have minimal environment impact. The Company is in the process of developing different technology platforms for efficient manufacturing of chemicals, which will make the Company a reliable partner of choice for sustainable supply. Substantial efforts are made to develop new product applications, which meets customer demands.
SAFETY, HEALTH & ENVIRONMENT
Your Company is committed to ensure a sound Safety, Health and Environment (''SHE'') performance related to its activities, products and services. It is continuously taking various steps to develop and adopt Safer Process technologies and unit operations.
The Company is investing in areas such as Process Automation for increased safety and reduction of human error element, Enhanced level of training on Process and Behaviour based safety, adoption of safe & environmental friendly production process, upgrading effluent treatment facilities, Reverse Osmosis plants, Multiple Effect Evaporator etc to reduce the discharge of effluents, commissioning of Waste Heat recovery systems, and so on to ensure the Reduction, Recovery and Reuse of effluents & other utilities. SHE Management System is monitored and reviewed periodically. Structured & regular safety meetings are carried out to Review Existing Process Safety Parameters.
Systematic and well documented scale up procedure is in place for the development of product from R&D to Pilot to Commercial Scale. It includes risk assessment and process safety study at each stage to ensure inherently safe processes.
The Company has policy and system in place to deploy internationally recognized guidelines, such as the principles of the United Nations'' Global Compact, the International Labour Organization (âILOâ) conventions and Responsible Care® Initiative. It has system in place to ensure social compliances related to human rights, labour & social standards, anti-discrimination, conflict of interest and anti-corruption. This is being audited by third party as a part of Together for Sustainability (âTfSâ) system.
Health and Safety remained a core area of importance for the Company with an aim to achieve accident-free workplace. Your Company believes that all injuries, occupational illnesses as well as safety and environmental incidents are preventable. This ensures that all employees strive for excellence in their own personal safety and the safety of others including employees, contractors, customers, and the communities within which the Company operates.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information pertaining to Conservation of Energy & Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure - F to this Report.
state of companyâs affairs
The state of your Company''s affairs is given under the heading ''Performance Review'' and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.
sIGNIFICANT AND MATERIAL ORDERs PAssED AGAINsT THE COMPANY
Pursuant to the requirement of Section 134(3)(q) of the Act, read with Rule 8 (5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during FY 2020-21 there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Company''s operations in future.
During the year under review, the Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India as approved by the Central Government.
Your Directors state that no disclosure or reporting is required in respect of the following matters as there is no transaction on these items during the year under review:
(i) Issue of equity shares with differential rights as to dividend, voting or otherwise.
(ii) Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except Employees'' Stock Options Schemes referred to in this Report.
(iii) The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.
(iv) There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.
Your Company has a Research and Development (''R&D'') facility at Nandesari, Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat. The Department of Scientific and Industrial Research (''DSIR''), New Delhi, on behalf of the Government of India vide letter October 14, 2020, has recognized the Company''s in-house R&D facilities for a further period of extension up to March 30, 2023.
The Company follows a strict incident reporting system. All incidents including near-miss and unusual occurrence are also logged into the Safety MIS. Each incident is analysed for their root-causes and required precautions are taken to prevent the recurrences. Each management of change and projects undertaken by the Company are made to undergo HAZOP studies before commencement. All plant-setting changes are first approved through Management of Change procedure before implementation. Workplace safety and Process Safety Management through employee engagement initiatives are continuously being strengthened. Your Company has a system of Internal and external Safety Audits and actions based on audit findings. All Manufacturing Units including Corporate Office are certified with the latest standard of ISO 9001, ISO 14001 and ISO 45001. The safety team regularly conducts safety awareness programs across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioural transformation.
Logistic Safety Management System
The Company has, along with its peers, founded Nicer Globe, an independent platform which provides real-time monitoring of the movement of hazardous materials across the length and breadth of India. This helps in monitoring any deviations in speed or route or driving time restrictions, which results in minimizing transport related incidents. Almost all raw materials and products within supply chain framework of the Company are transported in a secure manner, with GPS for real-time monitoring for the safety of its customers, carriers, suppliers, distributors and contractors.
The Company is committed to the chemical industry''s Responsible Care® initiative and have set out the basic principles fully aligned with UN Sustainable Development Goals. Commitment to environmental protection extends beyond the scope of legal requirements. It has focused on recycle and reuse and reduction of pollution load and constantly working on to reduce environmental footprint and find innovative solutions that benefit the environment.
Your Company recognizes its employees as most valuable resource and ensures strategic alignment of Human Resource Initiatives and practices to business priorities and objectives. Its constant endeavor is to invest in Human Talent and Talent Management Processes to improve capabilities and potentials of human capital of the organization to cope with challenging business environment, varying needs of the customers and bring about customers delight by focusing on the Customers'' needs. This approach has allowed the Company to withstand and overcome the challenges posed by COVID -19. Attracting, developing and retaining the right talent and keeping them motivated will continue to be a key strategic initiative and the organisation continues to be focused on building up the capabilities of its people to cater to the business needs. Given growth plans of the Company, an important strategic focus is to continue to not only nurture its human capital, but also proactively focus on preparing all employees for the challenges of the future.
The Company strives to provide a healthy, conducive and competitive work environment to enable the employees excel and
create new benchmarks of quality, productivity, efficiency and customer delight. The Company always believes in maintaining mutually beneficial, healthy and smooth industrial relations with the employees and the Unions which is an essential foundation for the success of any organisation. The proactive initiatives combined with fair Wage Settlements at Manufacturing Plants have ensured healthier and more transparent Industrial Relations based on foundation of mutual trust and co-operation.
insurance
All the insurable interests of the Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
disclosure as required under section 22 OF THE sExuAL harassment of women at workplace (PREVENTION, PROHIBITION AND REDREssAL) ACT, 2013
Your Company is committed to creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation. To empower women and protect women against sexual harassment, and as per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, a policy for prevention of sexual harassment is already in place and Internal Complaints Committee had been set up at all major locations of the Company. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair enquiry process with clear timelines. To build awareness in this regard, the Company has been conducting various programme on a continuous basis.
During FY 2020-21, no complaint was received from any employee and hence no complaint is outstanding as on March 31, 2021 for redressal.
acknowledgment
Your Directors express their gratitude to customers, vendors, dealers, investors, business associates and bankers for their continued support during the year. We place on record our appreciation of the commitment and contribution made by the employees at all levels. Our resilience to meet challenges was made possible by their hard work, solidarity, cooperation and support.
We thank the Government of India, the State Governments and statutory authorities and other government agencies for their support and look forward to their continued support in the future.
For and on behalf of the Board Deepak C. Mehta
Place: Vadodara Chairman & Managing Director
Date: May 5, 2021 (DIN: 00028377)
Mar 31, 2019
Dear Shareholders,
The Directors have pleasure in presenting the Forty Eighth Annual Report together with the Audited Statement of Accounts for the Financial Year (FY) ended March 31, 2019.
FINANCIAL RESULTS
The Company''s financial performance for the year ended March 31, 2019 is summarized below:
(Rs. In Crores)
|
Particulars |
standalone results |
consolidated results |
||
|
2018-19 |
2017-18 |
2018-19 |
2017-18 |
|
|
Total Revenue (Gross) |
1794.52 |
1,490.77 |
2715.04 |
1,688.47 |
|
Less : Excise Duty on sale of Goods |
- |
24.25 |
- |
24.73 |
|
Total Revenue (Net of Excise Duty) |
1794.52 |
1,466.52 |
2715.04 |
1,663.74 |
|
Operating Profit Before Depreciation, Finance Cost, Exceptional Item and Tax |
308.23 |
214.37 |
429.02 |
208.60 |
|
Less : Depreciation and Amortization expenses |
52.88 |
51.95 |
77.79 |
52.60 |
|
Less : Finance Costs |
42.85 |
40.34 |
83.25 |
45.15 |
|
Profit before Tax |
212.50 |
122.08 |
267.98 |
110.85 |
|
Less : Tax expenses |
74.46 |
38.62 |
94.32 |
31.83 |
|
Net Profit for the Year |
138.04 |
83.46 |
173.66 |
79.02 |
|
Other Comprehensive Income |
(2.67) |
0.86 |
(2.84) |
0.86 |
|
Total Comprehensive income for the Year |
135.37 |
84.32 |
170.82 |
79.88 |
|
Surplus brought forward from previous year |
402.32 |
342.02 |
380.61 |
324.76 |
|
Balance available for Appropriation |
537.64 |
426.20 |
548.16 |
404.49 |
PERFORMANCE REVIEW
Standalone
In FY 2018-19, Total Revenue including Other Income stood at Rs. 1794.52 Crores as against Rs. 1490.77 Crores in FY 2017-18.
EBITDA came in at Rs. 308.23 Crores in FY 2018-19, higher by 44% as compared to Rs. 214.37 Crores in FY 2017-18. Raw material costs stood at Rs. 976.17 Crores as against Rs. 843.82 Crores in FY 2017-18, up by 16%.
Profit Before Tax (PBT) excluding Exceptional Items stood at Rs. 212.50 Crores as compared to Rs. 122.08 Crores in FY 2017-18. The Profit After Tax (PAT) excluding Exceptional Items came in at Rs. 138.04 Crores as compared to Rs. 83.46 Crores in FY 2017-18. Favourable shift in product mix, strategic modifications in geography, end-user based better customer selection, various cost leadership initiatives across business segments led to better PAT performance. The Depreciation and Finance Costs during the year stood at Rs. 52.88 Crores and Rs. 42.85 Crores respectively.
Domestic Revenues stood at Rs. 1,211.53 Crores from Rs. 968.38 Crores in FY 2017-18, representing a growth of 25% owing to strong demand trends from local customers. Your Company, apart from reasons explained above, has also been benefitted due to production and supply disruption in China. The Revenue from exports stood at Rs. 580.39 Crores compared to Rs. 510.85 Crores last year.
The Chemical Industry in India is witnessing an unprecedented growth opportunity largely due to International events. For a company like Deepak Nitrite, which is into chemical intermediates, the opportunity stands accentuated as its products support a wide range of industries. In the current scenario, Chemical Intermediates are witnessing a big jump in demand both due to growing demand from domestic end user industries and reduced availability of intermediates from China. Your Company expects the situation to remain conducive in the foreseeable future.
At this backdrop, Your Company was able to ensure peak performance amidst fluctuating pricing of Raw Materials and volatility in Foreign Exchange.
Consolidated
In FY 2018-19, Total Revenue including Other Income stood at Rs. 2,715.04 Crores as against Rs. 1,688.47 Crores in FY 2017-18.
EBITDA came in at Rs. 429.02 Crores in FY 2018-19, higher by 106% as compared to Rs. 208.60 Crores in FY 2017-18. Raw material costs stood at Rs. 1,646.70 Crores as against Rs. 1,038.79 Crores in FY 2017-18, up by 59%.
Profit Before Tax excluding Exceptional Items stood at Rs. 267.98 Crores as compared to Rs. 110.85 Crores in FY 2017-18. The Profit After Tax excluding Exceptional Items came in at Rs. 173.66 Crores as compared to Rs. 79.02 Crores in FY 2017-18. Apart from reasons cited above for better performance, the newly commissioned Phenol-Acetone manufacturing facility performed well and contributed to PBT, PAT sizably within a very short time of its operation exhibiting sustainability of this business. The depreciation and finance costs during the year stood at Rs. 77.79 Crores and Rs. 83.25 Crores respectively.
The Domestic Revenues stood at Rs. 2,106.55 Crores from Rs. 1,164.22 Crores in FY 2017-18, representing a growth of 81% owing to strong demand trends from local customers and also due to commencement of operation of Phenol - Acetone plant which are sold in domestic market, being import substitutes. The Revenue from Exports stood at Rs. 593.38 Crores compared to Rs. 511.96 Crores last year.
dividend
Based on your Company''s Performance, the Board of Directors of your Company is pleased to recommend a Dividend of Rs. 2/-(Rupees Two only) per Equity Share for the year ended March 31, 2019 on 13,63,93,041 Equity Shares of Rs. 2/- each, as against Rs. 1.30 (Rupee One and Paisa Thirty only) per Equity Share in the previous year.
The total amount of Dividend, if declared by the Members, including Dividend Tax, will be Rs. 32.89 Crores (Previous Year Rs. 21.83 Crores).
DIVIDEND DISTRIBUTION POLICY
Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations'') requires top 500 listed entities, based on market capitalization calculated as on March 31 of every Financial Year, to formulate a Dividend Distribution Policy and disclose the same in their Annual Report and on their websites.
Accordingly, the Board of Directors of your Company has adopted a Dividend Distribution Policy, which aims to ensure fairness, sustainability and consistency in distributing profits to the Shareholders. The Dividend Distribution Policy is attached as Annexure - A and is also available on the website of your Company at www.godeepak.com.
share capital
The Paid-up Equity Share Capital of your Company as on March 31, 2019 was Rs. 27.27 Crores comprising of 13,63,93,041 Equity Shares of Rs. 2/- each. Your Company has not issued any Equity shares during the Financial Year 2018-19.
transfer to reserves
Your Company proposes to transfer Rs. 5 Crores to the General Reserves out of the amount available for appropriation.
update on phenol and acetone project
The Members are aware that your Company, through its wholly owned subsidiary, Deepak Phenolics Limited (''DPL''), commenced commercial production at a state-of-the-art plant at Dahej to manufacture 200,000 MTPA of Phenol and 120,000 MTPA of its co-product Acetone on November 1, 2018. This is supported by manufacturing facility of 260,000 MT of Cumene, which is a feedstock for manufacturing Phenol and Acetone.
With this, your Company addresses the opportunity offered by the supply deficit in the domestic market which is majorly being met by imports. In addition to being cost competitiveness as a domestic supplier to domestic end users, your Company started leveraging on the latest manufacturing technologies in its state-of-the art plant which is efficient in every aspect.
The plant is expected to save approx. USD 350 - 400 mn of Foreign Exchange every year by way of value addition of petrochemicals which otherwise was being converted to low value LPG or was being exported.
With an objective of developing working relationships with major clients across India as well as establishing strong marketing and distribution channels, DPL had worked on seed marketing of Phenol to understand and penetrate in the market. The seed marketing activity helped DPL to leverage its relationship to sell large manufacturing quantities. DPL has appointed distributors across India for selling and distributing Phenol and Acetone. It also has well tied up transportation and other logistics requirements which is one of the key requirements for handling such large volume of moving inbound and outbound materials.
FINANCE
Your Company tries to strike a balance in its capital structure on a consolidated level while efficiently managing its working capital, thereby maintaining debt at a reasonable level. During the year under review, the total debt of your Company decreased due to scheduled repayments and improved working capital management. However, as your Company commissions its expansion projects, on a consolidated level, the consolidated debt level has gone up. This level is expected to normalise as the Phenol-Acetone project has started generating revenue and it shall operate for the whole year from FY 2019-20 onwards. Your Company has already provided entire committed equity to its Phenol-Acetone project. On a consolidated basis, Debt Equity Ratio of your Company is at 1.11 which is reasonably comfortable given the size of its Phenol-Acetone project and associated debt.
Interest costs increased marginally during the year due to repayment of low cost Foreign Currency debt, increase in the LIBOR and increase in market rate in Rupee borrowing. Depreciation increased due to regular growth and maintenance Capex. Your Company has an active team to manage its Foreign Exchange exposures to minimise risk arising out of imports and exports. Due to prudent fund management, your Company has been able to effectively manage its cash flows. There is always an effort to reduce the overall interest costs. On a standalone basis, Debt/Equity as on March 31, 2019 is reduced to 0.31 compared to 0.49 as on March 31, 2018, while on a consolidated level, Debt/Equity ratio stood at 1.11 times, as mentioned above.
ICRA Limited re-affirmed the long-term rating of [ICRA] A and Short Term rating of [ICRA] A1 assigned to the fund based limits and non-fund based limits of your Company. ICRA also re-affirmed the short-term rating of [ICRA] A1 assigned to the Commercial Paper programme. The outlook on the long-term rating has been revised from Stable to Positive.
Further, CRISIL Limited has assigned the Long-Term rating as CRISIL AA- Stable and Short term rating as CRISIL A1 to your Company.
directors
During the year under review, following are the changes in the composition of Directors:
Shri Umesh Asaikar (DIN: 06595059) was re-appointed as a Wholetime Director designated as the Executive Director & CEO of your Company for a period from May 9, 2018 to May 31, 2020. The said re-appointment was approved by the Members at the 47th Annual General Meeting of your Company held on August 3, 2018.
Shri Deepak C. Mehta (DIN: 00028377) was re-appointed as the Chairman & Managing Director of your Company w.e.f. December 14, 2018 for a period of five (5) years, subject to the approval by the Members.
Pursuant to Provision of Section 152 of the Companies Act, 2013, Shri Sanjay Upadhyay (DIN: 01776546), Director-Finance & Chief Financial Officer, retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. The Board recommends his re-appointment for approval by the Members.
The Board of Directors of your Company appointed Shri Sanjay Asher (DIN: 00008221) and Smt. Purvi Sheth (DIN: 06449636) as Additional Directors at their meeting held on May 3, 2019, As per provisions of the Companies Act, 2013, Shri Sanjay Asher and Smt. Purvi Sheth hold office as Additional Director upto the ensuing Annual General Meeting.
Your Company has received notice from a Member proposing candidature for the appointment of Shri Sanjay Asher and Smt. Purvi Sheth as Independent Directors for a period of three (3) consecutive years alongwith requisite fees. The Resolution(s) for the appointment of Shri Sanjay Asher and Smt. Purvi Sheth as Independent Directors are given in the Notice for approval by the Members.
Shri Sudhin Choksey, Shri Sudhir Mankad, Shri Sandesh Kumar Anand, Dr. Swaminathan Sivaram and Dr. Richard H. Rupp, Independent Directors have consented to act as Independent Directors for the second term, subject to approval of shareholders by way of Special Resolution. Accordingly, Special Resolutions for the re-appointment of Shri Sudhin Choksey, Shri Sudhir Mankad, Shri Sandesh Kumar Anand, Dr. Swaminathan Sivaram and Dr. Richard H. Rupp as Independent Directors of your Company for second term of three (3) consecutive years are given in the Notice for approval by the Members.
Shri Nimesh Kampani and Prof. Indira Parikh, Independent Directors of the Company have expressed their desire not to be reappointed as Independent Directors of the Company for second term. Accordingly, the Board of Directors do not recommend their re-appointment as Independent Directors of the Company for second term. The first term of appointment of Shri Nimesh Kampani and Prof. Indira Parikh is upto August 7, 2019 and August 8, 2019, respectively.
KEY MANAGERIAL PERSONNEL
As required under Section 203 of Companies Act, 2013 of Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 following persons are the Key Managerial Personnel of the Company:
I. Shri Deepak. C. Mehta, Chairman & Managing Director
2. Shri Umesh Asaikar, Executive Director & CEO
3. Shri Sanjay Upadhyay, Director-Finance & CFO
4. Shri Maulik Mehta, Whole-time Director
5. Shri Arvind Bajpai, Company Secretary
MEETINGS OF THE BOARD
During FY 2018-19, Four (4) Board Meetings were held. The details of Board Meetings with regard to their dates and attendance of each of the Directors thereat have been set out in the Report on Corporate Governance, which forms part of this Report.
independent directors
The Independent Directors of your Company have furnished the declaration that they meet the criteria of independence as provided in Section 149 (7) of the Companies Act, 2013 and Regulation 25(8) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Board of Directors of your Company confirms that the Independent Directors fulfill the conditions specified in Section 149 (6) of the Act and Regulation 16(1)(b) of the Listing Regulations and are independent of the management.
performance evaluation
Pursuant to the provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations''), the Board of Directors have carried out annual evaluation of its own performance, Board Committees and individual Directors.
The performance of the Board / Committee was evaluated after seeking inputs from all the Directors / Committee members on the basis of the defined criteria including composition and structure, effectiveness of meetings, information and functioning.
Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated, on the basis of following evaluation criteria:
- Relevant Knowledge, Expertise and Experience.
- Devotion of time and attention to your Company''s long term strategic issues.
- Addressing the most relevant issues for your Company.
- Discussing and endorsing your Company''s strategy
- Professional Conduct, Ethics and Integrity.
- Understanding of Duties, Roles and Function as Independent Director.
Your Directors have expressed their satisfaction to the evaluation process.
audit committee
The Audit Committee consists of all Independent Directors with Shri Sudhin Choksey as the Chairman of the Committee. The other members of the Audit Committee are Shri Sudhir Mankad and Shri S. K. Anand. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members are set out in the Report on Corporate Governance, which forms part of this Report.
STATUTORY AUDITORâS REPORT
The observations made in the Auditor''s Report of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report.
REPORTING OF FRAUD BY AUDITORS
There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and/or Board under Section 143(12) of the Act and the rules made thereunder.
SECRETARIAL AUDITORâS REPORT
The Secretarial Audit Report of M/s. KANJ & Co. LLP, Company Secretaries, Pune, for the Financial Year ended March 31, 2019 does not contain any qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors.
The Secretarial Audit Report in Form MR-3 is annexed as Annexure - B, which forms part of this Report.
auditors
(A) statutory Auditors
The Statutory Auditor of your Company, M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/W-100018), were appointed for a period of five (5) years at the 46th Annual General Meeting held on June 26, 2017.
The Companies (Amendment) Act, 2017 has waived the requirement for ratification of the appointment of Statutory Auditor by the shareholders at every Annual General Meeting. Hence, the ratification of appointment of Statutory Auditors by your Company is not required. Accordingly, the Statutory Auditor will continue to hold office till the conclusion of the 51st Annual General Meeting of the Company approved by the Members at the 46th Annual General Meeting of the Company.
(B) Secretarial Auditors
Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2019 was carried out by the Secretarial Auditors, M/s. KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has appointed M/s. KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2019-20.
(C) Cost Auditors
The Board of Directors of your Company has appointed M/s. B. M. Sharma & Co., Cost Accountants, to conduct audit of your Company''s cost records for FY 2019-20 at a remuneration of Rs. 7,50,000/- (Rupees Seven Lakhs Fifty Thousand only) plus applicable tax, travelling and other out of pocket expenses in connection with the said Audit. As required under the provisions of Companies Act, 2013, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the shareholders at the ensuing Annual General Meeting.
The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year.
(D) Internal Auditors
The Board of Directors has appointed M/s. Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct the Internal Audit for FY 2019-20.
FIXED DEPOSITS
During FY 2018-19, your Company has not accepted or renewed any Fixed Deposits.
As on March 31, 2019, 37 warrants aggregating to Rs. 7,43,507 issued by your Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Companies Act, 2013, remained uncleared. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2019.
VIGIL MECHANISM
Your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behaviour, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of your Company''s Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimisation of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.
The Whistle Blower Policy is available on the website of your Company at https://www.godeepak.com/investor-compliances/
RELATED PARTY TRANSACTIONS
All Related Party Transactions that were entered into during the Financial Year were on an arm''s length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 (''the Act'') and the Listing Regulations. There were no materially significant Related Party Transactions entered into by your Company during the year that would have required shareholders'' approval under the Listing Regulations or the Act.
All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature. A statement of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis, specifying the name of the Related Party, nature and value of the transactions.
In line with the requirements of the Act and Listing Regulations, your Company has adopted a Policy on Related Party Transactions which is available on your Company''s website at www. godeepak.com.
Details of transactions with Related Parties are provided in the accompanying Financial Statements. There were no transactions with Related Parties during the year which would require to be reported in Form AOC-2.
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL sTATEMENTs
As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board''s Report has been prepared on a Standalone basis.
The Consolidated Financial Statements of your Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (''Ind AS''), forms part of the Annual Report and are reflected in the Consolidated Financial Statements of your Company.
The annual Financial Statements of the subsidiaries and related detailed information will be kept at the Registered Office of your Company, as also at the Registered Offices of the respective Subsidiary Companies and will be available to investors seeking information at any time. They are also available on the website of your Company. The Consolidated Financial results reflect the operations of subsidiary Companies, Deepak Phenolics Limited and Deepak Nitrite Corporation Inc. Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the Listing Regulations. The Policy, as approved by the Board, is uploaded on your Company''s website.
PERFORMANCE OF SUBSIDIARIES
(a) Deepak Phenolics Limited
Deepak Phenolics Ltd. (DPL), a wholly-owned subsidiary of your Company commenced commercial production at its Mega-Plant for manufacturing Phenol & Acetone on November 1, 2018.
DPL has reported Revenue from Operations of Rs. 913.50 Crores for the period ended March 31, 2019 and Net Profit for the period was Rs. 35.88 Crores.
(b) Deepak Nitrite Corporation Inc. (USA)
Deepak Nitrite Corporation Inc. (''DNC'') is a wholly owned subsidiary company incorporated in the United States of America to cater to the marketing requirements of your Company in North and South American region. DNC actively does market research and scouts for market and potential customers for your Company''s products in the North and South American region. DNC also provides warehousing, distribution and customer relationship management services.
During FY 2018-19 the Total Revenue of DNC was USD 1,78,347 and the Net Income for the period was USD 4,888.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the Financial Statements of your Company''s subsidiaries in Form AOC-1 is attached to the Financial Statements.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
The Particulars of Loans granted and Investments made by your Company have been disclosed in the Financial Statements, forming part of the Annual Report.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments affecting the financial position of your Company since the close of Financial Year i.e. since March 31, 2019 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of your Company.
DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(5) of the Companies Act, 2013 (âthe Actâ), the Board of Directors of your Company, to the best of their knowledge and ability, confirm that:
(a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;
(b) they have selected 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 your Company at the end of the Financial Year and of the profit of your Company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
corporate governance
A separate report on Corporate Governance is provided together with a Certificate from Shri Dinesh Joshi, a Practising Company Secretary, M/s. KANJ & Co. LLP, Company Secretaries, Pune regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report on your Company''s business as required by Regulation 34(2) of the Listing Regulations, initiatives on environmental, social and governance aspects forming part of this Report is annexed as Annexure - C.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility (CSR) activities of your Company are being implemented through Deepak Foundation, the group''s charitable trust encompassing social interventions in various developmental domains such as Health, Education, Livelihood, etc.
During FY 2018-19, your Company has spent Rs. 250 Lakhs on CSR activities, against the requirement of Rs. 213 Lakhs, being 2% of average of the net profits for the preceding three years.
Your Company has a policy on Corporate Social Responsibility and the same has been posted on the website of the Company at www.godeepak.com. The Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure - D, which forms part of this Report.
NOMINATION AND REMUNERATION POLICY
Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and Senior Management employees pursuant to the requirement of Section 178 of the Companies Act, 2013 and Listing Regulations.
The Nomination and Remuneration Policy of your Company is annexed as Annexure - E.
extracts of annual return
Pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return in the prescribed form i.e. Form MGT-9 is annexed herewith as Annexure - F, which forms part of this Report.
annual return
Pursuant to provisions of Section 92 (3) of the Companies Act, read with Rule 8A (1) of the Companies (Accounts) Rules, 2014 as amended from time to time, your Company has uploaded draft Annual Return for the Financial Year ended March 31, 2019 on the website of your Company at https://www.godeepak.com/investor-compliances/.
PARTICULARS OF EMPLOYEES
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act, 2013 and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed to this report as Annexure - G.
Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available at the Registered Office of your Company during working hours, 21 days before the 48th Annual General Meeting and shall be made available to any shareholder on request. Such details are also available on your Company''s Website www.godeepak.com.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Pursuant to the requirement of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant data pertaining to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are provided in Annexure - H of this Report.
STATE OF COMPANYâS AFFAIRS
The state of your Company''s affairs is given under the heading ''Performance Review'' and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.
SIGNIFICANT OR MATERIAL ORDERS PASSED AGAINST THE COMPANY
Pursuant to the requirement of Section 134(3)(q) of the Companies Act, 2013 read with Rule 8(5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during FY 2018-19 there were no significant or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and your Company''s operations in future.
SECRETARIAL STANDARDS OF ICSI
Your Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS - 1) and General Meetings (SS - 2) issued by The Institute of Company Secretaries of India and approved by the Central Government.
INTERNAL CONTROL SYSTEMS
Your Company has in place adequate Internal Control Systems, including Internal Financial Controls. The Internal Control System is exercised through documented policies, guidelines and procedures to ensure compliance with various policies, practices and statutes, and that all assets are safeguarded and protected against loss from unauthorised use or disposition and that those transactions are authorised, recorded and reported correctly.
The Internal Auditor carries out extensive audits throughout the year across all locations and across all functional areas.
The audit observations and corrective actions taken thereon are periodically reviewed by the Audit Committee to ensure effectiveness of the Internal Control System. The Internal Control system is designed to ensure that the financial and other records are reliable for preparing Financial Statements and other data, and for maintaining accountability of persons.
RISK MANAGEMENT
Your Company has in place a Risk Management framework to identify, evaluate and monitor business risks and challenges across your Company. The Risk Management Policy, pursuant to Section 134 of the Companies Act, 2013 has been adopted based on this framework. The Risk Management Policy provides for creation of a Risk Register, identification of risks and formulating mitigation plans. The enterprise risks for your Company are identified by the respective Risk Managers and presented to the Board for review. Your Company has duly constituted Risk Management Committee. The Committee reviews your Company''s performance against identified risks, formulates strategies towards identifying new and emergent risks that may materially affect your Company''s overall risk exposure and reviews the Risk Management Policy and structure.
The Board of Directors reviews the risk assessment and minimization procedures regularly. The Risk Register gets updated periodically, to ensure that the risks remain relevant at any point in time and corresponding mitigation measures are effective. This provides a proactive and value adding review process which enables maintaining the risk profile at an acceptable level in a rapidly changing environment.
RESEARCH & DEVELOPMENT
Your Company has a Research & Development (R&D) facility at Nandesari, Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat. The Department of Scientific and Industrial Research (DSIR), New Delhi, on behalf of Government of India vide letter August 10, 2017 has recognized your Company''s in-house R&D facilities for further period of 3 years i.e. upto March 31, 2020.
Your Company continues to invest in a comprehensive Research & Development programme leveraging its world-class infrastructure, benchmarked processes, state-of-the-art technology and a business-focused R&D strategy.
Your Company''s R&D center at Vadodara focuses on innovation of new compounds in order to substitute imports of pharmaceutical and agrochemical intermediates, innovation and development of specality chemicals and personal care intermediates and value added products from by-products.
Your Company continues to focus its R&D efforts on process improvement of its existing products, recovery of products from effluents. The R&D departments also helps in troubleshooting in manufacturing departments.
Your Company is a knowledge led entity and has spruced up its R&D facility for innovation and to collaborate with its customers to understand consumer preference and develop new product applications to cater to the needs of its customers. Your Company focuses its R&D efforts to develop cost effective, cleaner technologies to improve profitability. Through its R&D capabilities, your Company has been successful in developing and enhancing its portfolio of cutting edge products. Your Company believes that its ability to develop new product applications and ability to customize products to suit customer needs have helped in expanding its customer base, thereby enabling it to establish leadership position.
SAFETY, HEALTH & ENVIRONMENT
Your Company believes in responsible chemistry for sustainable future through its commitment to the principles of Responsible Care. The continual improvement of safety, health, environment protection, energy and resources efficiency and social responsibility is inbuilt in the strategy of your Company.
Your Company has laid down policies, principles and standards which are mandatory for all its manufacturing units for adherence. It aims to achieve excellence in environment protection, health management and safety across its businesses. Your Company''s Environment, Health and Safety (EHS) Policy also specifies the EHS requirements to be observed by its suppliers, contractors & others.
Your Company has adopted global principles of sustainable development, Responsible Care and management system standards. It has undertaken several environmental initiatives in the areas of reduction in greenhouse gases and energy efficiency programs.
Your Company has system to ensure compliance to the requirements of applicable laws and regulations. Manufacturing locations of your Company has facilities for the proper treatment of effluents. Your Company''s emissions, effluents and wastes are within the permissible limits.
Employees'' health and safety is accepted as a core business value at your Company. The top management of your Company continuously works towards establishing, sustaining and improving the safety culture.
All manufacturing plants and corporate office of your Company has Quality, Environment & Occupational Health & Safety Management Systems as per revised standards for ISO 9001, ISO 14001 & OHSAS 18001.
Your Company has Process Safety Management (PSM) system at all manufacturing locations. It has carried out Safety Integrity Level (SIL) based HAZOP studies and Layer of Protection Analysis (LOPA) study for existing and new processes and products. The outcomes of these studies are being used to enhance Process Automation in all the Units, which in turn improves process safety at the sites.
Your Company had zero lost time incidents during the year. Good engineering practices, preventive checking systems, safety awareness and training has helped your Company in maintaining its operations and workplace free from incidents.
Your Company regularly monitors the occupational health of employees working in designated hazardous areas with respect to exposure to hazardous chemicals and processes. It also monitors employees for any indications of lifestyle or work-style related diseases and provides counseling. Well-equipped Occupational Health Centers are in place at all manufacturing locations to monitor health of employees on regular basis.
Your Company has accepted and implemented the principles of Together for Sustainability (TfS) and has fetched the prestigious 75% score in Together for Sustainability (TfS) Audit by Intertek.
Your Company is founder member of Nicer Globe initiative. It takes utmost care during transportation and ensures compliance with all checks and measures for a safe and secured delivery. All raw materials and products within supply chain framework of your Company are transported in a secure manner, for the safety of its customers, carriers, suppliers, distributors and contractors.
Your Company proactively fulfills the environmental requirements of customers by delivering products that match international standards.
human resources
Your Company considers its employees as most valuable resource and ensures strategic alignment of Human Resource practices to business priorities and objectives. Your Company''s constant endeavour is to invest in people and processes to improve human capital for the organisation and service delivery to its customers. Attracting, developing and retaining the right talent will continue to be a key strategic initiative and the organisation continues to be focussed on building up the capabilities of its people. Given growth plans of your Company, an important strategic focus of your Company is to continue not only to nurture its human capital, but also proactively focus on preparing all employees for the challenges of the future. Your Company strives to provide a healthy, conducive and competitive work environment to enable the employees excel and create new benchmarks of productivity, efficiency and customer delight. Your Company always believes in maintaining mutually beneficial industrial relations with the Union, which are of paramount importance for success of any organisation and hence the industrial relations have always been smooth, cordial and trusting.
Insurance
All the insurable interests of your Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Company has in place an Anti-Discrimination and Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress the complaints received regarding sexual harassment at workplace. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. No complaint was received from any employee during FY 2018-19 and hence no complaint is outstanding as on March 31, 2019 for redressal.
ACKNOWLEGDEMENT
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The Board also places on record its appreciation for the continued cooperation and support received by your Company during the year from investors, bankers, financial institutions, customers, business partners, all regulatory and government authorities and other stakeholders.
For and on behalf of the Board
Deepak C. Mehta
Place: Vadodara Chairman & Managing Director
Date : May 3, 2019 (DIN: 00028377)
Mar 31, 2018
DIRECTORSâ REPORT
Dear Shareholders,
The Directors have pleasure in presenting the Forty Seventh Annual Report together with the Audited Statement of Accounts for the Financial Year (FY) ended March 31, 2018.
FINANCIAL RESULTS
_(Rs, in Crores)
|
Particulars |
standalone results |
consolidated results |
||
|
2017-18 |
2016-17 |
2017-18 |
2016-17 |
|
|
Revenue from Operations |
1,479.23 |
1,315.27 |
1,676.18 |
1,454.71 |
|
Other Income |
11.70 |
9.15 |
12.40 |
10.91 |
|
Total Revenue (Gross) |
1,490.93 |
1,324.42 |
1,688.58 |
1,465.62 |
|
Less : Excise Duty on sale of Goods |
24.25 |
82.57 |
24.73 |
84.00 |
|
total Revenue (net) |
1,466.68 |
1,241.85 |
1,663.85 |
1,381.62 |
|
Less : Operating and Administrative expenses |
1,252.31 |
1,089.44 |
1,455.25 |
1,235.24 |
|
Operating Profit before Depreciation, Finance Cost, Exceptional Item and Tax |
214.37 |
152.41 |
208.60 |
146.38 |
|
Less : Depreciation and Amortization expenses |
51.95 |
47.60 |
52.60 |
48.04 |
|
Less : Finance Cost |
40.34 |
30.89 |
45.15 |
34.12 |
|
Profit Before Exceptional Items & Tax |
122.08 |
73.92 |
110.85 |
64.22 |
|
Add : Exceptional Items |
- |
74.97 |
- |
70.48 |
|
Profit Before Tax |
122.08 |
148.89 |
110.85 |
134.70 |
|
Less : Tax expenses |
38.62 |
38.25 |
31.83 |
38.24 |
|
Net Profit for the Year |
83.46 |
110.64 |
79.02 |
96.46 |
|
Share of Loss from Associate |
- |
- |
- |
0.14 |
|
Other Comprehensive Income |
0.86 |
(2.41) |
0.86 |
(2.41) |
|
Total Comprehensive Income for the Year |
84.32 |
108.23 |
79.88 |
93.90 |
|
Surplus brought forward from Previous Year |
342.02 |
250.59 |
324.76 |
247.65 |
|
Balance available for Appropriation |
426.20 |
358.82 |
404.49 |
341.55 |
PERFORMANCE REVIEW
In FY 2017-18, Total Revenue including Other Income stood at Rs, 1466.68 Crores as against Rs, 1,241.85 Crores in FY 2016-17.
EBITDA came in at Rs, 214.37 Crores in FY 2017-18, higher by 41% as compared to Rs, 152.40 Crores in FY 2016-17. Raw material costs stood at Rs, 843.82 Crores as against Rs, 706.44 Crores in FY 2017, up by 19%.
Profit Before Tax excluding exceptional items stood at Rs, 122.08 Crores as compared to Rs, 73.92 Crores in FY 2016-17. The Profit After Tax excluding exceptional items came in at Rs, 83.46 Crores as compared to Rs, 51.94 Crores in FY 2016-17. Full resumption of normal operations and favourable shift in product mix led to better PAT performance. The depreciation and finance costs during the year stood at Rs, 51.95 Crores and Rs, 40.34 Crores respectively.
The domestic revenues stood at Rs, 968.38 Crores from Rs, 847.29 Crores in FY 2016-17, representing a growth of 14% owing to strong demand trends from local customers who are benefitting from supply disruption in China. The revenue from exports stood at Rs, 510.85 Crores compared to Rs, 467.98 Crores last year. The export performance was driven by encouraging trends in key geographies in the Basic Chemicals (''BC'') segment as well as higher product realization and improved performance of the Performance Products (''PP'') segment.
As you may recall, your Company had faced an accidental fire last year at one of the distillation columns of the manufacturing facility at Roha, which had impacted the performance. During the year under review, all the units at Roha resumed full operations which enabled your Company to deliver balanced growth with contribution from all the three Strategic Business Units (SBUs), thereby recovering from the one-off events that occurred last year. In spite of several challenges in the form of volatility in prices of inputs and finished goods as well as fluctuations in the Foreign Exchange rates, your Company was able to pursue opportunities in the domestic and export markets, thereby recording a sharp growth.
With respect to fire in October, 2016, your Company had lodged insurance claims, both for replacement value of the damaged facilities and loss of profits due to business interruption. The financial results for FY 2017-18 includes Rs, 18.33 Crores (Net of loss on account of fire) against expected settlement under Fine & Speciality Chemicals (''FSC'') segment. Remaining balance shall be accounted upon final settlement of claims. During FY 2017-18, your Company has already received Rs, 7.50 Crores as an interim payment against the above claims.
During the year under review, your Company undertook several initiatives to fortify its offerings by increasing integration of manufacturing process for select high value products in the FSC segment and has received regulator''s clearances for commencing operations, which will enable your Company to further enhance profitability. In addition, your Company is expanding capacity of couple of its existing products which shall further augment growth prospects.
Your Company is favorably positioned to capture opportunities emerging across the chemicals and specialty chemicals value-chain. More importantly, China, which is the world''s largest supplier for multiple chemicals, has enhanced its focus on environmental protection and sustainable manufacturing processes. As a result, local Chinese producers are faced with higher cost of operations which will increase the landed cost of chemicals. This has improved the competitiveness of alternate suppliers, opening up opportunities for established players like us with proven capabilities and abundant capacities.
iSSUE OF SHARES
During FY 2017-18, your Company, offered Equity Shares to the Qualified Institutional Buyers (âQIBsâ) on private placement basis through Qualified Institutions Placement (âQIPâ), in accordance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Accordingly, 56,81,775 Equity Shares of Rs,2/each were allotted to QIBs on January 30, 2018 at an issue price of Rs, 264/- per Equity Share (including share premium of Rs, 262/- per Equity Share). The QIP issue proceeds aggregating to Rs, 150.00 Crores will be utilized in accordance with the objects stated in the offer document. Pending utilization, the unutilized amount of issue proceeds have been parked in Liquid Mutual Funds.
Post issuance of Equity Shares under QIP, the issued, subscribed and paid-up capital of your Company has increased from Rs, 26.14 Crores in FY 2016-17 to Rs, 27.27 Crores in FY 2017-18.
DIVIDEND
The Board of Directors of your Company are pleased to recommend a dividend of Rs, 1.30 (Rupee One and Paisa Thirty only) per Equity Share for the year ended March 31, 2018 on 13,63,93,041 Equity Shares of Rs, 2/- each, as against Rs, 1.20 (Rupee One and Paisa Twenty only) per Equity Share in the previous year.
The dividend, as recommended above, if declared by the Members at the Annual General Meeting (''AGM''), the total outflow towards dividend on Equity Shares for the year would be Rs, 21.38 Crores, including corporate dividend tax (Previous Year Rs, 18.88 Crores).
DIVIDEND DISTRIBUTION POLICY
Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations'') requires top 500 listed entities, based on market capitalization calculated as on March 31 of every Financial Year, to formulate a Dividend Distribution Policy and disclose the same in their Annual Report and on their websites.
Accordingly, the Board of Directors of your Company has adopted a Dividend Distribution Policy, which aims to ensure fairness, sustainability and consistency in distributing profits to the Shareholders. The Policy is attached as Annexure - A and is also available on the website of your Company under the âInvestors Relationâ section.
TRANSFER TO RESERVES
Your Company proposes to transfer Rs, 5 Crores to the General Reserves out of the amount available for appropriation.
UPDATE ON PHENOL AND ACETONE PROJECT
The Members are aware that your Company, through its wholly owned subsidiary, Deepak Phenolics Limited (''DPL''), is setting up a state-of-the-art plant to manufacture 200,000 MTPA of Phenol and 120,000 MTPA of its co-product Acetone. This will be supported by manufacturing 260,000 MT of Cumene, which is a feedstock for manufacturing Phenol and Acetone. This Greenfield project is expected to be commissioned in the first half of FY 2018-19 at Dahej in the State of Gujarat. The overall capital outlay for this project is Rs, 1,400.00 Crores, which is being funded through a combination of debt and equity. The entire debt portion of Rs, 840.00 Crores and equity funds of Rs, 560.00 Crores have already been tied up.
With this, your Company will address the opportunity offered by the supply deficit in the domestic market which is majorly being met by imports. In addition to competitiveness on cost due to supplying the domestic markets from a plant located in India, your Company will leverage on the latest manufacturing technologies in its state-of-the art plant which will reduce wastage and is more efficient in utilization of inputs and energy.
With an objective of developing working relationships with major clients across India as well as establishing strong marketing and distribution channels, DPL has been doing seed marketing of Phenol to understand and penetrate in the market. Additionally, availability of benzene, a key raw material has improved significantly in the domestic market thereby enhancing the prospects for the mega Phenol project further. DPL is also in the process of setting up distribution channels and has also tied for transportation and other logistics requirements.
FiNANCE
Your Company tries to strike a balance in its capital structure on a consolidated level while following strict guidelines to efficiently manage its working capital, thereby maintaining its debt at a reasonable level. During the year under review, the total debt of your Company decreased due to scheduled repayments and improved working capital management. However, as your Company commissions its expansion projects, on a consolidated level the total debt will enhance. These levels would normalise as your Company generate revenues from the new projects.
Interest costs increased during the year due to repayment of low cost foreign currency debt, increase in the Libor and market rate in rupee borrowing. Depreciation increased due to regular growth and maintenance Capex. Your Company has an active team to manage its foreign exchange exposures to minimise risk arising out of imports and due to availing foreign currency loans. Due to prudent management, your Company has been able to effectively manage its cash flows. There is always an effort to reduce the overall interest costs. Debt : Equity as on March 31, 2018 reduced to 0.49 compared to 0.78 as on March 31, 2017, however, on a consolidated level, Debt : Equity ratio stood at 1.07 times.
ICRA Limited re-affirmed the long-term rating of [ICRA] A and Short Term rating of [ICRA] A1 assigned to the fund based limits and non-fund based limits of your Company. ICRA also re-affirmed the short-term rating of [ICRA] A1 assigned to the Commercial Paper programme.
directors
Mr Ajay C. Mehta (DIN:00028405) resigned from the position of Managing Director of the Company effective from December 1, 2017. He shall remain on the Board of your Company as a Non-Executive Non-Independent Director.
As required under the provisions of Section 152 of the Companies Act,
2013, Mr Maulik Mehta (DIN:05227290), Whole-time Director, liable to retire by rotation, will be retiring at the ensuing Annual General Meeting. He is eligible for re-appointment at the ensuing Annual General Meeting and has offered himself for re-appointment.
The Board of Directors at their meeting held on May 4, 2018, subject to the approval of shareholders, re-appointed Mr Umesh Asaikar as Whole - time Director designated as Executive Director & CEO of your Company for a period from May 9, 2018 to May 31, 2020 .
KEY MANAGERIAL PERsONNEL
Mr Deepak. C. Mehta, Chairman & Managing Director, Mr Umesh Asaikar, Executive Director & CEO, Mr Sanjay Upadhyay, Director-Finance & CFO, Mr Maulik Mehta, Whole-time Director and Mr Arvind Bajpai, Company Secretary are the Key Managerial Personnel of your Company.
meetings of the board
During FY 2017-18, 6 (six) Board Meetings were held. The details of the Board Meetings with regard to their dates and attendance of each of the Directors thereat have been set out in the Report on Corporate Governance, which forms part of this Report.
independent directors
The Independent Directors of your Company have furnished the declaration that they meet the criteria of independence as provided in Section 149 (6) of the Companies Act, 2013.
performance evaluation
Pursuant to the provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 (''Listing Regulations''), the Board of Directors have carried out annual evaluation of its own performance, Board Committees and individual Directors.
The performance of the Board / Committee was evaluated after seeking inputs from all the Directors / Committee members on the basis of the defined criteria including composition and structure, effectiveness of meetings, information and functioning.
Performance evaluation of Independent Directors was done by the entire board, excluding the Independent Director being evaluated, on the basis of following evaluation criteria:
Relevant Knowledge, Expertise and Experience
Devotion of time and attention to the Company''s long term strategic issues
Addressing the most relevant issues for the Company
Discussing and endorsing the Company''s strategy
Professional Conduct, Ethics and Integrity
Understanding of Duties, Roles and Function as Independent Director
Your Directors have expressed their satisfaction to the evaluation process.
audit committee
The Audit Committee consists of all Independent Directors with Mr Sudhin Choksey as the Chairman of the Committee. The other members of the Audit Committee are Mr Sudhir Mankad and Mr S. K. Anand. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members are set out in the Report on Corporate Governance, which forms part of this Report.
statutory auditorâs report
The observations made in the Auditor''s Report of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report.
REPORTING OF FRAUD BY AUDITORS
There is no instance of fraud reported by the Auditors during the FY 2017-18.
SECRETARIAL AUDITORâS REPORT
The Members are informed that the name of the Secretarial Auditors which was formerly known as M/s. KANJ & Associates, Company Secretaries, Pune, has been changed to M/s. KANJ & Co. LLP, Company Secretaries, Pune, consequent to their conversion into a Limited Liability Partnership.
The Secretarial Audit Report of M/s. KANJ & Co. LLP, Company Secretaries, Pune, for the Financial Year ended March 31, 2018 does not contain any qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors.
The Secretarial Audit Report in Form MR-3 is annexed as Annexure - B, which forms part of this Report.
AUDITORS (A) Statutory Auditors:
In compliance with the Companies (Audit and Auditors) Rules, 2014, the Members, at the 46th Annual General Meeting of the Company held on June 26, 2017, appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/W-100018), as Statutory Auditors of your Company for a term of 5 (five) years up to the conclusion of the 51st Annual General Meeting of the Company.
As required under the provisions of Section 139 of the Companies Act, 2013, their appointment as Statutory Auditors is subject to ratification by the Members at every Annual General Meeting. Accordingly, Members are requested to ratify their said appointment at the ensuing Annual General Meeting of your Company.
(B) Secretarial Auditors:
Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2018 was carried out by the Secretarial Auditors, M/s. KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has appointed M/s. KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2018-19.
(C) Cost Auditors:
The Board of Directors of your Company has appointed M/s. B. M. Sharma & Company, Cost Accountants, to conduct audit of your Company''s cost records for FY 2018-19 at a remuneration of '' 7,50,000/- (Rupees Seven Lakhs Fifty Thousand only) plus out of pocket expenses. As required under the provisions of Companies Act, 2013, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the shareholders at the ensuing Annual General Meeting.
The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year.
(D) internal Auditors:
The Board of Directors has appointed M/s. Sharp & Tannan Associates, Chartered Accountants as Internal Auditors of your Company to conduct the Internal Audit for FY 2018-19.
FIXED DEPOSITS
During FY 2017-18, your Company has not accepted or renewed any Fixed Deposits.
As on March 31, 2018, 39 warrants aggregating to Rs, 7,83,507 issued by your Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Companies Act, 2013, remained uncleared. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2018.
VIGIL MECHANISM
Your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behavior, actual or suspected fraud or violation of your Company''s Code of Conduct or ethics policy. The Policy 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. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.
RELATED PARTY TRANSACTIONS
All Related Party Transactions that were entered into during the Financial Year were on an arm''s length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 (''the Act'') and the Listing Regulations. There were no materially significant Related Party Transactions entered into by the Company during the year that would have required Shareholders'' approval under the Listing Regulations.
All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature. A statement of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis, specifying the name of the Related Party, nature and value of the transactions.
In line with the requirements of the Act and Listing Regulations, your Company has formulated a Policy on Related Party Transactions which is also available on your Company''s website at www. deepaknitrite.com.
Details of transactions with Related Parties are provided in the accompanying Financial Statements. There were no transactions with Related Parties during the year which would required to be reported in Form AOC-2.
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL sTATEMENTs
As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board''s Report has been prepared on a Standalone basis.
During FY 2017-18, Deepak Gulf LLC, a limited liability company incorporated in the Sultanate of Oman ceased to be Associate of your Company.
The Consolidated Financial Statements of your Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (''Ind AS''), form part of the Annual Report and are reflected in the Consolidated Financial Statements of your Company.
The annual Financial Statements of the subsidiaries and related detailed information will be kept at the Registered Office of your Company, as also at the Registered Offices of the respective Subsidiary Companies and will be available to investors seeking information at any time. They are also available on the website of your Company. The consolidated financial results reflect the operations of the following subsidiaries: Deepak Phenolics Limited and Deepak Nitrite Corporation Inc. Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the Listing Regulations. The Policy, as approved by the Board, is uploaded on your Company''s website.
performance of subsidiaries (a) Deepak Phenolics Limited
Your Company''s Phenol and Acetone Project is being undertaken through Deepak Phenolics Limited (''DPL''), a wholly owned subsidiary of your Company. The construction and erection activity with respect to the project is almost completed and is at trial run stage and commercial production has not yet started.
During FY 2017-18, DPL has been doing seed marketing of Phenol/Acetone and the Revenue from Operations of DPL was Rs, 199.86 Crores for the period ended March 31, 2018 and Net Loss for the period was Rs, 4.84 Crores.
(b) Deepak Nitrite Corporation Inc. (USA)
Deepak Nitrite Corporation Inc. (''DNC'') is a wholly owned subsidiary company incorporated in the United States of America to cater to the marketing requirements of your Company in North and South American region. DNC actively does market research and scouts for market and potential customers for your Company''s products in the North and South American region.
During FY 2017-18 the Total Revenue of DNC was USD 572,264 and the Net Loss for the period was USD 2,376.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of your Company''s subsidiaries in Form AOC-1 is attached to the Financial Statements.
particulars of loans, guarantees and investments under section 186 oF THE COMPANIES ACT, 2013
During the year under review, your Company sold 77,500 shares held in Deepak Gulf LLC (''DGL''), a limited liability company incorporated in the Sultanate of Oman, being 31% of total share capital of DGL. Post the said transaction, the shareholding of your Company in DGL is 45,000 shares, representing 18% total share capital of DGL. Consequently, DGL ceased to be Associate of your Company with effect from March 16, 2018.
The Particulars of Loans granted and Investments made by your Company have been disclosed in the Financial Statements.
MATERIAL CHANGEs AND commitments
There have been no material changes and commitments affecting the financial position of your Company since the close of Financial Year i.e. since March 31, 2018 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of your Company.
DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(5) of the Companies Act, 2013 (âthe Actâ), the Board of Directors of your Company, to the best of their knowledge and ability, confirm that:
(a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;
(b) they have selected 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 your Company at the end of the Financial Year and of profits of your Company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
A separate report on Corporate Governance is provided together with a Certificate from a Practicing Company Secretary, M/s. KANJ & Co. LLP, Company Secretaries, Pune regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
As stipulated under Regulation 34 of the Listing Regulations, the Business Responsibility Report on your Company''s business as required by Regulation 34(2) of the Listing Regulations, initiatives on environmental, social and governance aspects forming part of this Report is annexed as Annexure - C.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility (CSR) activities of your Company are being implemented through Deepak Foundation, the group''s charitable trust encompassing social interventions in various developmental domains such as Health, Education, Livelihood, etc.
During FY 2017-18, your Company has spent Rs, 225.00 Lakhs on CSR activities, against the requirement of Rs, 178.92 Lakhs, being 2% of average of the net profits for the preceding three years.
The brief outline of the CSR policy of your Company, composition of the Committee and report on initiatives undertaken by your Company on CSR activities during the year are set out in Annexure - D of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.
NOMINATION AND REMUNERATION POLICY
Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Companies Act, 2013 and Listing Regulations.
The Nomination and Remuneration Policy of your Company is annexed as Annexure - E.
extracts of annual return
The extract of Annual Return in Form MGT-9 as required under Section 134(3)(a) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, forms part of this Report and annexed as Annexure - F.
PARTICULARS OF EMPLOYEES
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act, 2013 and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel ) Rules, 2014 is set out in the Annexure - G to this report.
Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 are available at the Registered Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder on request. Such details are also available on your Company''s Website www.deepaknitrite.com.
conservation of energy & technology absorption and foreign exchange earnings and outgo
Pursuant to the requirement of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant data pertaining to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are provided in Annexure - H of this Report.
STATE OF COMPANYâS AFFAIRS
The state of your Company''s affairs is given under the heading ''Performance Review'' and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.
SIGNIFICANT OR MATERIAL ORDERS PASSED AGAINST THE COMPANY
Pursuant to the requirement of Section 134(3)(q) of the Companies Act, 2013 read with Rule 8(5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during FY 2017-18 there were no significant or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and your Company''s operations in future.
SECRETARIAL STANDARDS OF ICSI
Your Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS - 1) and General Meetings (SS - 2) issued by The Institute of Company Secretaries of India and approved by the Central Government.
INTERNAL CONTROL SYSTEMS
Your Company has put in place adequate internal control systems including internal financial controls, commensurate with size, scale and complexity of its operations, to ensure compliance with policies and procedures. Your Company has also adopted policies and procedures for ensuring the orderly and efficient conduct of its business, safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The internal control mechanism comprises a well-defined organization, which undertakes time bound audits and reports its findings to the Audit Committee, documents policy guidelines and determines authority levels and processes.
With a view to ensure and review the effectiveness and implementation of the systems and operations, the Audit Committee regularly reviews them. The Internal Auditors and Statutory Auditors regularly attend Audit Committee meetings and convey their views on the adequacy of internal control systems as well as financial disclosures. The Audit Committee is briefed about the corrective actions taken by the management on the audit observations. The Audit scope is regularly reviewed by the Audit Committee for enhancement/ modification of scope and coverage of specific areas.
risk management
Your Company has in place a Risk Management framework to identify, evaluate and monitor business risks and challenges across your Company. The Risk Management Policy, pursuant to Section 134 of the Companies Act, 2013 has been adopted based on this framework. The Risk Management Policy provides for creation of a Risk Register, identification of risks and formulating mitigation plans. The enterprise risks for your Company are identified by the respective Risk Managers and presented to the Board for review. The Board of Directors reviews the risk assessment and minimization procedures regularly. The Risk Register gets updated periodically, to ensure that the risks remain relevant at any point in time and corresponding mitigation measures are effective. This provides a proactive and value adding review process which enables maintaining the risk profile at an acceptable level in a rapidly changing environment.
Your Company has constituted a Risk Management Committee. The Committee reviews your Company''s performance against identified risks, formulates strategies towards identifying new and emergent risks that may materially affect your Company''s overall risk exposure and reviews the Risk Management Policy and structure.
RESEARCH & DEVELOPMENT
Your Company has a Research & Development (R&D) facility at Nandesari, Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat. The Department of Scientific and Industrial Research (DSIR), New Delhi, on behalf of Government of India vide letter August 10, 2017 has recognized your Company''s in-house R&D facilities for further period of 3 years i.e. up to March 31, 2020.
Your Company''s R&D center at Vadodara focuses on Import substituted pharmaceutical and agrochemical intermediate, development of specialty chemicals and value added products from by-products.
Your Company is a knowledge led entity and has spruced up its R&D facility for innovation and to collaborate with its customers to understand consumer preference and develop new product applications to cater to the needs of its customers. Your Company focuses its R&D efforts to develop cost effective cleaner technologies to improve profitability. Through its R&D capabilities, your Company has been successful in developing and enhancing its portfolio of cutting edge products. Your Company believes that its ability to develop new product applications and ability to customize products to suit customer needs have helped in expanding its customer base, thereby enabling it to establish leadership position.
SAFETY, HEALTH & ENVIRONMENT
Your Company believes in responsible chemistry for sustainable future through its commitment to the principles of Responsible Care®. The continual improvement of safety, health, environment protection, energy and resources efficiency and social responsibility is inbuilt in the strategy of your Company.
Your Company has laid down policies, principles and standards that all its manufacturing sites must adhere to. It aims to achieve excellence in environment protection, health management and safety across its businesses. Your Company''s Environment, Health and Safety (EHS) Policy also specifies the EHS requirements to be observed by its suppliers, contractors & others.
Your Company has adopted global principles of sustainable development, Responsible Care® and management system standards. It has undertaken several environmental initiatives in the areas of reduction in greenhouse gases and energy efficiency programs.
Your Company has system to ensure compliance to the requirements of applicable laws and regulations. Manufacturing locations of your Company has facilities for the proper treatment of effluents. Your Company''s emissions, effluents and wastes are within the permissible limits.
Employees'' health and safety is accepted as a core business value at your Company. The top management of your Company continuously works towards establishing, sustaining and improving the safety culture.
All manufacturing plants and corporate office of your Company has Quality, Environment & Occupational Health & Safety Management Systems as per revised standards for ISO 9001, ISO 14001 & OHSAS 18001.
Your Company has Process Safety Management (PSM) system at all manufacturing locations. It has carried out Safety Integrity Level (SIL) based HAZOP studies and Layer of Protection Analysis (LOPA) study for existing and new processes and products. The outcomes of these studies are being used to enhance Process Automation in all the Units, which in turn improves process safety at the sites.
Your Company had zero lost time incidents during the year. Good engineering practices, preventive checking systems, safety awareness and training has helped your Company in maintaining its operations and workplace free from incidents.
Your Company regularly monitors the occupational health of employees working in designated hazardous areas with respect to exposure to hazardous chemicals and processes. It also monitors employees for any indications of lifestyle or work-style related diseases and provides counseling. Well-equipped Occupational Health Centers are in place at all manufacturing locations to monitor health of employees on regular basis.
Your Company has accepted and implemented the principles of Together for Sustainability (TfS) and has fetched the prestigious 75% score in Together for Sustainability (TfS) Audit by Intertek.
Your Company is founder member of Nicer Globe initiative. It takes utmost care during transportation and ensures compliance with all checks and measures for a safe and secured delivery. All raw materials and products within supply chain framework of your Company are transported in a secure manner, for the safety of its customers, carriers, suppliers, distributors and contractors.
Your Company proactively fulfills the environmental requirements of customers by delivering products that match international standards.
HUMAN RESOURCES
Your Company considers its employees as most valuable resource and ensures strategic alignment of Human Resource practices to business priorities and objectives. Your Company''s constant Endeavour is to invest in people and processes to improve human capital for the organization and service delivery to its customers. Attracting, developing and retaining the right talent will continue to be a key strategic initiative and the organization continues to be focused on building up the capabilities of its people. Given growth plans of your Company, an important strategic focus of your Company is to continue to not only nurture its human capital, but also proactively focus on preparing all employees for the challenges of the future. Your Company strives to provide a healthy, conducive and competitive work environment to enable the employees excel and create new benchmarks of productivity, efficiency and customer delight. Your Company always believes in maintaining mutually beneficial industrial relations with the Union, which are of paramount importance for success of any organization and hence the industrial relations have always been smooth, cordial and trusting.
INSURANCE
All the insurable interests of your Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Company has in place an Anti-Discrimination and Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress the complaints received regarding sexual harassment at workplace. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaint was received from any employee during FY 2017-18 and hence no complaint is outstanding as on March 31, 2018 for redressal.
ACKNOWLEGDEMENT
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The Board also places on record its appreciation for the continued cooperation and support received by your Company during the year from investors, bankers, financial institutions, customers, business partners, all regulatory and government authorities and other stakeholders.
For and on behalf of the Board
D. C. MEHTA
Place: Mumbai Chairman & Managing Director
Date: May 4, 2018 (DIN: 00028377)
Mar 31, 2017
Dear Shareholders,
Your Directors have the pleasure in presenting the Forty Sixth Annual Report together with the Audited Statement of Accounts for the Financial Year ended March 31, 2017.
FINANCIAL RESULTS
(Rs, in Crores)
|
Particulars |
STANDALONE |
CONSOLIDATED |
||
|
2016-17 |
2015-16 |
2016-17 |
2015-16 |
|
|
Sale and Other Income |
1225.50 |
1337.27 |
1365.34 |
1374.52 |
|
Gross Profit (before interest, depreciation and tax but exceptional item) |
149.08 |
168.22 |
143.14 |
166.32 |
|
Exceptional item |
74.97 |
- |
70.48 |
- |
|
Gross Profit (before interest, depreciation and tax after exceptional item) Less: |
224.05 |
168.22 |
213.62 |
166.32 |
|
Interest |
30.89 |
37.45 |
34.12 |
37.65 |
|
Depreciation |
42.28 |
39.45 |
42.72 |
39.54 |
|
Provision for Current Tax |
31.88 |
19.85 |
31.88 |
19.90 |
|
Provision for Deferred Tax |
9.08 |
10.32 |
9.08 |
10.32 |
|
MAT Credit Entitlement Recognized |
(2.12) |
(3.99) |
(2.12) |
(3.99) |
|
Loss for the year from Associates |
- |
- |
0.14 |
0.17 |
|
Profit After Tax |
112.04 |
65.15 |
97.94 |
62.73 |
|
Surplus in Profit & Loss Account Brought Forward |
231.63 |
188.28 |
228.61 |
187.67 |
|
Amount available for appropriation |
343.67 |
253.42 |
326.55 |
250.40 |
PERFORMANCE REVIEW
The Financial Year ("FY") 2016-17 was a challenging year on multiple fronts, and your Company has delivered a resilient performance indicating robustness of the business model. The emphasis on quality and sustainability of operations, widening of portfolio of products, active customer engagement, focus on profitable products and a healthy mix of end-user industries and markets served has enabled it to emerge stronger and better positioned to capture the opportunities ahead.
The performance in FY 2016-17 should be viewed in light of the several challenges faced. The wave of regional protectionism has spread across the developed world and has increased the pitch for supporting local production to preserve jobs and has thus impacted growth in export markets. These were coupled with BREXIT and instability in EU region. The lingering effects of the depressed crude oil prices and resultant impact on petrochemical intermediates also continued to exert pressure on growth. Furthermore, re-entry of Iran as a global crude supplier improved the availability of higher grades of crudes thereby impacting demand for fuel additive products. At the same time, prices of commodities were on the wane though they were thought to be reversing.
Apart from these developments, your Company encountered multiple headwinds in the form of temporary closure of one of the three units at its Hyderabad facility due to excessive flooding and the resulting issues related to pollution. The performance was further impacted by an accidental fire that broke out at one of the distillation columns of your Company''s manufacturing facility for Fine and Specialty Chemicals intermediates at Roha Industrial Estate in Maharashtra. Both these events impacted the volume off take of key products in the Fine & Specialty Chemicals as well as the Performance Products segments. Apart from these major events, demonetization also impacted performance of some of your Company''s end user industries, which impacted your Company''s operations temporarily though it recovered swiftly.
Against this backdrop, your Company has reported a resilient performance in FY 2016-17. Your Company recorded revenues at Rs, 1,221.56 crores in FY 2016-17 compared to Rs, 1,335.73 crores in FY 2015-16 and volumes declined by 4% due to one-time events which impacted the production as well as sales. That said, favorable product mix and aggressive marketing helped your Company to increase volumes towards the end of the year, especially in the established business segments partly offsetting this impact and enabling your Company to effect a turnaround from the impact of one-time events in October and November, 2016.
Further, your Company leveraged its strength to switch to enhance the volumes of value added products to mitigate impact from down-cycle of existing product categories.
Export markets contributed 39% to the total revenues, while contribution from domestic market came in at 61%. Export Revenue stood at Rs, 470.84 crores in FY 2016-17, lower by 10.6% compared to Rs, 525.75 crores last year a result of the multiple headwinds faced by your Company. Active efforts have been made by your Company to deepen its connect with customers in key export markets of Europe, USA and China. Going ahead, your Company will continue to work towards widening and deepening market presence to grow revenues from exports in absolute terms. Once the Phenol project is commissioned, the proportion of exports in overall revenue mix in the consolidated performance will reduce since Phenol and Acetone are meant for domestic consumption, being import substitution products.
Profit Before Tax excluding Exceptional Items stood at Rs, 75.90 crores as compared to Rs, 91.33 crores in FY 2015 16. Apart from the revenue impact due to onetime events, your Company incurred certain one-time expenses as well as higher depreciation due to increase in asset base. Profit After Tax excluding Exceptional Items stood at Rs, 53.33 crores in FY 2016-17 compared to Rs, 65.15 crores in FY 2015-16. Earnings Per Share (excluding Exceptional Items) for FY 201617 stood at '' 4.55 per share (of face value of '' 2 each) on an enlarged capital base compared to '' 6.07 per share in FY 2015-16.
The road ahead appears encouraging as your Company foresees several opportunities in the Indian chemicals space. Following the unforeseen events, your Company has now restarted all the facilities at Roha except one and is confident of restoring the growth momentum. It is anticipated that all the three SBUs viz. Basic Chemicals, Fine & Specialty Chemicals and Performance Products segment will contribute positively to the performance. Your Company is confident of its prospects as the focus of strategies and efforts of the last few years has been to diversify and strengthen the business model and allow your Company to further elevate the growth trajectory by strengthening all of the growth engines.
A review of the performance during the year is given under the section "Management Discussion and Analysis Report".
ISSUE OF SHARES
During FY 2016-17, your Company, offered Equity Shares to the Qualified Institutional Buyers ("QIBs") on private placement basis through Qualified Institutions Placement ("QIP"), in accordance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Accordingly, 1,44,23,076 Equity Shares of Rs, 2/- each were allotted to QIBs on March 7, 2017 at an issue price of Rs, 104.00 per Equity Share (including premium of Rs, 102.00 per Equity Share). The QIP issue proceeds aggregating to Rs, 150.00 crores will be utilized in accordance with the objects stated in the offer document. Pending utilization, the unutilized amount of issue proceeds have been invested in Liquid Mutual Funds.
Post issuance of Equity Shares under QIP, the issued, subscribed and paid-up capital of your Company has increased from Rs, 23.26 crores in FY 2015-16 to Rs, 26.14 crores in FY 2016 17.
DIVIDEND
Based on your Company''s performance, the Board of Directors has recommended payment of dividend of Rs, 1.20 (Rupee One and Paisa Twenty only) per Equity Share for the year ended March 31, 2017 on 13,07,11,266 Equity Shares of Rs, 2/each, as against Rs, 1.20/- (Rupee One and Paisa Twenty only) per Equity Share in the previous year.
The total sum of the dividend, if approved, including Corporate Dividend Tax, will be Rs, 18.88 crores (previous year Rs, 16.79 crores).
TRANSFER TO RESERVES
Your Company proposes to transfer Rs, 5.00 crores to the General Reserves out of the amount available for appropriation.
UPDATE ON PHENOL AND ACETONE PROJECT
As you may be aware, your Company is implementing a Greenfield project to manufacture Phenol and Acetone at Dahej in the State of Gujarat. This project is being implemented through Deepak Phenolics Limited (''DPL''), a wholly owned subsidiary of your Company. The capacity of the Phenol Plant will be 200,000 MTPA and that of co-product Acetone will be 120,000 MTPA. DPL would also be manufacturing 260,000 MTPA of Cumene, which is a Feedstock for manufacturing Phenol and Acetone. This project is expected to be commissioned in the second half of FY 2017-18 with total capital outlay of around Rs, 1,400 crores, to be funded through a combination of debt and equity.
The project once commissioned is expected to substitute the Phenol imports to India. India currently imports most of its Phenol requirements and the country''s current demand will absorb the entire capacity that DPL plans to install. With an objective of developing working relationships with major clients across India as well as establish strong marketing and distribution channels, DPL has already started seed marketing to understand the market dynamics and the response thus far has been encouraging.
FINANCE
Your Company follows stringent guidelines to efficiently manage its working capital requirements and maintain its debt at a reasonable level. Hence, debt / equity ratio stood at a healthy level of 0.78 times. With expansion also your Company strives to maintain healthy Debt: Equity ratio of not crossing 1.5 times, once the project starts generating revenue.
The overall capital outlay for this project is approximately Rs, 1,400 crores, which is being funded through a combination of Debt and Equity. Your Company has already tied up the entire debt portion of Rs, 840 crores, while the Equity funds are being raised and deployed in a progressive manner, your Company has made significant progress in raising equity for the project as it secured funds to the tune of Rs, 1 50 crores through phase II of Qualified Institutional Placement (QIP) which was concluded in March 201 7. This is in addition to equity funds already raised in Phase I of the QIP and sale of parcel of land in FY 2015-16 and FY 2016-17, respectively.
Interest costs declined during the year due to repayment of debt, better negotiation of funding costs as well as reduction in the general softening of interest rate. Depreciation increased due to regular growth and maintenance Capex. Your Company has an active team to manage its foreign exchange exposures and hence to minimize the risk.
Due to prudent management, your Company has been able to effectively manage its cash flows. There is always an effort to reduce the overall interest costs. Debt : Equity as on March 31, 2017 came down to 0.78 compared to 1.04 as on March 31,
2016. ICRA Limited re-affirmed the long-term rating of [ICRA] A and Short Term rating of [ICRA] A1 assigned to the fund based limits and non-fund based limits of your Company. ICRA also reaffirmed the short-term rating of [ICRA] A1 assigned to the Commercial Paper programme.
DIRECTORS
The Board of Directors at their Meeting held on August 4,
2016, elevated Shri Deepak C. Mehta as the Chairman & Managing Director of your Company w.e.f. August 5, 2016 after retirement of Shri C. K. Mehta, from the Directorship of the Company. Shri C. K. Mehta, founder of your Company has been designated as Chairman-Emeritus w.e.f. August 5, 2016.
The Board of Directors at their Meeting held on April 28,
2017, has appointed Shri Sanjay Upadhyay, the Chief Financial Officer of your Company as Additional Director and Whole-time Director, designated as Director-Finance & Chief Financial Officer. He shall continue to be the Chief Financial Officer of your Company.
As required under the provisions of Section 152 of the Companies Act, 2013, Shri Ajay C. Mehta, Managing Director, a Director liable to retire by rotation, will be retiring at the ensuing Annual General Meeting. He is eligible for reappointment at the ensuing Annual General Meeting and has offered himself for re-appointment.
KEY MANAGERIAL PERSONNEL
Shri Deepak C. Mehta, Chairman & Managing Director, Shri Ajay C. Mehta, Managing Director, Shri Umesh Asaikar, Executive Director & CEO, Shri Sanjay Upadhyay, Director -Finance & CFO, Shri Maulik Mehta, Whole-Time Director and Shri Arvind Bajpai, Company Secretary are the Key Managerial Personnel of your Company.
MEETINGS OF THE BOARD
During FY 2016-17, five (5) Board Meetings were held. The details of the Board Meetings with regard to their dates and attendance of each of the Directors there at have been set out in the Report on Corporate Governance, which forms part of this Report.
INDEPENDENT DIRECTORS
The Independent Directors of your Company have furnished the declaration that they meet the criteria of independence as provided in Section 149 (6) of the Companies Act, 2013.
PERFORMANCE EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 (''Listing Regulations''), the Board of Directors have carried out annual evaluation of its own performance, Board Committees and individual Directors.
The performance of the Board / Committee was evaluated after seeking inputs from all the Directors / Committee members on the basis of the defined criteria including composition and structure, effectiveness of meetings, information and functioning.
Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated, on the basis of following evaluation criteria:
- Relevant Knowledge, Expertise and Experience.
- Devotion of time and attention to your Company''s long term strategic issues.
- Addressing the most relevant issues for your Company.
- Discussing and endorsing your Company''s strategy
- Professional Conduct, Ethics and Integrity.
- Understanding of Duties, Roles and Function as Independent Director.
Your Directors have expressed their satisfaction for the evaluation process.
AUDIT COMMITTEE
The Audit Committee consists entirely of Independent Directors with Shri Sudhin Choksey as the Chairman of the Committee. The other members of the Audit Committee are Shri Sudhir Mankad and Shri S. K. Anand. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members are set out in the Report on Corporate Governance, which forms part of this Report.
STATUTORY AUDITOR''S REPORT
The observations made in the Auditor''s Report of M/s. B. K. Khare & Co., Chartered Accountants, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report.
REPORTING OF FRAUD BY AUDITORS
There is no instance of fraud reported by the Auditors during the FY 2016-17.
SECRETARIAL AUDITOR''S REPORT
The Secretarial Audit Report of M/s. KANJ & Associates, Company Secretaries, Pune for the Financial Year ended March 31, 2017 does not contain any qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors. However, the comments of the Secretarial Auditor in their Report has been noted and necessary steps are being taken in this regard. The Secretarial Audit Report is annexed as Annexure - A, which forms part of this Report.
AUDITORS (A) Statutory Auditors:
In compliance with the Companies (Audit and Auditors) Rules, 2014, the Members, at the 43rd Annual General Meeting of your Company held on August 8, 2014, appointed M/s. B. K. Khare & Co., Chartered Accountants, Mumbai, as Statutory Auditors of the Company to hold the office until the conclusion of the ensuing Annual General Meeting of the Company.
The Board of Directors of your Company, on the basis of recommendation of the Audit Committee, has recommended the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (FRN: 11 7366W/W-1 0001 8), as the Statutory Auditors of the Company for a term of five years from conclusion of the 46th Annual General Meeting of the Company up to the conclusion of the 51st Annual General Meeting of the Company. M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (FRN:11 7366W/W-10001 8) have submitted a certificate to your Company stating that their appointment, if made, shall be within the limits prescribed under the Companies Act, 2013 and that they satisfy the criteria prescribed under Section 141 of the Companies Act, 2013.
(B) Secretarial Auditors:
Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2017 was carried out by the Secretarial Auditor M/s. KANJ & Associates, Company Secretaries, Pune. The Board of Directors of your Company has appointed M/s. KANJ & Associates, Company Secretaries, Pune to carry out Secretarial Audit of the Company for FY 2017-18.
(C) Cost Auditors:
The Board of Directors of your Company has appointed M/s. B. M. Sharma & Company, Cost Accountants, to conduct audit of your Company''s cost records for FY 2017-18 at a remuneration of '' 6,50,000/- (Rupees Six Lakhs Fifty Thousands only) plus out of pocket expenses. As required under the provisions of Companies Act, 2013, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the shareholders at the ensuing Annual General Meeting.
The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year.
(D) Internal Auditors:
The Board of Directors has appointed M/s. Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct Internal Audit for FY 2017-18.
FIXED DEPOSITS
During FY 2016-17, your Company has not accepted or renewed any Fixed Deposits.
As on March 31, 2017, 39 warrants aggregating to '' 7,83,507 issued by your Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Companies Act, 2013, remained uncleared. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2017.
VIGIL MECHANISM
In accordance with the provisions of Section 1 77 of the Companies Act, 2013 and requirements of Listing Regulations, your Company has a vigil mechanism which has been incorporated in the Whistle Blower Policy for Directors and employees to report genuine concerns. The Whistle Blower Policy also provides for adequate safeguards against victimization of persons who use vigil mechanism and for direct access to the Chairman of the Audit Committee in appropriate or exceptional cases. The Whistle Blower Policy is uploaded on the website of your Company.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year ended March 31, 2017 were at arm''s length basis. There were no materially significant related party transactions entered into by your Company during the year and hence no information is required to be provided as prescribed under Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014.
SUBSIDIARIES AND ASSOCIATES
As required by Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board''s Report has been prepared on a Standalone basis. Further, during the FY 2016-17, no Company has become or ceased to be subsidiary, joint venture or associate of your Company.
Your Company has the following subsidiaries and associate:
(a) Deepak Phenolics Limited
Your Company''s Phenol and Acetone Project is being undertaken through Deepak Phenolics Limited (''DPL''), a wholly owned subsidiary. The said Project is at the construction stage and commercial production has not started yet. DPL has started seed marketing of Phenol in India. However, as these activities are at an early stage, there is no information to provide on the highlights of its performance and its contribution to the overall performance of the Company during the period under report.
(b) Deepak Nitrite Corporation Inc. (USA)
Deepak Nitrite Corporation Inc. (''DNC'') is a wholly owned subsidiary company formed in the United States of America to cater to the marketing requirements of your Company in the North and South American region. DNC actively does market research and scouts for market and potential customers for your Company''s products in the North and South American region. DNC contributes in enhancing Company''s exports in the said region and overall profitability of your Company.
(c) Deepak Gulf LLC
Deepak Gulf LLC is an associate company where your Company has 49% shareholding. As Deepak Gulf LLC has not commenced any commercial activity yet, there is no information to provide on the highlights of its performance and its contribution in overall performance of your Company during the period under report.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8(1) of the Companies (Accounts) Rules, 2014, a statement containing salient features of the Financial Statements of your Company''s subsidiaries in Form AOC-1 is attached to the Financial Statements.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
The Particulars of Loans granted and Investments made by your Company have been disclosed in the Financial Statements.
MATERIAL CHANGES
There have been no material changes and commitments affecting the financial position of your Company since the close of Financial Year i.e. since March 31, 2017. Further, it is hereby confirmed that there has been no change in the nature of business of your Company.
DIRECTORS'' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(5) of the Companies Act, 2013 ("the Act"), the Board of Directors of your Company, to the best of their knowledge and ability, confirm that:
(a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;
(b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the Financial Year and of the profit of your Company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
As required under Listing Regulations, a Report on Corporate Governance with a Certificate from a Company Secretary in Practice, confirming compliance of the conditions of Corporate Governance and a Management Discussion and Analysis Report are attached, which form part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility (CSR) activities of your Company are being implemented through Deepak Foundation, the group''s charitable trust encompassing social interventions in various developmental domains such as Health, Education, Livelihood, etc.
During FY 2016-17, your Company has spent Rs, 205.00 Lakhs on CSR activities, against the requirement of Rs, 166.00 Lakhs, being 2% of average of the net profits for the preceding three years.
The brief outline of the CSR policy of your Company, composition of the Committee and report on initiatives undertaken by your Company on CSR activities during the year are set out in Annexure - B of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.
REMUNERATION POLICY
In compliance with the provisions of Section 1 78 of the Companies Act, 2013 and Listing Regulations, the Remuneration Policy of your Company is set out as Annexure
- C.
EXTRACTS OF ANNUAL RETURN
The extract of Annual Return as required under Section 134(3) (a) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 201 4, forms part of this Report and annexed as Annexure - D.
PARTICULARS OF EMPLOYEES
The information required under Section 197 of the Companies Act, 2013 read with Rule 5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure - E.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Pursuant to the requirement of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant data pertaining to the conservation of energy, technology absorption and foreign exchange earnings and outgo are provided in Annexure - F of this Report.
STATE OF COMPANY''S AFFAIRS
The state of the Company''s affairs is given under the heading ''Performance Review'' and various other headings in this Report and in the Management Discussion and Analysis, which forms part of this Report.
SIGNIFICANT OR MATERIAL ORDERS PASSED AGAINST THE COMPANY
Pursuant to the requirement of Section 134(3)(q) of the Companies Act, 2013 read with Rule 8(5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during the Financial Year under review, there are no significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and your Company''s operations in future.
INTERNAL CONTROL SYSTEMS
Your Company has in place adequate internal control systems, including Internal Financial Controls. The Internal Control System is exercised through documented policies, guidelines and procedures to ensure compliance with various policies, practices and statutes, and that all assets are safeguarded and protected against loss from unauthorized use or disposition and that those transactions are authorized, recorded and reported correctly.
The Internal Auditor carries out extensive audits throughout the year across all locations and across all functional areas. The audit observations and corrective actions taken thereon are periodically reviewed by the Audit Committee to ensure effectiveness of the internal control system. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data, and for maintaining accountability of persons.
RISK MANAGEMENT
Risk is an integral part of any business and therefore, Risk Management is an important function that the business management has to perform to ensure sustainable business growth.
Your Directors have adopted a Risk Management Framework. The Framework operates for timely identification of the elements of risks in your Company''s business, their assessment, monitoring and the mitigation strategy. The Risk Management Committee constituted by the Board of Directors oversees the risk assessment and mitigation processes regularly. The composition of the Risk Management Committee is disclosed in the Report on Corporate Governance, which forms part of this Report.
RESEARCH & DEVELOPMENT
Your Company has a Research and Development facility at Nandesari, Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat. This facility has been recognized by the Department of Science and Technology.
Your Company has spruced up its Research & Development facility for innovation and to collaborate with its customers to understand consumer preference and develop new product applications to cater to the needs of its customers. Your Company focuses its Research and Development efforts to develop cost effective cleaner technologies to improve profitability. Through its Research and Development capabilities, your Company has been successful in developing and enhancing its portfolio of customized products. Your Company believes that its ability to develop new product applications and ability to customize products to suit customer needs have helped in expanding its customer base, thereby enabling it to establish leadership position.
SAFETY, HEALTH & ENVIRONMENT
Your Company focuses on protecting the interests of the environment, safeguarding the health and safety of employees and ensuring the sustainability of the business in line with your Company''s objectives, policies, and the requirements of applicable laws and regulations.
Your Company believes that a safety culture is central to taking safety to higher levels and its top management continuously works towards establishing, sustaining and improving the safety culture.
Your Company has implemented Process Safety Management (PSM) at Nandesari and other locations. As a part of PSM initiative, your Company has carried out Safety Integrity Level (SIL) based HAZOP studies and Layer of Protection Analysis (LOPA) study for existing and new processes and products. The outcomes of these studies are being used to enhance Process Automation in all the Units, which will in turn improve process safety at the sites. These efforts have been recognized in different forums including "Best Compliant Company" under the Process Safety Code by the Indian Chemical Council (ICC).
Your Company has accepted and implemented the principles of Together for Sustainability (TfS) and has fetched the prestigious 75% score in Together for Sustainability (TfS) Audit by Intertie.
Your Company is signatory to ''Responsible Care'' initiatives and holds Responsible Care logo. The ICC audit team, carried out Responsible Care Surveillance Audit and has allowed your Company to use the logo for an extended period of three years.
Your Company has upgraded the Quality, Environment & Occupational Health & Safety Management Systems as per revised standards for ISO 9001, ISO 14001 & OHSAS 18001, at all manufacturing plants and corporate office.
Your Company is committed to maintain its operations and workplace free from incidents and significant risk to the health and safety of its stake holders through improved engineering practices, strong channels of communication, safety awareness, robust checking systems and sound training practices.
Your Company has dedicated team at each Plant which continuously monitors performance to ensure adherence to global regulations. It regularly monitors the occupational health of employees working in designated hazardous areas with respect to exposure to hazardous chemicals and processes. Your Company has well-equipped Occupational Health Centers at all manufacturing locations to monitor health of employees on regular basis. It also monitors employees for any indications of lifestyle or work-style related diseases and provides counseling.
Your Company follows well-mapped procedure in order to select projects, assess impacts on society and environment and mitigate any adverse impacts. It has instituted a compliance management system which, mandates undertaking an adverse impact analysis and risk analysis study, Hazard & Operability Study (HAZOP) and implementation of actions based on such analysis.
Environmental performance indicators of your Company are defined and monitored by the top management regularly. Special emphasis is given on resource conservation and process innovations to convert waste streams into saleable products and minimize use of water in processing.
Your Company proactively fulfils the environmental requirements of customers by delivering products that match international standards. Your Company continues to focus on proper treatment of effluents and reduction of pollution as a part of its green and eco-friendly initiatives. This has made your Company a safe and healthy place to work.
All raw materials and products within supply chain framework of your Company are transported in a secure manner, for the safety of its customers, carriers, suppliers, distributors and contractors. Your Company takes utmost care during transportation and ensures compliance with all checks and measures for a safe and secured delivery.
AWARDS & ACCOLADS
Your Company was conferred with Corporate Social Responsibility Award 2015-16 in the category of Women Empowerment Private Sector Companies with turnover between Rs, 201 Crores - Rs, 3000 Crores by FICCI. Further, the Comprehensive Emergency Obstetric & Newborn Care (CEmONC) implemented in partnership with Govt. of Gujarat by Deepak Foundation under the CSR activities of your Company has been awarded as the Best CSR project by Gujarat CSR authority for cohesive and strategic partnerships.
HUMAN RESOURCES
Your Company''s Human Resource philosophy is to establish and build a high performing organization responding to the ever-changing business environment, where each and every employee is motivated to perform to the fullest capacity; to contribute to developing and achieving individual excellence and organizational objectives and thereby contributing continuously to improved performance and to realize the full potentials of its personnel. Your Company has undertaken inter alia an exercise of identifying Organizational Competencies and all the Senior Management employees have gone through Assessment Centreâs with a view to developing the requisite Competencies for performing their roles with greater effectiveness. During the year under review, your Company''s industrial relations at all manufacturing and other locations have remained healthy, cordial and amicable. All these efforts are concentrated on attracting and retaining the best talent in the industry as people are at the centre of your Company''s growth.
INSURANCE
All the insurable interests of your Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Company has in place a Anti-Discrimination and Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee has been set up to redress the complaints received regarding sexual harassment at workplace. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No compliant was received from any employee during FY 201 6-1 7 and hence no complaint is outstanding as on March 31, 2017 for redressal.
ACKNOWLEGDEMENT
Your Directors wish to place on record their appreciation to the Investors, Bankers, Customers, Business Associates, all Regulatory and Govt. authorities for their continued support, encouragement and confidence reposed in your Company''s management.
Your Directors also convey their appreciation to the employees at all levels for their dedicated services, efforts and collective contribution towards growth of your Company.
For and on behalf of the Board
Place: Mumbai DEEPAK C. MEHTA
Date: April 28, 2017 Chairman & Managing Director
Mar 31, 2016
Dear Shareholders,
The Directors have pleasure in presenting the Forty Fifth Annual
Report together with the Audited Financial Statements for the year
ended March 31, 201 6.
FINANCIAL RESULTS (Rs, in Crore)
STANDALONE CONSOLIDATED
2015-16 2014-15 2015-16 2014-15
Sales & Other Income 1,337.27 1,329.221 1,374.52 1,329.23
Gross Profit (before
interest, depreciation,
and tax) 168.22 140.17 166.32 139.72
Less:
Interest 37.45 36.41 37.65 36.41
Depreciation 39.45 36.02 139.54 36.02
Provision for
Current Tax 19.85 13.45 19.90 13.45
Provision for
Deferred Tax 10.32 12.07 10.32 12.07
MAT Credit
Entitlement Recognized (3.99) (11.22) (3.99) (11.22)
Loss for the year
from Associates - - 10.17 0.09
Profit After Tax 65.14 53.441 62.73 52.90
Surplus in Profit &
Loss Account Brought
Forward 188.28 163.87 187.67 163.80
Transferred to Share
Capital towards issuing
Bonus Equity Shares - (10.45) - (10.45)
Depreciation Adjustment
on Account of Schedule
II net of Deferred .
Tax Asset I
Amount available for
appropriation 253.42 205.86 250.40 205.25
Appropriation:
Dividend 13.95 10.45 13.95 10.45
Corporate Dividend Tax 2.84 2.13 2.84 2.13
General Reserve 5.00 5.00 5.00 5.00
Balance carried
to the Balance Sheet 231.63 188.28 228.61 187.67
PERFORMANCE REVIEW
The Financial Year 201 5-16 ("FY 201 5-1 6") was an extremely
challenging year for the chemical industry. The sharp decline in the
prices of global crude oil and related petrochemical intermediates as
well as continuous weakness in key emerging markets had an adverse
impact on the chemical industry. In this backdrop, your Company
delivered a strong performance. It has reported a steady growth in
profitability during the year while recording progress on several
strategic initiatives, including expansion plans.
On a standalone basis, your Company registered a marginal growth of
0.6% in revenues which stood at Rs, 1,335.73 crore in FY 201 5-1 6
compared to Rs, 1,327.16 crore in FY 201 4-1 5. This was driven by
healthy volume growth of 9%. Due to the decline in the prices of crude
oil and related petrochemical intermediates, there was a commensurate
reduction in realizations of some products. As a result, the strong
growth in volumes has been offset by lower realization leading to
moderate growth in absolute revenues though operating margins improved.
Initiatives taken by your Company to improve operating efficiency,
de-bottlenecking of production lines, improvement in working capital
and control of operating and finance cost helped to register 35% growth
in Profit Before Tax as compared to the previous year.
The commendable growth in volumes was backed by healthy trajectory in
the Fine & Specialty Chemicals (FSC) segment which includes agro hem
intermediates as well as pharma and personal care intermediates. The
shift towards higher contribution products in the overall product mix
and traction from newly introduced products has been instrumental in
the strong performance of this segment. Within the Fluorescent
Whitening Agent (FWA) segment, the performance of Optical
Brightening Agents (OBA) improved due to volume growth on account of
better acceptance of your Company''s products, doubling the customer
base and expanding the geographies in both domestic and export markets.
Your Company is able to acquire orders from large MNC customer in paper
and detergent industry. The revenue performance of the Bulk Chemicals &
Commodities (BCC) segment reflects the situation of lower crude oil
prices during FY 2015-16. The fall in crude oil prices and related
petrochemical intermediates had a cascading effect on the top line of
this segment. Your Company was, however, able to maintain the spread.
Export markets of Europe, USA and China supported the momentum with
procurement of high volumes on the back of high visibility. Export
markets contributed 40% to your Company''s top line, while the
contribution from domestic market stood at 60%. Export revenue was
marginally higher by 2% to Rs, 525.75 crore. Your Company launched a
special grade of Sodium Nitrite for exports market in FY 201 5-1 6 and
the response so far has been promising.
Profit before Tax for FY 2015-16 came in at Rs, 91.33 crore compared to
Rs, 67.74 crore in FY 2014-15. Your Company was able to successfully
maintain the spread in most of its products in the face of reduced
realizations, especially for the products linked to crude oil and
petrochemical intermediates. Profit After Tax for the year was higher
by 21 .9% to Rs, 65.14 crore compared to Rs, 53.44 crore in FY 2014-15.
Earnings Per Share in FY 2015-16 was Rs, 6.07 on enhance capital
compared to Rs, 5.1 1 per Share in FY 201 4-1 5.
The outlook remains favorable. Your Company is confident of delivering
value-led growth in all the three SBUs of Bulk Chemicals & Commodities,
Fine & Specialty Chemicals and Fluorescent Whitening Agents.
Significant efforts have been undertaken to customize the product
portfolio and drive customer acceptance which are expected to result in
higher volumes of OBA products. This will lead to an increase in the
utilization rate at the FWA facility in Dahej. Your Company''s
established business segments will continue to see enhanced momentum
given the relative stability in the global prices of crude oil,
improved sentiment in both domestic and international markets, the
foray into complementary segments of pharma and personal care
intermediates and an improved outlook for agro hem products in light of
expectations of a normal monsoon. In addition, further improvements in
operational efficiency along with cost reduction initiatives will help
improve the overall profitability in the near future.
A review of the performance during the year is given under the section
Management Discussion and Analysis Report, which forms part of this
report.
ISSUE OF SHARES
During FY 2015-16, your Company, offered Equity Shares to the Qualified
Institutional Buyers ("QIBs") on private placement basis through
Qualified Institutions Placement ("QIP"), in accordance with Chapter
VIII of SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009. Accordingly, 11,750,000 Equity Shares of Rs, 2/-
each were allotted to QIBs on January 6, 2016 at an issue price of Rs,
70.90 per Equity Share (including premium of Rs, 68.90 per Equity
Share). The QIP issue proceeds aggregating to Rs, 83.31 crore will be
utilized in accordance with the objects stated in the offer document.
Pending utilization, the unutilized amount of issue proceeds have been
invested in Liquid Mutual Funds.
Post issuance of Equity Shares under QIP, the issued, subscribed and
paid-up capital of your Company has increased from Rs, 20.91 crore in
FY 201 4-1 5 to Rs, 23.26 crore in FY 201 5-1 6.
DIVIDEND
Based on your Company''s performance, the Board of Directors has
recommended payment of dividend of Rs, 1 .20 (Rupee One and Paisa
Twenty only) per Equity Share for the year ended March 31, 2016 on
11,62,88,190 Equity Shares of Rs, 2/- each, as against Rs, 1 /- (Rupee
One only) per Equity Share (after adjustment for sub-division and
bonus) in the previous year.
The total sum of the dividend, if approved, including Corporate
Dividend Tax, will be Rs, 16.79 crore (previous year Rs, 12.58 crore).
TRANSFER TO RESERVES
Your Company proposes to transfer Rs, 5 crore to the General Reserves
out of the amount available for appropriation and an amount of Rs, 231
.63 crore is proposed to be retained in the
Statement of Profit and Loss.
UPDATE ON PHENOL AND ACETONE PROJECT
Last year your Company announced setting up of a Greenfield project to
manufacture Phenol and Acetone at Dahej, in the State of Gujarat,
through its wholly owned subsidiary, Deepak Phenolics Limited. Till
March 2016, total investment made by your Company in Deepak Phenolics
Limited was Rs, 61.84 crore. Kellogg Brown & Root International, Inc.
has been selected for technology and engineering services while M/s.
ThyssenKrupp Industrial Solutions (India) Pvt. Ltd. has been selected
as the Engineering, Procurement, and Construction Management (EPCM)
contractor. Basic engineering has been completed and significant
progress has been made on detailed engineering. The Project management
team is established and the Project is being implemented as per
schedule. On Project procurement side, orders for majority of long lead
items have been placed or are in the process of negotiation.
Deepak Phenolics Limited has started seeding phenol market with an
objective to develop relationships with all major clients in India. The
demand for phenol continues to be buoyant in India and is expected to
increase steadily based on consumption trends of end-user industries.
Phenol imports remain strong and the country''s current demand will
absorb the entire capacity that your Company plans to install thereby
substituting imports. Further, the abundant availability of phenol in
the local market is expected to spur pent-up demand which is expected
to further expand the market.
SALE OF LAND AT PUNE
In order to monetize the value of your Company''s unutilized assets and
improve shareholders value by freeing up capital to facilitate growth,
your Directors had approved the sale of freehold land and surrender/
assignment of leasehold rights in respect of lands situated at Sinhagad
Road, Pune, Maharashtra.
Your Directors are pleased to inform that during April, 2016, the said
transactions were concluded for a total consideration of Rs, 79.26
crore. The profit on sale of land and surrender / assignment of
leasehold rights will be recognized in the first quarter of FY 201 6-1
7.
FINANCE
Your Company adheres to strict guidelines to efficiently manage its
working capital level and maintain its debt at a reasonable level. The
long term debt of your Company decreased during the year due to
repayment of external commercial borrowing and term loan borrowed in
earlier years. Interest cost is expected to moderate further as the FWA
business gains momentum with increase in volumes. Depreciation
increased due to capitalization of the Hydrogenation facility. Your
Company''s improved financials have helped improvement in the financial
parameters. In addition, there is active management of foreign exchange
exposures to minimize risk to your Company arising out of imports and
repayment of external commercial borrowings.
Your Company has been able to effectively manage its cash flows due to
prudent management. There has been a continued focus to reduce the
overall interest costs. Healthy cash flow, repayment of term loan and
effective management of working capital led to decrease in overall debt
level to Rs, 495 crore. The Debt to Equity ratio is now at a better and
comfortable level at 1 .04 times as on March 31, 2016.
ICRA Limited re-affirmed the long-term rating of [ICRA] A and Short
Term rating of [ICRA] Al assigned to the fund based limits and
non-fund based limits of your Company. ICRA also re-affirmed the
short-term rating of [ICRA] Al assigned to the Commercial Paper
programme.
DIRECTORS
The Board of Directors at their meeting held on May 9, 2016, appointed
Shri Maulik D. Mehta as an Additional Director and subject to the
approval of shareholders, also approved the appointment of Shri Maulik
D. Mehta as a Whole-Time Director of your Company w.e.f. May 9, 2016.
As per provisions of Companies Act, 201 3, Shri Maulik D. Mehta holds
office as an Additional Director upto the ensuing Annual General
Meeting. Your Company has received a notice from a Member proposing
the candidature of Shri Maulik D. Mehta for appointment as a
Director along with requisite fees. The respective resolutions for the
appointment of Shri Maulik D. Mehta as a Director and Whole-Time
Director for approval by the Members are given in the Notice for the
Annual General Meeting.
As required under the provisions of Section 152 of the Companies Act,
2013, Shri C. K. Mehta, a Director liable to retire by rotation, will
be retiring at the ensuing Annual General Meeting. Although he is
eligible for re-appointment at the ensuing Annual General Meeting, he
has not offered himself for the re-appointment due to his advancing
age. The Board of Directors while extending their gratitude for the
valuable contribution of Shri C. K. Mehta as the Chairman of your
Company, have decided not to fill the vacancy that will be caused by
the retirement of Shri C. K. Mehta not offering himself for
re-appointment. However, in order to continue to have the guidance and
benefit from the wealth of experience of Shri C. K. Mehta, the Board of
Directors has requested Shri C. K Mehta to continue as the Chairman -
Emeritus and Shri C. K. Mehta has assented to the request.
Shri C. K. Mehta is the founder of your Company and has been the
Chairman since October, 1998. He is an eminent personality with proven
business acumen of successfully building formidable corporate
conglomerates in his illustrious career spanning over six decades. The
able leadership of Shri C. K. Mehta, his futuristic vision, dedication
and commitment for the service of the society, has taken your Company
to such greater heights and earned its name not only at the national
level but has achieved international acclaim too. Shri C. K. Mehta has
also been at the forefront for promoting several philanthropic
activities, especially for education and health care. The Board of
Directors of your Company places on record their sincere appreciation
for the relentless guidance and support of Shri C. K. Mehta and his
contribution towards growth of your Company.
KEY MANAGERIAL PERSONNEL
Shri Umesh Asaikar, Executive Director, Shri Sanjay Upadhyay, Chief
Financial Officer and Shri Arvind Bajpai, Company Secretary are the Key
Managerial Personnel of your Company. There has been no change in Key
Managerial Personnel of your Company during the FY 201 5-1 6.
MEETINGS OF THE BOARD
During FY 2015-16, five (5) Board Meetings were held. The details of
the Board Meetings with regard to their dates and attendance of each of
the Directors thereat have been set out in the Report on Corporate
Governance, which forms part of this Report.
INDEPENDENT DIRECTORS
The Independent Directors of your Company have furnished the
declaration that they meet the criteria of independence as provided in
Section 149 (6) of the Companies Act, 2013.
PERFORMANCE EVALUATION
Pursuant to the provisions of Companies Act, 2013 and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (''Listing
Regulations''), the Board of Directors have carried out annual
evaluation of its own performance, Board Committees and individual
Directors.
The performance of the Board /Committee was evaluated after seeking
inputs from all the Directors / Committee members on the basis of the
defined criteria including composition and structure, effectiveness of
meetings, information and functioning.
Performance evaluation of Independent Directors was done by the entire
board, excluding the Independent Director being evaluated, on the basis
of following evaluation criteria:
- Relevant Knowledge, Expertise and Experience.
- Devotion of time and attention to the Company''s long term strategic
issues.
- Addressing the most relevant issues for the Company.
- Discussing and endorsing the Company''s strategy.
- Professional Conduct, Ethics and Integrity.
- Understanding of Duties, Roles and Function as Independent Director.
Your Directors have expressed their satisfaction for the evaluation
process.
AUDIT COMMITTEE
The Audit Committee consists of all Independent Directors with Shri
Sudhin Choksey as the Chairman of the Committee. The other members of
the Audit Committee are Shri SudhirMankad and Shri S. K. An and. The
terms of reference of the Audit Committee, details of meetings held
during the year and attendance of members are set out in the Report on
Corporate Governance, which forms part of this Report.
STATUTORY AUDITOR''S REPORT
The observations made in the Auditor''s Report of M/s. B. K. Khare &
Co., Chartered Accountants, read together with relevant notes thereon,
are self-explanatory and hence do not call for any comments. There is
no qualification, reservation, adverse remark or disclaimer by the
Statutory Auditors in their Report.
SECRETARIAL AUDITOR''S REPORT
The Secretarial Audit Report of M/s. KANJ & Associates, Company
Secretaries, for the year ended March 31, 201 6 do not contain any
qualification, reservation, adverse remark or disclaimer by the
Secretarial Auditors. The Secretarial Audit Report is annexed as
Annexure - A, which forms part of this Report.
AUDITORS
(A) Statutory Auditors:
In compliance with the Companies (Audit and Auditors) Rules, 2014, the
Members, at the 43rd Annual General Meeting of the Company held on
August 8, 2014, appointed M/s. B. K. Khare & Co., Chartered
Accountants, Mumbai, as Statutory Auditors of the Company to hold the
office until the conclusion of 46th Annual General Meeting of the
Company.
As required under the provisions of Section 139 of the Companies Act,
201 3, their appointment as Statutory Auditors is subject to
ratification by the Members at every Annual General Meeting.
Accordingly, Members are requested to ratify their said appointment at
the ensuing Annual General Meeting of the Company.
(B) Secretarial Auditors:
Pursuant to the provisions of Section 204 of the Companies Act, 2013
read with the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, the Secretarial Audit for the year ended March
31, 2016 was carried out by the Secretarial Auditor, M/s. KANJ &
Associates, Company Secretaries, Pune. The Board of Directors of your
Company has appointed M/s. KANJ & Associates, Company Secretaries, Pune
to carry out Secretarial Audit of the Company for FY 2016-1 7.
(C) Cost Auditors:
The Board of Directors of your Company has appointed M/s. B. M. Sharma
& Company, Cost Accountants, to conduct audit of your Company''s cost
records for FY 2016-17 at a remuneration of Rs, 6,50,000/- (Rupees Six
Lacs Fifty Thousands only) plus out of pocket expenses. As required
under the provisions of Companies Act, 201 3, the remuneration of Cost
Auditors as approved by the Board of Directors is subject to
ratification by the shareholders at the ensuing Annual General Meeting.
The Cost Audit Report will be filed within the prescribed period of 1
80 days from the close of the Financial Year.
(D) Internal Auditors:
The Board of Directors has appointed M/s. Deloitte Haskins & Sells as
Internal Auditors of your Company to conduct the Internal Audit for FY
201 6-1 7.
CHANGE IN REGISTRAR & SHARE TRANSFER AGENT
The Company has changed its Registrar & Share Transfer Agent from M/s.
Sharepro Services (I) Pvt. Ltd. to M/s. Link In time India Pvt. Ltd.
FIXED DEPOSITS
During FY 2015-16, your Company has not accepted or renewed any Fixed
Deposits.
As on March 31, 2016, 44 warrants aggregating to Rs, 9,23,437 issued by
your Company to the respective deposit holders towards compulsory
repayment of deposits and interest thereon in accordance with the
provisions of Section 74 of the Companies Act, 2013, remained
nucleated. There has been no default in repayment of deposits or
interest thereon during the year and there are no deposits outstanding
as on March 31, 2016.
VIGIL MECHANISM
In accordance with the provisions of Section 1 77 of the Companies Act,
2013 and requirements of Listing Regulations, your Company has a vigil
mechanism which has been incorporated in the Whistle Blower Policy for
Directors and employees to report genuine concerns. The Whistle Blower
Policy also provides for adequate safeguards against victimization of
persons who use vigil mechanism and for direct access to the Chairman
of the Audit Committee in appropriate or exceptional cases. The Whistle
Blower Policy is uploaded on the website of your Company.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year
ended March 31, 2016 were at arm''s length basis and in the ordinary
course of business. There were no materially significant related party
transactions entered into by your Company during the year and hence no
information is required to be provided as prescribed under Section 1
34(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the
Companies (Accounts) Rules, 2014.
SUBSIDIARIES AND ASSOCIATES
As required under Rule 8(1) of the Companies (Accounts) Rules, 2014,
the Board''s Report has been prepared on a Standalone basis.
Your Company has following subsidiaries and associate:
(a) Deepak Phenolics Limited
Your Company''s Phenol and Acetone Project is being undertaken through
Deepak Phenolics Limited, a wholly owned subsidiary of your Company.
(b) Deepak Nitrite Corporation Inc. (USA)
A wholly owned subsidiary company is formed in the United States of
America to cater to the marketing requirements of your Company in the
North and South American region.
(c) Deepak Gulf LLC
Deepak Gulf LLC is an associate company where your Company has 49%
shareholding.
Pursuant to the provisions of Section 1 29(3) of the Companies Act,
2013 read with Rule 8(1) of the Companies (Accounts)
Rules, 2014, a statement containing salient features of the financial
statements of your Company''s subsidiaries in Form AOC-1 is attached to
the Financial Statements.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF
THE COMPANIES ACT, 2013
The particulars of Loans granted and Investments made by your Company
have been disclosed in the Financial Statements.
MATERIAL CHANGES
There have been no material changes and commitments affecting the
financial position of your Company since the close of Financial Year
i.e. since March 31, 201 6 except as disclosed in this Report. Further,
it is hereby confirmed that there has been no change in the nature of
business of your Company.
DIRECTORS'' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 1 34(5) of the Companies Act,
201 3 ("the Act"), the Board of Directors of your Company, to the best
of their knowledge and ability, confirm that:
(a) in the preparation of the Annual Accounts, the applicable
accounting standards have been followed and there are no material
departures;
(b) they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the Financial Year and of the profit of the
Company for that period;
(c) they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by
the Company and that such internal financial controls are adequate and
are operating effectively;
(f) they have devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
CORPORATE GOVERNANCE
As required under Listing Regulations, a Report on Corporate Governance
with a Certificate from the Statutory Auditors of your Company
confirming compliance of the conditions of Corporate Governance and a
Management Discussion and Analysis are attached, which form part of
this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility (CSR) activities are being
undertaken by your Company through Deepak Foundation, a charitable
trust of the group as implementing agency for CSR activities of your
Company. Through Deepak Foundation, your Company supports in
development of underprivileged communities through various social
interventions. The CSR activities during FY 2015-16 were focused on
women empowerment through skills building in health and livelihood
promotion, primary healthcare services, early childhood care and
development and education. The interventions were spread around the
plants of your Company, located at Dahej & Nandesari in Gujarat, Roha &
Taloja in Maharashtra and Hyderabad in Telangana.
During FY 201 5-1 6, your Company has spent Rs, 1 57.60 Lacs (including
the unspent amount of Rs, 1 5.72 Lacs in the previous year) on CSR
activities, against the requirement of Rs, 1 22 Lacs, being 2% of
average of the net profits for the preceding three years.
The major CSR activities carried during FY 201 5-1 6 were:
Comprehensive Emergency Obstetric and Newborn Care (CEmONC)
It was constructed by Deepak Foundation within the premise of the
government''s Community Health Centre (CHC), Jabugam, Pavi Jetpur of
Chhota Udepur district in February 2006 under the large scale
intervention project of Safe Motherhood and Child Survival (SMCS). This
is the only First Referral Unit (FRU) at the CHC in the area serving a
tribal population of 9,00,000 round the clock with availability of
skilled manpower. CEmONC operates under the specific objectives of
strengthening the health delivery system for maternal and child care;
providing immediate care to the emergency obstetric cases referred from
grassroots level and public health facilities; providing timely
referral of complicated cases to tertiary level hospitals
Mobile Health Unit (MHU)
MHU was initiated as a means to ensure delivery of general health care
services to the poorest and vulnerable segments of population in rural
and tribal areas. The MHU operate with the overall goal of providing
access to primary healthcare with the objectives for deploying primary
healthcare and speciality services at the doorstep; facilitate basis
diagnostic care services; community health education for poor and
vulnerable segments of population.
Integrated Child Development Services (ICDS)
Your Company, through Deepak Foundation has been supporting and
supervising activities of Anganwadi Centers under ICDS scheme of the
Department of Women and Child Development, Government of Gujarat. This
scheme offers a package of services comprising of supplementary
nutrition, immunization, health checkups, referral services, non-formal
preschool education, and nutrition and health education. Deepak
Foundation has entered into partnership with Department of Women and
Child Development, Government of Gujarat to manage and monitor 65
Anganwadi centres in Nandesari of Vadodara district, Gujarat. The
Foundation undertakes various value addition programs with the support
of your Company such as tracking and facilitation of severely
undernourished children, promoting adolescent health, maintaining
hygiene and sanitation, improving health and nutrition awareness. It
also provides free treatment to children identified with severe
malnutrition as well as chronic disorders.
Deepak Occupational Health Centre (DOHC)
DOHC was initiated to provide comprehensive occupational health
services to industries. The centre is equipped with trained medical and
paramedical staff along with well- equipped laboratory and pharmacy
facilities. DOHC renders services that include outpatient and inpatient
care for industrial workers and their families; injury care; general
OPDs and specialized OPDs for ophthalmic, dental and skin diseases;
diagnosis and treatment of occupational health problems; periodic and
annual medical check-ups; industrial training on first aid, Personal
Protective Equipment (PPE), Health and Safety, Chemical Hazards;
promotion of occupational health programs; health counseling.
The brief outline of the CSR policy of your Company, composition of the
Committee and report on initiatives undertaken by your Company on CSR
activities during the year are set out in Annexure-B of this Report in
the format prescribed in the Companies (Corporate Social Responsibility
Policy) Rules, 2014.
REMUNERATION POLICY
In compliance with the provisions of Section 178 of the Companies Act,
2013 and the Listing Regulations, the Remuneration Policy of your
Company is set out as Annexure-C.
EXTRACTS OF ANNUAL RETURN
The extract of Annual Return as required under Section 134(3)(a) of the
Companies Act, 2013 read with Rule 12(1) of the Companies (Management
and Administration) Rules, 2014, is annexed as Annexure-D.
PARTICULARS OF EMPLOYEES
The information required under Section 1 97 of the Companies Act, 2013
read with Rule 5(1) and 5(2) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 201 4, is annexed as
Annexure-E.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Pursuant to the requirement of Section 134(3)(m) of the Companies Act,
2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the
relevant data pertaining to the conservation of energy, technology
absorption and foreign exchange earnings and outgo are provided in
Annexure-F of this report.
STATE OF COMPANY''S AFFAIRS
The state of Company''s affairs is given under the heading ''Performance
Review'' and various other headings in this Report and in the Management
Discussion and Analysis, which forms part of this Report.
INTERNAL CONTROL SYSTEMS
Your Company has a proper and adequate internal control system, which
includes internal financial controls, to ensure compliance with various
policies, practices and statutes, and that all assets are safeguarded
and protected against loss from unauthorized use or disposition and
that those transactions are authorized, recorded and reported
correctly.
The internal control is exercised through documented policies,
guidelines and procedures. The Internal Auditor''s team carries out
extensive audits throughout the year across all locations and across
all functional areas. The audit observations and corrective action
taken thereon are periodically reviewed by the Audit Committee to
ensure effectiveness of the internal control system. The internal
control is designed to ensure that the financial and other records are
reliable for preparing financial statements and other data, and for
maintaining accountability of persons.
RISK MANAGEMENT
Risk Management is a very important part of business in today''s
economic environment. The main aim of risk management is to identify,
monitor and take precautionary measures in respect of the events that
may pose risks for the business.
Your Company has in place a Risk Management Framework adopted by the
Board of Directors of your Company. The Framework provides an
integrated approach to identify, assess, monitor and mitigate risks in
various aspects of your Company''s business. Risks identified by the
functions are systematically addressed through mitigating actions on a
continuing basis. Your Company has a duly constituted Risk Management
Committee which oversees the risk assessment and mitigation process
regularly. The composition of Risk Management Committee is disclosed in
the Report on Corporate Governance, which forms part of this Report.
RESEARCH & DEVELOPMENT
Your Company has a Research and Development facility at Nandesari,
Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat.
This facility has been recognized by the Department of Science and
Technology.
Your Company has spruced up its Research & Development facility for
innovation and to collaborate with its customers to understand consumer
preference and develop new product applications to cater to the needs
of its customers. Your Company focuses its Research and Development
efforts to develop cost effective cleaner technologies to improve
profitability. Through its Research and Development capabilities, your
Company has been successful in developing and enhancing its portfolio
of customized products. Your Company believes that its ability to
develop new product applications and ability to customize products to
suit customer needs have helped in expanding its customer base, thereby
enabling it to establish leadership position.
SAFETY, HEALTH & ENVIRONMENT
Employee''s Health, Safety and Environmental protection are core
business values within your Company. It is your Company''s objective to
protect its employees, property and environment in which it operates.
It strives towards excellence and align its growth path to make
tomorrow safer, cleaner, greener and more sustainable. Your Company is
committed to maintain its operations and workplace free from incidents
and significant risk to the health and safety of its stake holders
through improved engineering practices, strong channels of
communication, safety awareness, robust checking systems and sound
training practices.
Your Company regularly monitors the occupational health of employees
working in designated hazardous areas with respect to exposure to
hazardous chemicals and processes. Your Company has well-equipped
Occupational Health Centers at all its manufacturing locations to
monitor health of employees on regular basis. It also monitors
employees for any indications of lifestyle or work-style related
diseases and provides counseling.
All the manufacturing locations of your Company have a well defined
Environment Management System. It follows well- mapped procedure in
order to select projects, assess impacts on society and environment and
mitigate any adverse impacts. It has instituted a compliance
management system which mandates undertaking an adverse impact analysis
and risk analysis study and implementation of actions based on such
analysis.
Environmental performance indicators of your Company are defined and
monitored by the top management regularly. Special emphasis is given
on resource conservation and process innovations to convert waste
streams into saleable products and minimize use of water in processing.
Your Company proactively fulfils the environmental requirements of
customers by delivering products that match international standards.
Your Company continues to focus on proper treatment of effluents and
reduction of pollution as a part of its Green and ecofriendly
initiatives. This has made your Company a safe and healthy place to
work.
Your Company is signatory to the ''Responsible Care'' initiatives and
Responsible care logo holding organization.
Quality, Environment & Occupational Health & Safety Management System
at all manufacturing plants and corporate office have been assessed,
registered and certified as per ISO 9001, ISO 14001 & OHSAS 18001.
All raw materials and products within supply chain framework of your
Company are transported in a secure manner, for the safety of its
customers, carriers, suppliers, distributors and contractors. Your
Company takes utmost care during transportation and ensures that it
complies with all the checks and measures for a safe and secure
delivery.
AWARDS & ACCOLADES
Your Company was conferred with supplier excellence award in the
"Outstanding Performance" category for the year 2015 from a leading
global agrochemical major Bayer Crop Science. This award recognizes the
quality and excellence of your Company''s products in the Fine &
Specialty Chemicals offering.
HUMAN RESOURCES
Your Company''s HR philosophy is to establish and build a high
performing organization, where each individual is motivated to perform
to the fullest capacity; to contribute to developing and achieving
individual excellence and departmental objectives and continuously
improve performance to realize the full potential of its personnel.
During the year under review, your Company''s industrial relations at
all manufacturing and other locations have remained amicable. All these
efforts are concentrated on attracting and retaining the best talent in
the industry as people are at the center of your Company''s growth.
INSURANCE
All the insurable interests of your Company including inventories,
buildings, plant and machinery are adequately insured against risk of
fire and other risks.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN
AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
Your Company has in place a Anti-Discrimination and Harassment policy
in line with the requirements of the Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Act, 2013. The
Internal Complaint Committee has been set up to redress complaints
received regarding sexual harassment at workplace. All employees
(permanent, contractual, temporary, trainees) are covered under the
policy. There were no complaint received from any employee during FY
2015-16 and hence no complaint is outstanding as on March 31, 201 6 for
redressal.
ACKNOWLEDGEMENT
Your Directors take this opportunity to express their gratitude to all
investors, clients, vendors, bankers, regulatory and government
authorities, stock exchanges and business associates for their
co-operation, encouragement and continued support extended to your
Company. Your Directors also wish to place on record their appreciation
for the hard work and efforts put in by all the employees and their
contribution towards growth of your Company.
For and on behalf of the Board
Place: Mumbai C.K. MEHTA
Date: May 9, 201 6 Chairman
Mar 31, 2013
Dear Shareholders,
The Directors have the pleasure in presenting the Forty Second Annual
Report of your Company, together with the audited Statement of Accounts
for the financial year ended March 31, 2013.
FINANCIAL RESULTS
Particulars 2012-13 2011-12
(Rs. in Lacs) (Rs. in Lacs)
Sales & Other Income 1,03,010.04 79,273.32
Gross Profit (before interest, 8,122.22 5,880.45
depreciation and tax)
Less:
(i) Interest 970.56 943.27
(ii) Depreciation 1,893.86 1,778.58
(iii) Provision for Tax
- For the Year
-Current Tax 820.25 749.51
- Deferred Tax 655.20 72.70
- Prior Year
- Current Tax - 28.11
Profit After Tax 3,782.35 2,308.28
Add: Surplus in Statement of Profit & 11,973.90 10,895.29
Loss Brought Forward
Amount available for appropriation 15,756.25 13,203.57
Appropriation :
Dividend 837.09 627.82
Corporate Dividend Tax 142.26 101.85
General Reserve 500.00 500.00
(as required by Section 205 (2A) of the
Companies Act,1956)
Balance carried to the Balance Sheet 14,276.90 11,973.90
15,756.25 13,203.57
DIVIDEND
Considering the overall improved performance of your Company, the Board
of Directors are pleased to recommend a dividend of Rs. 8.00 per equity
share for the year ended March 31, 2013 on 1,04,63,679 Equity Shares,
as against Rs. 6.00 (Rupees six) per equity share in the previousyear.
The total amount of dividend, if approved, including Corporate Dividend
Tax, will beRs. 9.79 crores (previousyearRs. 7.29 crores).
THEYEARIN RETROSPECT
The financial year 2012-13 proved to be a benchmark year for your
Company''s performance. Your Company has achieved a significant
milestone this year by crossing the Rs. 1,000 crores turnover mark. In
spite of headstrong global and domestic challenges, your Company has
outperformed competition and, revenues and profits have touched new
highs. Turnover for FY 2012-13 stood at Rs. 1004.09 crores as compared
to Rs. 776.91 crores in FY 2011-12. These were driven by increased
volumes as a result of de-bottlenecking activities and progressively
higher realisations. Exports flourished and products like Fuel
Additives were also major contributors to the top line.
Exports to key markets in Europe continued to remain strong and your
Company enjoyed a favourable traction from its expanding presence in
the US as well. The export turnover increased by 27.71% over FY 2011-12
and in absolute terms stood atRs. 447.59 crores in FY 2012-13 over Rs.
350.47 crores in FY 2011-12.
Profit before Interest, Depreciation and Tax for the year was Rs. 81.22
crores as compared to Rs. 58.80 crores in the previousyear. Profit
After Tax was Rs. 37.82 crores as compared to Rs. 23.08 crores in FY
2011-12. Earnings per Share was Rs. 36.15 as compared to Rs. 22.06 per
Share in FY 2011-12.
On the global front, the US market is showing signs of a more stable
recovery while Europe seems to be facing continuing challenges. The
Middle East has recovered steadily from the political unrest and China
and India, though still slowly recovering, remain the key engines for
global growth. Your Company has shown resilience even though the global
operating environment over the last few years has been demanding.
Growth in exports to economies that are in economic turmoil is a
testament to strong customer relationships and a growth-driven business
model thatyourCompanyfollows.
For the next financial year the key focus will be on expansion plans.
The greenfield expansion at Dahej, will make your Company, the only
player to completely backward integrate its processes and manufacture
OBA (Optical Brightening Agents) from Toluene. On the other hand, the
brownfield expansion at Nandesari will help your Company make a
completely new foray in renewable energy which will aid in the
manufacture of Solar Salts. Since many Solar Projects in India as well
as overseas are temporarily delayed there is a need to mitigate the
short-term risk of dependence on Solar Energy sector. With this in
view, your Company has initiated Research & Development efforts to
develop salts for other applications.
Your Company has also taken measures to address currency risk through
prudent hedging policies as exports play a significant role.
A review of the performance during the year is given under the section
"Management Discussion and Analysis Report".
GREENFIELD EXPANSION AT DAHEJ
Your Company''s new state-of-the-art greenfield plant at Dahej (Dist.
Bharuch, Gujarat) will be manufacturing OBA (Optical Brightening
Agents), a Performance Chemical. This will make your Company the only
fully-integrated player in the world. After the successful completion
of production trial runs at its OBA Plant, your Company commenced its
first stream of commercial production of OBA on March 15, 2013
involving a capex cost of around Rs. 140 crores. The other part of the
facility is well on track and is expected to be operational by the
beginning of the second quarter of FY2013-14.
Your Company would be offering OBA at the door-step not only from the
world''s largest Brightener Plant but it would be offering equally
matching logistic solutions and after-sale technical services.
BROWNFIELD EXPANSION AT NANDESARI
Your Company, through its brownfield expansion at Nandesari (Gujarat),
envisaged a dual purpose of expanding the production capacity and also
foraying into a new business segment of Solar Salts.
The Salt Project at Nandesari was set up with the objectives of meeting
the emerging demand for solar salt application and for catering to the
high-end Sodium Nitrite market in the US. Since many Solar Projects in
India as well as overseas are temporarily delayed there is need to
mitigate the short-term risk of dependence on Solar Energy sector. With
this in view, your Company has initiated Research & Development efforts
to develop salts for other applications. The project is expected to be
operational by the first quarter of FY2013-14.
FINANCE
Your Company lays emphasis on its working capital program as well as
long term debt in order to effectively manage debt levels. Prudent
management has always enabled your Company to maintain healthy cash
flows. The focus has been to reduce interest costs, and although your
Company has borrowed ECB of USD 45 million (fully drawn for expansions
at Dahej & Nandesari), the Debt to Equity has still been maintained at
reasonable levels; Debt to Equity as on March 31, 2013 stood at 1.20.
The Capital Expenditure during the year was Rs. 170.61 crores and was
mainly for your Company''s Greenfield and Brownfield projects at Dahej
and Nandesari.
DIRECTORS
During the year under review, Shri Hasmukh Shah ceased to be the
Director of your Company since August 4, 2012. As members are aware,
Shri Shah had not opted for his re-appointment at the 41st Annual
General Meeting.
Shri Berjis Desai resigned from the directorship of your Company w.e.f.
October 25, 2012, due to his other commitments. During the tenure of
his directorship, your Company has benefited immensely by his extensive
knowledge and experience on various legal aspects concerning your
Company''s business. The Board of Directors place on record their
sincere appreciation for the valuable contribution, guidance and
suggestions provided by Shri Desai during his tenure.
Dr. Swaminathan Sivaram and Shri Umesh Asaikar have been appointed as
Additional Directors by the Board of Directors on May 9, 2013. Under
the provisions of Section 260 of the Companies Act, 1956 and Article
127(a) of the Articles of Association of your Company, Dr. Swaminathan
Sivaram and Shri Umesh Asaikar will hold office up to the date of
forthcoming Annual General Meeting. Notices have been received from
members pursuant to Section 257 of the Companies Act, 1956, together
with necessary deposits, proposing the appointments of Dr. Swaminathan
Sivaram and Shri Umesh Asaikar as Directors on the Board of your
Company. Resolutions for the appointment of Dr. Swaminathan Sivaram
and Shri Umesh Asaikar as Directors of your Company have been
incorporated in the Notice for the forthcoming Annual General Meeting
forthe member''s approval.
Subject to the approval of shareholders at the ensuing Annual General
Meeting, the Board of Directors at their meeting held on May 9, 2013,
appointed Shri Umesh Asaikar as the Executive Director with effect from
May 9, 2013. Prior to his appointment as the Executive Director, Shri
Asaikar was functioning as the Chief Executive Officer of your Company.
In accordance with the Articles of Association of your Company, Shri
Nimesh Kampani and Shri Sudhin Choksey will retire by rotation at the
ensuing Annual General Meeting and being eligible, offer themselves for
re-appointment.
Shri A. K. Dasgupta, who is also due to retire by rotation at the
ensuing Annual General Meeting, has indicated his desire not to seek
re-appointment.
Shri A. K. Dasgupta joined the Board of your Company way back in the
year 1976. The Board places on record its appreciation for the valuable
services rendered by Shri A. K. Dasgupta during his long association
with your Company. It is proposed not to fill the vacancy so caused on
the Board of Directors.
FIXEDDEPOSITS
The total amount of Fixed Deposits held by your Company from
shareholders and public was Rs. 15.06 crores as on March 31, 2013
(previous year Rs. 17.87 crores). Your Company does not have any
deposits which have matured and are claimed but remain unpaid.
CORPORATE GOVERNANCE
Your Company has been following the principles of good corporate
governance over the years and lays a strong emphasis on transparency,
accountability and integrity. Pursuant to Clause 49 of the Listing
Agreement, the Management Discussion and Analysis, and the Corporate
Governance Report, together with the Auditors'' Certificate on
compliance with the conditions of Corporate Governance as laid down,
forms a part of this Annual Report.
RESEARCH & DEVELOPMENT
Every year your Company spends around 1% of its revenues on Research &
Development. Innovation can help scale greater heights and discovery of
new products can have long lasting impact on revenues. The year under
review saw fruition of Research & Development efforts as Fuel Additives
turnover atRs. 196 crores was achieved and a newly developed chemical
in Fine & Speciality segment was supplied to a transnational Company
reinforcing further the synergistic relationship that the two Companies
enjoy
SAFETY, HEALTH & ENVIRONMENT
It is of utmost importance to a company with the status, size and scale
of your Company to follow best practices with regard to safety. Inthe
chemicals business, processes must be carried out with the highest
degree of safety to avoid hazardous reactions. Your Company conducts
regular maintenance checks of all its machinery at all plants and makes
sure that every employee is well-trained before operating on any
machine. This makes your Company a safe place to work.
Your Company matches international environmental standards and makes
sure that natural environment is protected. To make a company a healthy
place to work, the environment must be green and eco-friendly.
A noteworthy addition this year was the establishment of the
Responsible Care system. Your Company was audited by expert auditors
from various fields in Sept-12, and based on their feedback the Indian
Chemical Council has honoured your Company with the Responsible Care
logo. Your Company is now responsible care logo holding company. This
indicates that your Company is committed to not just development but
sustainable development - by adopting technology and processes that
have minimum impact on the environment, and operates the facilities in
a responsible way Health, Safety & Environment (HSE) management
continued to receive top priority this year as well. Processes were
reviewed on various parameters including safety, efficiency, quality,
quantity and sustainability. Benchmarking against global best
practices, continuous improvement programes and Responsible Care
initiatives have ensured safe operations at all our locations. Your
Company has adopted a HSE audit program which is a critical component
of the HSE governance process. The audit program is specifically
designed to ensure that stakeholder expectations, HSE Policy, HSE
management systems and Responsible Care management systems are being
effectively implemented across the organisation. HSE performance of
each manufacturing facility is reviewed by top management and lessons
learned from incidents and best practices are shared among all
locations. Further, your Company has reinforced ties with the global
institution, the British Safety Council, to get access to the best
available practices across the globe.
Employees'' well-being is ensured through consistent health monitoring.
The facilities at every Occupational Health Center (OHC) have been
upgraded and have 24X7 ambulance service to ensure quick transportation
to the near-by hospitals. Medical facilities have been extended to
contractual workforce as well. Occupational health of employees is
monitored to assess the exposure to hazardous chemicals. It is your
Company''s constant endeavor to focus on prevention of pollution,
control of pollution and compliance with the environmental norms.
HUMAN RESOURCES
Your Company recognises that its people are central to its operations
and growth strategy, and all efforts are made to attract and retain the
best talent in the industry. Your Company''s Human Resource policy is
focused on every individual''s skill sets'' development, keeping the
morale and performance level high, providing employees a platform for
personal growth within the organisation, suitably recognising and
rewarding individual achievements, while simultaneously addressing the
business needs of your Company. Emphasis is being placed on building a
cohesive workforce to maximise returns for all stakeholders. Focused
attention is given to updation of knowledge and application of new
technologies available to reduce costs and to meetthe business
challenges.
Your Directors are pleased to report that industrial relations at all
manufacturing and other locations have remained amicable during the
year under review. Your Company''s initiative to provide a constructive
work environment enables it to attract and retain employees with high
potential and caliber.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
The information required under 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 annexed hereto as Annexure
''A'' and forms part of this Report.
PARTICULARS OF EMPLOYEES
In terms of the provisions of Section 217(2A) of the Act, read with the
Companies (Particulars of Employees) Rules, 1975 as amended, the names
and other particulars of the employees are set out in the Annexure to
the Directors'' Report. However, having regard to the provisions of
Section 219(1)(b)(iv) of the Act, the Annual Report excluding the
aforesaid information is being sent to all members of the Company and
others entitled thereto. Any member interested in obtaining such
particulars may write to the Company Secretary at the Registered Office
of the Company
INSURANCE
All the insurable interests of your Company, including inventories,
buildings, plant and machinery are adequately insured against risk of
fire and other risks.
CORPORATE SOCIAL RESPONSIBILITY
Your Company remains committed to social development through Deepak
Foundation.
During the year under review, your Company has been accredited with the
coveted Businessworld FICCI CSR Award 2011-12 by the Federation of
Indian Chambers of Commerce and Industry (FICCI) in category I B -
Large Enterprises. The honour was bestowed upon your Company for its
contribution and efforts, through Deepak Foundation, towards the
upliftment of women in the society and making them economically
independent as well as inculcating awareness about health-related
issues in their mind. The award demonstrates your Company''s continuous
endeavours and achievement in corporate social responsibility
activities.
Deepak Foundation (accredited by Credibility Alliance and an ISO
9001:2008 organisation) is a CSR initiative of your Company. The Public
Health Training Institute under this initiative was set up through an
Memorandum of Understanding with the Department of Health & Family
Welfare of the Govt. of Gujarat. One of the prime objectives of this
Institute was to undertake phased trainings of ASHAs on Modules 6 & 7
in three blocks of the Vadodara district; thus strengthening ASHA''s
role in villages as an important "Healthcare Provider at Grass root
Level". An assessment of needs was also undertaken in the Dahej
industrial area to plan developmental interventions in the surrounding
area. The Foundation is also planning to initiate a plumbing course in
the Nandesari industrial area in collaboration with the Indian
Institute of Entrepreneurship Development & Research, Pune. For this
purpose, a location has been identified and construction of the
infrastructure for the work shed will shortly commence. Apart from
this, a Reverse Osmosis (RO) plant was installed jointly with the
Nandesari Industrial Association at the Nandesari School to ensure pure
water supply for the school''s 1300 students.
The Foundation has initiated "Apna Kisan Malls" in three blocks of
Vadodara viz. Naswadi, Pavijetpur and Kawant. Nearly 1500 farmers have
enrolled and benefited from this in terms of increase in production at
minimal investment. A Mobile Medical Unit was also started in Kawant,
in partnership with NRHM Gujarat, which provides essential healthcare
and referral services in 40 villages. A computer training center was
established in Naswadi, with the objective of spreading computer
literacy among tribals, especially youth, in association with the
Jankalyan Computer Saksharata Mission.
AUDITOR''S REPORT
The Auditor''s Report to the Shareholders, read with relevant notes
thereon, are self-explanatory and do not contain any qualifications,
and hence do not call for any comments under section 217 of the
Companies Act, 1956.
AUDITORS
M/s. B. K. Khare & Co., Chartered Accountants, Mumbai, who are the
statutory auditors of your Company, hold office till the conclusion of
the ensuing Annual General Meeting and are eligible for re-
appointment. It is proposed to re-appoint them as Statutory Auditors of
your Company for FY 2013-14. Members are requested to consider their
re-appointment and fix their remuneration at the ensuing Annual General
Meeting. The auditors, underthe provisions of Companies Act, 1956, have
furnished a certificate of eligibility for re-appointment.
COSTAUDITORS
The Central Government, vide order dated January 24, 2012 has
prescribed cost audit for a number of industries, with effect from the
financial year 2012-13. Accordingly, the Board of Directors, with the
prior approval of the Central Government, have appointed M/s. B. M.
Sharma & Company, Cost Accountants, to conduct audit of your Company''s
cost records for the financial year 2012-13.
The Cost Audit Report will be filed with the Central Government within
the prescribed time of 180 days from the close of the financial year.
DIRECTORS'' RESPONSIBILITYSTATEMENT
Pursuant to the requirement of Section 217(2AA) of the Companies Act,
1956, the Board of Directors of your Company confirm that:
1. In the preparation of accounts, the applicable accounting standards
have been followed and that there are no material departures;
2. Accounting policies selected were applied consistently. Reasonable
and prudent judgments and estimates were made so as to give a true and
fair view of the state of affairs of the Company as of March 31, 2013,
and the profit of the Company for the year ended on that date;
3. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of your Company, and
for preventing and detecting fraud and other irregularities; and
4. The Annual Accounts of your Company have been prepared on an
on-going concern basis.
ACKNOWLEDGEMENT
The Directors wish to place on record their appreciation of the
continued support and co-operation received from Financial
Institutions, Banks, Government authorities and other stakeholders.
Your Directors also acknowledge the support extended by your Company''s
employees for their dedicated service.
For and on behalf of the Board
Place : Mumbai C. K. MEHTA
Date : May 9, 2013 Chairman
Mar 31, 2012
The Directors have the pleasure of presenting your Company's Forty
First Annual Report, together with the Audited Statement of Accounts
for the financial year ended March 31, 2012.
FINANCIAL Results
2011-12 2010-11
(Rs in Lacs) (Rs in Lacs)
Sales & Other Income 79,273.32 67,741.60
Gross Profit (before interest, 5,810.85 6,216.88
depreciation, impairment and tax)
Less :
(i) Interest 943.27 551.18
(ii) Depreciation 1,778.58 1,813.38
(iii) Impairment (69.60) 156.64
(iv) Provision for Tax
- for the Year
- Current Tax 749.51 1,162.95
- Deferred Tax 72.70 (165.90)
- Prior Year
- Current Tax 28.11 150.38
- Deferred Tax - (31.46)
Profit After Tax 2,308.28 2,579.71
Add: Surplus in Statement of Profit
& Loss Brought Forward 10,895.27 9,545.22
Amount available for appropriation 13,203.56 12,124.96
Appropriation :
Dividend 627.82 627.82
Corporate Dividend Tax 101.85 101.85
General Reserve 500.00 500.00
(as required by Section 205 (2A) of
the Companies Act,1956)
Balance carried to the Balance 11,973.89 10,895.29
Sheet
13,203.54 12,124.94
dividend
Your Directors are pleased to recommend the payment of a dividend of Rs
6.00 (Rupees six) per equity share {same as in the previous year i.e. Rs
6.00 (Rupees six) per equity share} on 1,04,63,679 Equity Shares.
The dividend, if approved along with the Corporate Dividend Tax, will
absorb a sum of Rs 729.67 lacs (Previous year Rs 729.67 lacs).
THE YEAR IN RETROSPECT
Notwithstanding the challenging operating environment that prevailed,
FY 2011-12 was a year of steady progress for your Company as turnover
increased by 18%. Turnover grew to Rs 776.91 crores from Rs 661.08 crores
in the previous year to touch a new high. This increase in turnover was
driven by increased volume off-take, contribution from emerging product
lines like Fuel Additives and Xylidines, as well as efforts to expand
its base in new geographies like U.S. and China. Volume growth was
achieved by de-bottlenecking activities undertaken in earlier years.
The Fuel Additives business also touched a new high during FY 2011-12,
generating a revenue of almost Rs 100 crores as compared to Rs 63 crores
in the previous year. The share of overall revenue contributed by the
domestic market decreased from 58% to 56%, and in absolute terms,
revenue grew from Rs 390 crores in FY 2010-11 to Rs 439 crores in FY
2011-12. While the share of exports to total revenues increased from
42% to 44%, revenue increased significantly on an absolute basis from Rs
282 crores to Rs 350 crores.
The Profit before Interest, Depreciation, Impairment and Tax for the
year was Rs 58.11 crores compared to Rs 62.17 crores in previous year,
and Profit After Tax for the year was Rs 23.08 crores as against Rs 25.80
crores in FY 2010-11. Earnings per Share stood at Rs 22.06 in FY
2011-12, as compared to Rs 24.65 per Share in FY 2010-11.
The year under review threw up varying operating conditions for
countries around the world. Continued stagnation in the developed
economies, intensification of the Eurozone debt crisis, persistent
inflation in emerging markets and the events in the Middle East led to
sluggish demand. However, your Company's business showed remarkable
resilience, mainly on account of a robust domestic demand and because
of the fact that a majority of the Company's exports in Europe are to
economically stronger countries such as Germany and Switzerland.
Further, exports to markets such as the U.S. and China are still at a
nascent stage but your Company is confident of growing on the small
base established in these countries.
In the domestic markets, your Company saw continued demand from
agrochemicals, pharma and dyes & pigments segments, as well as growth
in products like Fuel Additives and Xylidines.
While revenue growth was good, given the prevailing circumstances,
profitability was muted due to price increases in raw materials,
firming up of interest rates and fluctuations in foreign exchange
rates. However, these pressures are showing signs of moderating and
your Company is confident of improved margins, going forward.
During the year, your Company also continued to make steady progress on
key strategic initiatives. A key area of your Company's focus, over the
last few quarters, has been expansion, for which it has tied up US $ 45
million in ECBs at competitive rates for greenfield and brownfield
projects at Dahej and Nandesari respectively. Once these projects
become functional, your Company is hopeful of crossing revenues of the
Rs 1,000 crore mark in the near future.
Your Company has steadfastly maintained its policy of taking adequate
measures to hedge currency risk, as a significant part of its revenues
come from exports.
A detailed review of the performance during the year is given under the
section Management Discussion and Analysis Report.
GREENFIELD EXPANSION
Your Company had embarked on a greenfield expansion at Dahej by
establishing a new facility which would be a forward integration step
of its Fine & Speciality Chemical - DASDA for manufacturing Optical
Brightening Agents (OBA). With the completion of this greenfield
project at Dahej, your Company will be amongst the few fully integrated
players in the world to be present across the entire value chain from
Toluene to Optical Brightening Agent - OBA (Toluene -> PNT -> DASDA ->
OBA). This plant will enable your Company to penetrate deeper into the
global markets which is estimated at Rs 4200 crores. The project is well
on track and it is expected to be operational by FY 2013.
brownfield expansion
Your Company through its brownfield expansion has achieved a dual
purpose of expanding the production capacity and also foraying into a
new business segment (Heat storage related Solar Salts).
Your Company's existing facility of Sodium Nitrite is operating at
almost full capacity. This expansion will enhance the manufacturing
capacity by at least 50%. The additional production will cater mainly
to the high price export market.
Your Company is also embarking on a new business segment i.e. heat
storage related Solar Salts. It is creating a capacity which would make
it capable of manufacturing sodium and potassium nitrate of advanced
quality, matching the needs of Solar Industry. The demands for such
solar salts would be project based particularly where solar companies
are targeting peak power supply. A part of this facility has been
commissioned in FY 2012.
FINANCE
Your Company has availed External Commercial Borrowing (ECB) of USD 45
million for the projects at very competitive rates. Out of the above,
USD 40 million has already been drawn.
Effective Working Capital management has always been a key aspect of
your Company's growth plan, especially in the last few years. This
focus has enabled your Company to reduce its interest costs
significantly over the years and the gearing is also very comfortable
with debt-equity ratio of 0.68.
As a result, the cash flows of your Company have improved and it has
enough leveraging ability for its expansion plans.
ICRA has re-affirmed your Company's short term rating at A1 and long
term rating at LA .
DIRECTORS
During the year under review, Shri Shrenik K. Lalbhai resigned from the
directorship of the Company with effect from May 25, 2011, due to his
advancing age. The Board of Directors place on record their sincere
appreciation for Shri Shrenik K. Lalbhai's valuable contribution and
guidance provided as a Chairman of the Company from 1 971 to 1 998 and
as a Director of the Company thereafter. Under the able leadership of
Shri Shrenik K. Lalbhai, your Company made progress and earned its name
not only at the national level but has achieved international acclaim
too.
In accordance with the provision of the Companies Act, 1956 and those
contained in the Articles of Association of your Company, Shri C. K.
Mehta and Shri Sudhir Mankad retire by rotation at the 41st Annual
General Meeting and being eligible, offer themselves for
re-appointment.
Shri Hasmukh Shah, who is also due to retire by rotation has indicated
his desire not to seek re-appointment.
Shri Shah was associated as a Director with your Company since October
21, 2003. The Board of Directors place on record their sincere
appreciation of the valuable services rendered, advice given and
contribution made by Shri Hasmukh Shah towards the growth of the
Company and also his commitment to social work for the betterment of
the society. It is proposed not to fill the vacancy so caused in the
Board of Directors.
Shri S. K. Anand was appointed as an Additional Director by the Board
of Directors on November 4, 2011. Under the provisions of Section 260
of the Companies Act, 1956 and Article 127(a) of the Articles of
Association of your Company, Shri Anand holds office up to the date of
forthcoming Annual General Meeting. Your Company has received a notice
in writing from a Member proposing the candidature of Shri S. K. Anand
for his appointment as Director of your Company. The Resolution seeking
approval of the members for appointment of Shri S.K. Anand as a
Director of your Company has been incorporated in the Notice of the
forthcoming Annual General Meeting.
FIxED DEPOSITS
The total amount of Fixed Deposits held by your Company from the
Shareholders and public was Rs 17.87 crores as at March 31, 2012 (Rs
24.33 crores). Your Company does not have any deposits which are
matured and claimed but remain unpaid.
CORPORATE GOvERNANCE
Your Company believes in maintaining the highest standards of Corporate
Governance.
A Report on Corporate Governance as stipulated under clause 49 of the
Listing Agreement with the Stock Exchanges
forms part of this Annual Report. A Certificate from the Statutory
Auditors of your Company confirming compliance of the conditions of
Corporate Governance, as stipulated under the aforesaid Clause 49, is
annexed to the Report on Corporate Governance.
RESEARCH & DEvELOPMENT
Your Company plays strong emphasis on Research & Development and
innovation as levers for value creation. Your Company has a world-class
set-up, including a dedicated pilot plant at Roha primarily for the
purpose of Research and Development. Its continued focus on R&D has
been yielding rich dividends and Fuel Additives, which were developed
in-house, have alone contributed to nearly Rs 100 crores in revenue this
year. Your Company invests around 1% of its revenues in R&D each year
and is working on several initiatives, which it hopes to commercialise
in the ensuing financial years.
SAFETY, HEALTH & ENvIRONMENT
Your Company takes matters of safety, health and environment very
seriously. There is great emphasis on the well-being of all employees
and the health of employees is consistently being monitored. Your
Company's facilities are monitored on a regular basis to ensure a safe
working environment.
With the ever increasing threat of pollution caused due to factories
all over India, it is your Company's constant endeavour to focus
strongly on pollution control, treatment of effluents and compliance of
stringent environmental norms. Adherence to these is of utmost
importance not only to your Company but also to its customers and has
contributed to the stability of your Company's relationships with world
class international companies.
Your Company is committed to sustainable development and is a signatory
to Global Responsible Care Core Principles. These principles, inter
alia, govern technology, processes and products to minimise the impact
to overall environment and to enhance sustainability. Your Company is
committed to the Responsible Care Programme to achieve established
goals, targets and objectives with due consideration for the
environment.
HUMAN RESOURCES
Your Directors are pleased to inform that industrial relations at all
manufacturing and other locations remained amicable during the year
under review. Your Company's initiatives to provide a constructive work
environment enables it to attract and retain employees with high
potential and calibre.
Your Company recognises that its people are central to its growth
strategy and all efforts are made to attract and retain the best talent
in the industry. Your Company's human resource policy is focussed on
the development of the skill-sets of the individuals, keeping the
morale and performance level high, providing employees the platform for
personal growth within the organisation, suitably recognising and
rewarding individual achievements, while simultaneously addressing the
business needs of your Company.
CONSERvATION OF ENERGY & TECHNOLOGY ABSORPTION AND Foreign ExCHANGE
EARNINGS AND OUTGO
As required by the Companies (Disclosure of particulars in the Report
of Board Directors) Rules, 1988, the relevant data pertaining to the
conservation of energy, technology absorption and foreign exchange
earnings and outgo is given in Annexure 'A' forming part of this
report.
INSURANCE
All the insurable interests of your Company, including inventories,
buildings, plant and machinery, are adequately insured against risk of
fire and other risks.
CORPORATE SOCIAL RESPONSIBILITY
Deepak Foundation is a CSR initiative of your Company. Having worked in
the areas of maternal and child health for the past 28 years, the
Foundation has taken a major stride forward by establishing a Public
Health Training Institute in Vadodara.The institute was established
within a year of signing an MoU with the Department of Health & Family
Welfare.
The core activity of PHTI comprises four major divisions: 1) Training
and Capacity Building 2) Research and Surveillance,
3) Clinical Services and 4) Livelihood.
The Foundation was accredited by Credibility Alliance and also
certified as an ISO 9001:2008 organisation during the year.
AUDITOR'S REPORT
The Auditor's Report to the Shareholders, read together with relevant
notes thereon, are self-explanatory and do not contain any
qualifications and hence do not call for any comments under section 217
of the Companies Act, 1956.
AUDITORS
The Auditors, M/s. B.K. Khare & Company, Chartered Accountants, Mumbai,
hold office until the conclusion of the 41st Annual General Meeting and
are recommended for re-appointment. Certificate from the Auditors has
been received to the effect that their re-appointment, if made, would
be in the limits prescribed under section 224 (1B) of the Companies
Act, 1956.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by sub-section (2AA) of section 217 of the Companies Act,
1956, the Board of Directors of your Company confirm that:
1 . In the presentation of annual accounts for the year ended March 31,
2012 the applicable accounting standards have been followed along with
proper explanations relating to material departures, if any;
2. Accounting policies selected were applied consistently. Reasonable
and prudent judgments and estimates were made so as to give a true and
fair view of the state of affairs of the Company as of March 31, 2012
and of the profit of the Company for the year ended on that date;
3. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with provisions of the
Companies Act 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and
4. The annual accounts of the Company have been prepared on a going
concern basis.
PERSONNEL
The Board of Directors wishes to express their appreciation for the
outstanding contribution made by the employees to the operations of
your Company during the year.
The information required under section 217 (2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975,
as amended, forms part of this report. However, under the terms of
Section 219(1) (b) (iv) of the Companies Act 1956, the Report and
Accounts are being sent to all Shareholders of the Company, excluding
the statement of particulars of the employees. Any Shareholder
interested in obtaining a copy of the same may write to the Company
Secretary at the Registered Office of the Company.
acknowledgement
Your Directors wish to acknowledge the contributions of all the
stakeholders and are grateful for the co-operation of various
government authorities, excellent support received from shareholders,
banks, dealers and other business associates. Your Director recognise
and appreciate the significant contributions made by employees at all
levels through their competence, perseverance and hard work that has
enabled your Company to reach the new highs in a very challenging
environment.
For and on behalf of the Board
Place : Mumbai C. K. MEHTA
Date : May 4, 2012 Chairman
Mar 31, 2011
Dear Shareholders,
The Directors have pleasure in presenting the Fortieth Annual Report,
together with the Audited Statement of Accounts, for the financial year
ended March 31, 2011.
FINANCIAL RESULTS 2010-11 2009-10
(Rs.) (Rs.)
Sales & Other Income 677,41,61,732 546,45,78,360
Gross Profit (before interest,
depreciation impairment and tax) 62,16,89,900 54,48,93,709
Less :
(i) Interest 5,51,18,788 6,66,12,600
(ii) Depreciation 18,13,38,236 17,51,01,574
(iii) Impairment 1,56,63,955 -
(iv) Provisions for Taxation
- For the Year
Current Tax 11,62,95,000 6,92,71,000
Deferred Tax (1,65,90,000) 2,12,02,000
- Prior Year
Current Tax 1,50,38,000 3,20,84,675
Deferred Tax (31,46,000) (1,95,15,000)
Profit After Tax 25,79,71,620 20,01,36,860
Add: Surplus in Proft & Loss
Account Brought Forward 95,45,22,378 86,53,93,344
Amount available for appropriation 121,24,93,998 106,55,30,204
Appropriation :
Dividend 6,27,82,074 5,23,18,395
Corporate Dividend Tax 1,01,84,822 86,89,431
General Reserve 5,00,00,000 5,00,00,000
(as required by Section 205
(2A) of the Companies Act,1956)
Balance carried to the Balance Sheet 108,95,27,102 95,45,22,378
121,24,93,998 106,55,30,204
DIVIDEND
Your Directors are pleased to recommend the payment of a dividend of Rs.
6.00 (Rupees Six) per equity share (as against Rs. 5.00 (Rupees Five) per
equity share in the previous year) on 1,04,63,679 Equity Shares.
The dividend, if approved along with the Corporate Dividend Tax, will
absorb a sum of Rs. 729.67 lacs (Previous year Rs. 610.07 lacs).
THE YEAR IN RETROSPECT
This financial year 2010-2011 has laid an excellent foundation for your
Company's plans for the years ahead. Your Company's revenue has grown
by 24% to Rs. 660.46 crore when compared to revenues of Rs. 532.36 crore in
the previous year. This was largely driven by strong demand in the
domestic market which saw its domestic revenues increase from Rs.292.88
crore in FY 2009-10 toRs.390.34crore in FY 2010-11. The share of overall
revenue contributed by the domestic market has increased from 54% to
58%. While the share of exports to total revenues has reduced to 42%
when compared to 46% in the previous year, the gross revenue has
increased significantly on an absolute basis to Rs. 130.03 crore. This
portrays significant expansion in the top line numbers which has
crossed the Rs. 600 crore mark during the year. The strong growths in
revenues were largely driven by expansion in volumes which grew by 23%.
The Profit before Interest, Depreciation, Impairment and Tax for the
year was Rs. 62.17 crore compared to Rs. 54.49 crore in previous year and
Profit After Tax for the year was Rs. 25.80 crore compared to Rs. 20.01
crore in FY 2009-10. The Earnings per Share was Rs. 24.65 in FY 2010-11
compared to Rs.21.82 per share in FY 2009-10.
The global economy has encountered many unsettling events in the past
year. Events like the unrest in the Middle East saw oil prices hitting
USD 90 a barrel in January. Although the Indian economy has experienced
very high growth this year, inflation remains a worry. Your Company has
not been affected to a great extent and has taken necessary steps to
mitigate the effects of these events.
Your Company continues to make significant inroads into China and USA.
Although China is considered to be the epicenter of global
manufacturing and is an extremely competitive market, we have been able
to leverage strengths in quality, process expertise and environmental
awareness to make inroads into the Chinese market. Exports to China
during the year stood at Rs. 35 crore, while exports to USA this year
stood at Rs.45 crore.
By catering to markets such as India, Europe, China and USA, your
Company will be catering to the largest markets across the globe. Fuel
Additives business continues to be promising despite the current global
tensions, and your Company has made significant progress in all
Aviation Fuels, Petrol Blending as well as Diesel Blending. Turnover
from this business segment was around Rs. 63 crore during the year, and
your Company sees a higher growth potential in this business for the
current year.
Your Company continues to strive for in-house development of its
products. The focus to develop new products, through expenditure of
around 1% of its revenues, has led to successful creation of products
like Fuel Additives, Xylidine Derivatives and Nitro Sulphuric Acid.
The business outlook remains strong as your Company anticipates the
healthy demand for its products to continue. It has drawn up an
expansion plan which will incorporate Green field expansion at Dahej
and Brown field expansion at Nandesari at an estimated combined
expenditure of around Rs. 200 crore.
Your Company has maintained its policy of taking adequate measures to
hedge currency risk as a significant part of its revenues comes from
exports.
A review of the performance during the year is given under the section
Management Discussion and Analysis Report.
FINANCE
Effective Working Capital management has always been a key aspect in
your Company's operations, especially in the last few years. Your
Company has been able to reduce its interest costs significantly and
its debt to equity ratio has been more or less stable, being 0.25 as
compared to 0.30 for the preceding year. As a result the cash flows of
your Company have improved and it has enough leveraging ability for its
capacity expansion plans at Dahej.
You will be pleased to know that ICRA has upgraded your Company's short
term rating from A1 to A1 and long term rating from LA to LA .
LISTING
During the year under review, the Equity Shares of your Company were
listed on the National Stock Exchange of India Limited (NSE) with
effect from September 29, 2010. This would facilitate the investors
across the country to trade in Company's Equity Shares more
conveniently.
DIRECTORS
In accordance with the provisions of the Companies Act, 1956 and those
contained in the Articles of Association of the Company, Shri M. R. B.
Punja, Shri Berjis Desai and Dr. Richard H. Rupp retire by rotation at
the ensuing Annual General Meeting and being eligible, offer themselves
for re-appointment.
FIXED DEPOSITS
The total amount of Fixed Deposits held by your Company from the
Shareholders and the Public was Rs. 24.33 crore as at March 31, 2011 (Rs.
27.03 crore). Your Company does not have any deposits which are matured
and claimed but remain unpaid.
CORPORATE GOVERNANCE
Your Company believes in maintaining the highest standards of Corporate
Governance. A Report on Corporate Governance as stipulated under clause
49 of the Listing Agreement with the Stock Exchanges forms part of this
Annual Report. A Certificate from the Statutory Auditors of the
Company
confirming compliance of the conditions of Corporate Governance as
stipulated under the aforesaid Clause 49, is annexed to the Report on
Corporate Governance.
RESEARCH & DEVELOPMENT
Research & Development has always been a key focus area for your
Company. Your Company strongly believes that it is through investment
in its in-house Pilot Plant at Roha that your Company is able to
develop competitive products. About 1% of its revenues go towards R&D.
One of your Company's key developments last year was in the Fuel
Additives sector. Your Company achieved revenue of around Rs. 63 crore
through these products.
SAFETY, HEALTH & ENVIRONMENT
It is very important for a company with the scale and size of your
Company to maintain top most standards with regards to safety. Safety
of employees is paramount especially in the chemicals business and your
Company takes utmost care in this department by not only following
standard rules and regulations but also going above and beyond. All the
plants and facilities of your Company are monitored on a regular basis
to ensure safety of personnel. Your Company continues to focus on
pollution control, treatment of effluents and compliance of stringent
environmental norms.
Your Company's plant at Roha has received an award from National Safety
Council-Maharashtra Chapter, for best safety performance.
Your Company recognises the importance of good environmental practices
and strives to be on par with the best-in-class across the globe. Your
Company's focus on environmental care is a USP for its global
customers. This ensures that our industry gradually moves towards
sustainable business practices.
Your Company is committed to sustainable development and Global
Responsible Care Core Principles inter alia governing the technology,
processes and products to minimise impact to the overall environment
and to enhance sustainability. Responsible Care certification programme
is at advanced stage of completion.
HUMAN RESOURCES
Your Company continues to regard human capital as its strategic
resource. Sustained and focused efforts have been made to use in-house
training programs, external professional development program and on-job
training for up-gradation of the human capital. The inculcation of
performance-based culture has been the high-priority area during the
year.
In view of the ambitious growth plans, your Company has made
significant addition to its Technology Skill base. Your Company has the
requisite competencies to embark on a rapid and sustainable growth
path.
Your Company continues to enjoy harmonious industrial relationship
which has helped in scaling new levels of productivity.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
As required by the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988 the relevant data pertaining to the
conservation of energy, technology absorption and foreign exchange
earnings and outgo are given in Annexure 'A' forming part of this
report.
INSURANCE
All the insurable interests of your Company including inventories,
buildings, plant and machinery are adequately insured against risk of
fire and other risks.
COMMUNITY SERVICE
Your Company remains committed to social development through Deepak
Foundation.
Deepak Foundation has been implementing health and livelihood projects
in rural areas of Vadodara district, Gujarat, since past 28 years.
Currently it provides services in all 1548 tribal and rural villages of
the district covering a two million populace. The Foundation undertakes
most of its ventures in partnership with concerned government
departments to ensure sustainability and replicability of the
initiatives.
The Foundation was instrumental in strengthening of community-based
groups at Primary Health Center level (75), Block level (12) and
District level (1) and was, the first in the entire State, to
facilitate formulation of need-based, decentralised District Health
Action Plan.
AUDITOR'S REPORT
The Auditor's Report to the Shareholders, read together with relevant
notes thereon, are self-explanatory and do not contain any
qualifications, and hence do not call for any comments under section
217 of the Companies Act, 1956.
AUDITORS
The Auditors, M/s. B.K. Khare & Co., Chartered Accountants, Mumbai,
hold office until the conclusion of the 40th Annual General Meeting and
are eligible for re-appointment. Certificate from the Auditors has
been received to the effect that their re-appointment, if made, would
be in accordance with the limits prescribed under section 224 (1B) of
the Companies Act, 1956. Members are requested to consider their
re-appointment and fix their remuneration in the ensuing Annual General
Meeting.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by sub-section (2AA) of section 217 of the Companies Act,
1956, the Board of Directors of your Company confirm that:
1. In the presentation of annual accounts for the year ended March 31,
2011, the applicable accounting standards have been followed along with
proper explanations relating to material departures, if any;
2. Accounting policies selected were applied consistently. Reasonable
and prudent judgments and estimates were made so as to give a true and
fair view of the state of affairs of the Company as at March 31, 2011
and of the profit of the Company for the year ended on that date;
3. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with provisions of the
Companies Act 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and
4. The annual accounts of the Company have been prepared on a going
concern basis.
PERSONNEL
The Board of Directors wish to express their appreciation for the
outstanding contribution made by the employees to the operations of
your Company during the year.
The information required under Section 217 (2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975 as
amended, forms part of this report. However, under the terms of Section
219(1) (b) (iv) of the Companies Act 1956, the Report and Accounts are
being sent to all Shareholders of the Company excluding the statement
of particulars of the employees. Any Shareholder interested in
obtaining a copy of the same may write to the Company Secretary at the
Registered Office of the Company.
ACKNOWLEGDEMENT
Your Directors wish to acknowledge the contributions of all the
stakeholders and are grateful for the co-operation of various
government authorities, excellent support received from shareholders,
Banks, Dealers and other business associates. Your Directors recognise
and appreciate the hard work and efforts put in by all the employees of
the Company and their contribution to the progress of the Company in a
very challenging environment.
For and on behalf of the Board
Place : Mumbai C. K. MEHTA
Date : May 6, 2011 Chairman
Mar 31, 2010
The Directors have pleasure in presenting the Thirty Ninth Annual
Report, together with the Audited Statement of Accounts, for the
financial year ended 31st March, 2010.
FINANCIAL RESULTS 2009-10 2008-09
Rs. Rs.
Sales & Other Income 546,45,78,361 582,89,44,185
Profit before Interest, Depreciation,
Impairment and Tax 54,48,93,709 78,38,09,733
Less:
(i) Interest 6,66,12,600 15,08,34,056
(ii) Depreciation 17,51,01,574 16,99,48,129
(iii) Impairment - 3,44,59,823
(iv) Provision for Taxation
For the Year
Current Tax 6,92,71,000 15,16,48,446
Deferred Tax 2,12,02,000 (2,74,50,638)
Prior Year
CurrentTax 3,20,84,675 15,17,000
Deferred Tax (1,95,15,000) -
MAT Set off Reversal - 1,73,51,554
Fringe Benefit Tax - 27,00,536
Profit After Tax 20,01,36,860 28,28,00,826
Add: Surplus in Profit & Loss Account
Brought Forward 86,53,93,344 68,50,82,869
Amount available for appropriation 106,55,30,204 96,78,83,695
Appropriation:
Dividend 5,23,18,395 4,48,65,465
Corporate Dividend Tax 86,89,431 76,24,886
General Reserve 5,00,00,000 5,00,00,000
(as required by Section 205(2A) of the
Companies Act, 1956)
Balance carried to the Balance Sheet 95,45,22,378 86,53,93,344
106,55,30,204 96,78,83,695
DIVIDEND
Your Board of Directors are pleased to recommend the payment of
dividend of Rs. 5.00 per Equity Share on the enhanced Equity Share
Capital of 1,04,63,679 Equity Shares (post conversion of Warrants into
Equity Shares) (Previous year: Rs. 5.00 per Equity. Share on 89,73,093
Equity Shares).
The dividend, if approved along with the Corporate Dividend Tax, will
absorb a sum of Rs. 610.07 lacs (Previous year Rs. 524.90 lacs).
THE YEAR IN RETROSPECT
Financial Year 2009-10 has been an eventful year for your Company. The
turnover for the year was Rs. 532 crores compared to Rs. 572 crores in
the previous year. The export turnover for the year was Rs. 250 crores
compared to Rs. 304 crores in the previous year. Your Company has been
able to increase the quantitative volumes by more than 20% compared to
the previous year.
The Profit before Interest, Depreciation, Impairment and Tax for the
year was Rs. 54.49 crores compared to Rs. 78.38 crores in previous year
and Profit After Tax for the year was Rs. 20.01 crores compared to Rs.
28.28 crores in the previous year. The Earning Per Share was Rs.21.82
compared to Rs.31.55 in the previous year on an enhanced capital
following the conversion of Warrants during the year under review.
The Financial Year 2009-10 threw up several challenges for your
Company. At the start of the year, the global economy was still reeling
under the impact of the financial crisis and hence, the outlook was
subdued. The general elections in India in May 2009 were an inflection
point for the Indian economy and marked the beginning of the revival in
the capital markets. As the year went by, several other regions around
the world began to report an improvement in economic performance. Thus,
the operating environment underwent several changes in the span of a
single financial year. As your Company caters to various markets
globally, it was faced with markets that were recovering in different
ways and at different speeds.
Your Company was able to grow volumes due to its emphasis on high
potential markets like China, where we see significant opportunities in
select product categories. The opportunity is significantly larger than
the domestic market and your Companys focus is to continue to make
steady progress in those market. During the year under review, the
turnover from the Chinese market has more than doubled to Rs. 42
crores, as compared to the previous year.
However, the recession has been a catalyst for change in the global
economy. It has helped to enhance the attractiveness and
competitiveness of emerging markets as a competent sourcing centres for
a variety of products and services. Specific to the Speciality
Chemicals Industry, it has forced the leading companies in the world to
re-examine their business models. While your Company has responded well
to the challenges thrown up by changes in the world economy, it has
also undertaken several initiatives to take its performance forward.
The introduction of products catering to the fuel additives space has
helped to add incremental revenues during the year. These products have
been developed through expertise in processes like hydrogenation and
nitration. Your Company has also decreased its interest outgo by 56%
through enhanced working capital management and has repaid some debts
to further reduce its leverage. Lastly, there has been a concerted
effort to undertake de-bottlenecking at the existing facilities to
improve the potential performance of your Company. Further plans
include enhancement of capacity at existing plants and setting up of a
Greenfield facility atDahej.
During the year under review, a new hydrogenation stream was set up at
Taloja Chemicals Division thereby enhancing the
capacity by 40%. Your Company also commissioned a Coal Fired Boiler at
its Nandesari Plant to reduce energy consumption.
Your Company, being a net exporter, has taken adequate measures to
hedge the currency risk.
A review of the performance during the year is given under the section
Management Discussion and Analysis which forms part of the Annual
Report.
CONVERSION OF WARRANTS INTO EQUITY SHARES
During the year under review, your Company has converted 14,90,586
Detachable Warrants, which were issued alongwith the Right Shares in
the year 2006, into Equity Shares of Rs. 10/- each. These Detachable
Warrants were converted into Equity Shares at a conversion price of Rs.
100/- for each Warrant i.e. face value Rs. 10/- and premium Rs. 90/-
per Equity Share. Post conversion of Warrants, the Issued, Subscribed
and Paid-up Share Capital of your Company has enhanced from Rs. 8.96
crores divided into 89,63,233 Equity Shares of Rs. 10/- each to Rs.
10.45 crores divided into 1,04,53,819 Equity Shares of Rs. 10/- each.
FINANCE
Your Company has focused on more effective working capital management
in recent financial years resulting in improved free cash flows. The
improved performance of your Company is also resulting in higher
internal accruals. During the year under review, your Company repaid
the term loan instalments of Rs. 17.39 crores, net of exchange
revaluation. Corporate Loan of Rs. 24.50 crores was raised during the
year. The net debt equity ratio has further improved from 0.47 to 0.30.
During the year under review, your Company has received proceeds of Rs.
14.91 crores towards Conversion of Detachable Warrants into Equity
Shares. The proceeds of the issue have been utilised for the purpose
mentioned in the Letter of Offer for the Rights Issue.
DIRECTORS
In accordance with the provisions of the Companies Act, 1956 and those
contained in the Articles of Association of the Company, Shri Nimesh
Kampani, Shri A. K. Dasgupta and Shri Sudhin Choksey retire by rotation
at the ensuing Annual General Meeting and being eligible, offer
themselves for re- appointment.
FIXED DEPOSITS
The total amount of Fixed Deposits held by the Company from the
Shareholders and the Public was Rs. 27.03 crores as at 31 st March,
2010 (Rs. 23.63 crores in the previous year). Your Company does not
have any deposits which are matured and claimed but remain unpaid.
CORPORATE GOVERNANCE
The Board of Directors of your Company is committed to ensure that the
affairs of your Company are governed in the best interests of the
Shareholders, and that all endeavours would be made to maintain
transparency and fairness in all facets of its operations. Your Company
is also conscious of its responsibility as a good Corporate Citizen,
and assures that its operations would be guided by ethics and social
values.
Pursuant to Clause 49 of the Listing Agreement with the Stock
Exchanges, a Report on Corporate Governance with Auditors Certificate
on Compliance with the conditions of Corporate Governance have been
attached to form part of the Annual Report.
During the year the Ministry of Corporate Affairs, Government of India
has issued Corporate Governance Voluntary Guidelines, 2009 for adoption
by companies. These guidelines provide Corporate India a framework to
govern themselves voluntarily as per the highest standards of ethical
and responsible conduct of business.
Your Company has taken initiatives to adhere to the Corporate
Governance Voluntary Guidelines, 2009 to ensure that the Company is run
in the best interests of the shareholders and the society.
RESEARCH & DEVELOPMENT
Your Company maintains a steadfast focus on its R&D activities. It
believes that its R&D initiatives can be instrumental in identification
of new applications, new processes or new products which will enable it
to differentiate itself from competitors. Therefore, your Company has
invested meaningfully in R&D infrastructure and personnel and has
developed and test marketed many products during the year under review.
During the year, your Company introduced a range of products applicable
as fuel additives. Your Company has been able to enhance its
competitiveness in the production of these fuel additives through its
ability to improve the overall manufacturing process for these
products. This was made possible through its R&D initiatives which have
helped to increase efficiencies and reduce wastage, resulting in
improvement of the overall process. Further, your Company also
introduced a new range of Xylidines which have application in the
Agro-chemical and Pharmaceutical segments.
SAFETY, HEALTH & ENVIRONMENT
Your Company maintains the highest standards of safety at all of its
plants and facilities. In addition to this, there is significant focus
on pollution control, treatment of effluents and compliance with
stringent environmental norms. Lastly, there is emphasis on the
well-being of all employees and health of the employees is continuously
monitored, while environment improvement measures in and around the
plant area have been given due care and attention.
Your Company is committed to sustainable development and is a signatory
to Global Responsible Care Core Principles. These principles inter
alia govern the technology, processes and products to minimise impact
to the overall environment and to enhance sustainability. Your Company
is committed to the Responsible Care Programme to achieve established
goals, targets and objectives with due consideration for the
environment.
HUMAN RESOURCE
Your Company regards Human Resource as its prime source and the
contribution from the employees has continuously been harnessed for the
attainment of corporate goals. A planned management process is being
pursued to move towards a performance-based culture. Your Company
attaches utmost priority to the Human Resource Development, with a
focus on knowledge, skills and behavioural aspects to meet the
challenges of change and growth successfully.
Focussed attention was given to knowledge updating and application of
new technologies available to reduce costs and to meet business
challenges. Industrial relations during the year under review were
harmonious and cordial.
Your Company has improved the overall team with a focus on adding skill
sets in the areas of Technology and Marketing, keeping in mind long
term strategic needs.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Particulars pertaining to the Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo, as prescribed under
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, are given in Annexure A forming part of this report.
INSURANCE
All the insurable interests of your Company including inventories,
buildings, plant and machinery are adequately insured against risk of
fire and other risks.
COMMUNITY SERVICE
Your Company remains committed to social development through Deepak
Foundation. Deepak Foundation firmly believes in bringing about change
through community participation and is now striving to involve the
community in the cause of not only health but overall development.
Having brought about remarkable improvement in institutional deliveries
in remote tribal and rural areas of Vadodara district, Deepak
Foundation is now actively involved in mentoring of Village and Health
Sanitation Committees (VHSCs). The Safe Motherhood and Child Survival
(SMCS) project initiated by the Foundation in 2004-05 aims at
developing and strengthening community ownership and monitoring of
health services as a well thought out sustainable plan of project
activities.
Currently, 1494 VHSCs of the district are being supported and
strengthened by the Foundation through organising monthly meetings,
trainings and mentoring. A series of fourteen "Jan Samvads" (Public
Dialogues^were organised in the district in coordination with block
level federations and Jan Samvad Committees of VHSC members during the
year 2009-10. Over 6200 people from the innermost villages of the
district participated in these Samvads. Community contribution of more
than Rs. 3.25 Lakh poured in and more than 2000 applications on issues
of Water and Sanitation, construction of roads, health, electricity and
Anganwadis were submitted to
various government departments.
The Foundation has launched an ambitious project, namely Kawant
Livelihood Project (KALP), in the most underprivileged tribal block of
the state i.e. Kawant, with an aim to provide livelihood opportunities
to 60% of the 30,000 households of the block. Till date, more than 6000
beneficiaries have been reached through Rashtriya Krishi Vikas Yojana
(RKVY) and Integrated Wadi Agricultural Diversification Project
(IWADP). These projects have covered agriculture, horticulture, water
resources and dairy components. A Skills Development Center in Kawant
has trained about 150 students in various vocational courses like
gardening and nursery making, paravet training, sewing and beauty
parlour training. In the coming years, more than 25,000 beneficiaries
will be reached through these sectors. Two large check-dams with 4 lift
irrigation schemes will be constructed on River Kara in Kawant to
improve the irrigation coverage.
During the year under review, your Company has contributed Rs. 75 lacs
towards the promotion of various activities of the Foundation related
to social welfare.
AUDITORS REPORT
The Auditors Report to the Shareholders, read together with relevant
notes thereon, are self-explanatory and do not contain any
qualifications, and hence do not call for any comments under Section
217 of the Companies Act, 1956.
AUDITORS
The Auditors, M/s. B.K. Khare & Co., Chartered Accountants, Mumbai,
retire at the ensuing Annual General Meeting and have confirmed their
eligibility and willingness to accept office, if reappointed.
DIRECTORS RESPONSIBILITY STATEMENT
As required by Sub-Section (2AA) of Section 217 of the Companies Act,
1956, the Board of Directors of your Company confirm that:
1. In the presentation of Annual Accounts for the year ended 31st
March, 2010, the applicable accounting standards have been followed
along with proper explanations relating to material departures, if any;
2. Accounting policies selected were applied consistently. Reasonable
and prudent judgments and estimates were made so as to give a true and
fair view of the state of affairs of the Company as of 31 st March,
2010 and of the profit of the Company for the year ended on that date;
3. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and
4. The Annual Accounts of the Company have been prepared on a going
concern basis.
PARTICULARS OF EMPLOYEES
In terms of Section 217 (2A) of the Companies Act, 1956, read with the
Companies (Particulars of Employees) Rules, 1975, the names and other
particulars of employees forms part of this report. However, having
regard to the provisions of Section 219(1)(b)(iv) of the Companies Act
1956, the Annual Report excluding the aforesaid information is being
sent to all the Members of the Company and others entitled thereto.
Any Member interested in obtaining such particulars may write to the
Company Secretary at the Registered Office of the Company.
ACKNOWLEGDEMENT
Your Directors wish to gratefully thank and acknowledge the
co-operation, assistance and support extended by the Central
Government, the State Government, Financial Institutions, Companys
Bankers, Customers, other Business Associates and Shareholders. Your
Directors also wish to place on record their appreciation of the
all-round co- operation, hard work and contribution made by the
employees at all levels to the continued growth and prosperity of the
Company.
Your Directors hope for such continued support from all the above
partners in the coming years also.
For and on behalf of the Board
Place : Mumbai C. K. MEHTA
Date : 14th May, 2010 Chairman
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