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Directors Report of Gujarat Fluorochemicals Ltd.

Mar 31, 2014

To the Members of

GUJARAT FLUOROCHEMICALS LIMITED

The Directors take pleasure in presenting to you their Twenty-Seventh Annual Report for the year ended 31st March, 2014.

1. FINANCIAL RESULTS

Following are the working results for the year 2013-2014:

(Rs. in Lacs)

2013-2014 2012-2013

Continuing Operations

Net Sales / Income from Operations 113487 150416

Other Operating Income 607 9192

Total Income from Operations 114094 159608

Less: Total Expenses 105287 99019

Profit from operations before other income and finance cost and exceptional items 8807 60589

Add: Other Income 6506 5690

15313 66279

Less: Finance Cost 5528 6895

Profit from ordinary activities after finance cost but before exceptional items 9785 59384

Profit from ordinary activity before Taxation 9785 59384

Provision for Taxation 2243 19594

Profit for the year from Ordinary Activity 7442 39790 Discontinuing Operations

Profit / (Loss) before Tax 0 65

Tax Expense 0 21

Net Profit / (Loss) 0 44

Net Profit / (Loss) for the year 7442 39834

Profit brought forward form earlier year 722 374

Profit available for appropriations 8164 40208 Appropriations

Transferred to General Reserves 3000 35000

Interim Dividend 0 1648

Proposed Dividend subject to approval of the Shareholders 3845 2197

Tax on Dividend 653 640

Balance Carried forward to Balance Sheet 666 723

TOTAL 8164 40208

(2) MANAGEMENT DISCUSSION AND ANALYSIS REPORT - 2013-14

a. PTFE / Chemicals Business

Industry structure and developments

Total global PTFE market is around 150000 tpa, of which 60% is granular and 40% is fine powder and aqueous dispersion grades. The market is growing at a CAGR of 3-4% for last several years. However, it had witnessed significant upheaval during last 3-4 years. After having seen a period of shortage and rising prices, the market entered a period of surplus and falling prices. During the financial year the prices remained subdued and demand sluggish, though there have been some signs of recovery towards the end of the year. Going forward, demand is expected to get a boost due to increased usage in architectural and household applications.

In terms of supply, the industry is dominated by two kinds of players - long term, high quality, large players from developed countries, who command around 50% market share, and new players from developing countries who have around 50% market share. There is a distinct shift occurring towards the later.

The Company entered the PTFE business in 2008, and in a short span of time, became a significant player in the global market. The Company is perceived as a high quality PTFE supplier, who works closely with customers to meet their requirements. With the present capacity of about 16,000 tpa, your Company caters to a significant share of the global market, putting it in the bracket of the top 3-4 PTFE suppliers globally. The Company has also introduced in the market various grades of fine powders and aqueous dispersion PTFE. Consistent with its commitment towards the environment, the Company manufactures fine powder and aqueous dispersion PTFE grades manufactured by using environment friendly surfactant technology.

Your company has managed to retain its market share and has added a number of key customers with its relentless marketing efforts. In its efforts to be closer to the customer, your Company has incorporated a subsidiary in Germany, in addition to the subsidiary in the US.

Indian market for PTFE is around 3000 - 3500 tpa, growing at a healthy 7 - 8% per annum. The Company has around 70% market share in India, being the only significant producer in the country. There is an immense latent potential for higher PTFE demand and the Company is working with Indian PTFE processors to develop new products and applications to spur higher growth and demand in the domestic market.

Globally, established players are moving to higher value added polymers, leaving the space in the traditional PTFE markets for players like your Company. The Company also plans to enter the segment of higher value added fluoropolymers and fluoroelastomers in the near future. Due to its continued marketing efforts the Company has been able to increase its market penetration and enlarge its customer base.

The Company enjoys a significant competitive advantage, because of its integrated operations. It is amongst the most integrated players globally, giving it significant cost competiveness amongst other global players. The Company has placed enormous emphasis on high and consistent quality of all PTFE grades matching the best in the business, by continuous operations and process improvements. The Company has adopted marketing strategies to be proximate with customers and provide value added services such as office and warehousing facilities in the US and EU markets, and technical services to drive value for customers. The Company has enlarged its sales field force both in domestic as well as in international market to further increase its market share.

Opportunities and threats

The key opportunities in the PTFE business include the vast undeveloped potential in the Indian markets that would be converted into market demand by new product and application development, and the market gaps created by established players moving to higher value added polymers. There also exists the potential to work with reputed global players of PTFE based components to expand the PTFE market in India. Your company also sees major opportunities in US, Latin America and Far East to boost its sales and global market share. The Company has accordingly deployed sales personnel in these markets to achieve this goal.

Some of the significant threats include further capacity expansions in China, and the impact of such expansion on PTFE prices.

Segment-wise product-wise performance

Caustic Soda accounts for around 25% of the Company''s sales in value terms. Caustic soda sales, though increased by 8% in volume terms compared to last year, dropped by around 4% in value terms, largely due to lower price realisations.

Chloromethanes account for around 19% of the Company''s sales in value terms. Chloromethane sales has increased by around 15% in value terms, due to higher price realisations despite remaining the same in volume terms.

PTFE accounts for around 38% of the Company''s sales in value terms. PTFE sales recorded increase by 34% in volume terms and 12% in value terms.

Around 24% of the Company''s PTFE sales last financial year came from the domestic market and more than 76% of PTFE sales came from the export markets, in value terms. The Company witnessed a 21 % fall in its PTFE exports in value terms.

A bulk of the Company''s PTFE sales, more than 78%, comes from granular PTFE (including modified granular) with dispersion PTFE accounting for 18%, and APTFE for around 4% Granular PTFE sales increased by around 9%.

Outlook

The demand sluggishness and consequently subdued prices witnessed in the previous year spilled over in this year too. However, the US economy in particular, fuelled by shale gas discovery, is expected to do well in the coming year. This is expected to boost the global economy. Therefore, the Company expects the growth momentum in PTFE sales to pick up during this coming financial year.

With the introduction of fine powder and aqueous dispersion grades of PTFE in the product mix and growth in the modified and compounding businesses, the Company expects value addition in the PTFE business to increase further.

The Company is, in addition to being the largest PTFE producer in the country, also the largest producer of chloromethanes, and a significant player in the caustic soda business in India.

The Company is also seriously considering other products in the fluoropolymer, fluoroelastomers and speciality fluorochemicals segments, and would take investment decisions in these areas shortly, after a complete evaluation of the market, technologies and economics. This would provide an avenue of growth in the near future.

The Company has launched several profit improvement, cost reduction and energy saving projects some of which have already started yielding good results. During the forthcoming financial year there will be significant contribution on revenues and profitability from these projects.

Risk and concerns

As indicated in the "threats" section, the key risk includes increased competition and impact on pricing, due to any additional capacities set up by Chinese manufacturers.

However, the Company remains confident of being able to maintain a healthy return on investment due to the cost competiveness arising out of its integrated operations and its increased efforts in the market to retain and expand customers and enhance market share.

b. Wind Energy Business

The Company has floated two subsidiaries to pursue its wind energy business - Inox Wind Limited and Inox Renewables Limited. Inox Wind Limited manufactures state-of-the-art wind turbine generators, rotor blades and tubular towers, at its two manufacturing plants, one in Himachal Pradesh and one in Gujarat, with technology sourced from a leading European wind turbine technology developer. Inox Renewables Limited owns and operates wind farms.

Inox Wind Limited is one of India''s leading wind power solutions providers. It manufactures wind turbine generators, and provides turnkey solutions by supplying WTGs and their components. Inox Wind Limited also, through its 100% subsidiary Inox Wind Infrastructure Services Limited, offers a variety of services including wind resource assessment, site acquisition, project development, erection and commissioning, and also long term operations and maintenance of wind power projects. During the financial year ended March 2014, Inox Wind Limited has emerged as one of the largest wind power solutions provider in the country.

Inox Renewables Limited, and its 100% subsidiary Inox Renewables (Jaisalmer) Limited, own and operate wind farms. By March 2014, Inox Renewables Limited with its subsidiary operates around 213.1 MW on wind capacity, making it one of the large wind IPPs in the country today.

The regulatory development in this business remains favourable, with various incentives like higher feed-in tariffs, generation based incentives, mandatory Renewable Purchase Obligations (RPOs) on distribution companies, and Renewable Energy Certificates (RECs) all adding to the revenue streams a wind energy producer can avail to improve the viability of investments in wind farms. With access to a significant pool of viable land banks, and access to efficient wind turbines, the Company''s subsidiaries a re well-poised to mark a significant presence in this business.

Discussion on financial performance with respect to operational performance

The financial performance of your Company continues to remain strong, and is expected to show an improvement in the coming years, with the higher production levels at the chemical complex at Dahej and the commencement of revenues from the Wind Energy business through its subsidiaries.

(3) RESPONSIBILITY STATEMENT

Your Directors would like to confirm that

I. in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

II. the Directors have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the Profit or Loss of the Company for that period;

III. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. the Directors have prepared the Annual Accounts on a going concern basis.

4. DIVIDEND

Your Directors have recommended dividend of Rs 3.50 per share (350%) subject to approval of the Members. The total dividend pay-out (including dividend distribution tax on dividend pay-out) for the year will be Rs 4498 lacs.

5. DIRECTORS

Shri Deepak Asher (DIN: 00035371) retires by rotation and being eligible, offer himself for re-appointment.

Shri Shailendra Swarup (DIN: 00167799), Shri Om Prakash Lohia (DIN: 00206807), Dr. S Rama Iyer (DIN: 00076549) and Shri Shanti Prasad Jain (DIN: 00023379), Independent Directors of the Company were appointed as Independent Directors of the Company by the Board of Directors at its meeting held on 29th May, 2014 for a period of five consecutive years with effect from 1st April, 2014 subject to approval of Members at the ensuing Annual General Meeting.

The Board of Directors has re-appointed Shri Dinesh Kumar Sachdeva (DIN 00050740) and Shri Jitendra Singh Bedi (DIN: 01670022) as Whole-time Director /s of the Company for a period of one year subject to the approval of Members at the ensuing Annual General Meeting. Shri Paresh Trivedi who was appointed by the Board of Directors as an Additional and Whole-time Director at its meeting held on 22nd October, 2013 had resigned as Director and Whole-time Director with effect from 27th June, 2014. The appointment of Shri Paresh Trivedi and payment of remuneration to him during the said period is placed for approval of Members.

Necessary resolutions in respect of Directors seeking appointment / re-appointment and their brief resume pursuant to Clause 49 of the Listing Agreement are provided in the Notice of the Annual General Meeting forming part of this Annual Report.

6. SUBSIDIARIES

In accordance with the General Circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will provide a copy of separate annual accounts in respect of each of its subsidiary to any shareholder of the Company who asks for it and the said annual accounts will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies.

7. AUDITORS'' REPORT

The notes forming part of the accounts are self-explanatory and do not call for any further clarifications under Section 217(3) of the Companies Act, 1956.

8. AUDITORS

Members are requested to appoint Auditors for the current year and to fix, or authorise the Board to fix, their remuneration. The Auditors, M/s. Patankar & Associates, retire and offer themselves for re-appointment. A certificate has been received from them that their appointment, if made, will be in compliance with the provisions of the Companies Act, 2013.

9. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

In compliance with the requirements of Clause 49(V), a certificate from the Managing Director and Director and Group Head (Corporate Finance) of the Company, who are responsible for the finance function, was placed before the Board.

All the Board Members and Senior Management Personnel of the Company had affirmed compliance with the Code of Conduct for Board and Senior Management Personnel. A declaration to this effect duly signed by the Managing Director is enclosed as a part of the Corporate Governance Report.

10. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to the matters contained therein is given by way of an Annexure to this Report.

11. PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the rules framed there under, the names and other particulars are set out in the Annexure to the Directors'' Report. In terms of the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the Shareholders of the Company excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of the Company. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

12. SUSTAINABLE DEVELOPMENT ACTIVITIES

The Company undertakes sustainable development work as part of its ongoing efforts to improve the quality of life of the people in the areas surrounding its plant. Your company has spent around Rs 41.74 lakhs in the last financial year on these initiatives. Diligent and sincere efforts in this direction have had a positive and lasting impact on the neighbouring community. During the year, the Company has had its Corporate Social Responsibility initiatives certified by Ernst and Young.

13. SAFETY, HEALTH AND ENVIRONMENT

Safety, health and environment have been of prime concern to the Company and necessary efforts were made in this direction in line with the safety, health and environment policy laid down by the Company. The Company has achieved certification of ISO: 14001:2004 (Environment Management System) and ISO 18001:2007 (Occupational Health and Safety Management System) for its Ranjitnagar and Dahej Plant. Health of employees is being regularly monitored and environment has been maintained as per statutory requirements.

14. INSURANCE

The Company''s property and assets have been adequately insured.

15. ACKNOWLEDGEMENT

Your Directors express their gratitude to all other external agencies for the assistance, co-operation and guidance received. Your Directors place on record their deep sense of appreciation for the dedicated services rendered by the workforce of the Company.

16. INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

In compliance with the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, your Company has formed a Committee to look into such cases.

During the period under review, no case was filed with the Committee.

By Order of the Board of Directors

Noida Devendra Kumar Jain Vivek Jain

29th July, 2014 Director Managing Director


Mar 31, 2013

To the Members of GUJARAT FLUOROCHEMICALS LIMITED

The Directors take pleasure in presenting to you their Twenty-Sixth Annual Report for the year ended 31st March, 2013.

1. FINANCIAL RESULTS

Following are the working results for the year 2012-2013:

(Rs. in Lacs)

2012-2013 2011-2012

Continuing Operations

Net Sales / Income from Operations 159090 206556

Other operating Income 518 344

Total Income from Operations 159608 206900

Less: Total Expenses 99019 106835

Profit from operations before other income and finance cost and exceptional items 60589 100065

Add: Other Income 5690 5764

66279 105829

Less: Finance Cost 6895 5713

Profit from ordinary activities after finance cost but before exceptional items 59384 100116

Profit from ordinary activity before Taxation 59384 100116

Provision for Taxation 19594 24816

Profit for the year from Ordinary Activity 39790 75300

Discontinuing Operations

Profit / (Loss) before Tax 65 (34927)

Tax Expense 21 (2787)

Net Profit / (Loss) 44 (32140)

Net Profit / (Loss) for the year 39834 43160

Profit brought forward form earlier year 374 183

Profit available for appropriations 40208 43343

Appropriations

Transferred to General Reserves 35000 38500

Interim Dividend 1648 2197

Proposed Dividend subject to approval of the Shareholders 2197 1648

Tax on Dividend 640 624

Balance Carried forward to Balance Sheet 723 374

40208 43343

2. RESPONSIBILITY STATEMENT

Your Directors would like to confirm that

I. in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

II. the Directors have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the Profit or Loss of the Company for that period;

III. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. the Directors have prepared the Annual Accounts on a going concern basis.

3. DIVIDEND

Your Company has paid an Interim Dividend of Rs 1.50 per share (150%) and your Directors now recommend a final dividend of Rs 2 per share (200%) subject to approval of the shareholders. The total dividend pay-out (including dividend distribution tax on dividend pay-out) for the year will be Rs 4485.44 lacs.

4. DIRECTORS

Shri Pavan Kumar Jain and Shri Om Prakash Lohia retire by rotation and being eligible, offer themselves for re-appointment.

The Board of Directors has re-appointed Shri Dinesh Kumar Sachdeva and Shri Jitendra Singh Bedi as Whole-time Director /s of the Company for a period of one year subject to the approval of Members at the ensuing Annual General Meeting.

Necessary resolutions in respect of Directors seeking re-appointment and their brief resume pursuant to clause 49 of the listing agreement are provided in the Notice of the Annual General Meeting forming part of this Annual Report.

5. SUBSIDIARIES

Ministry of Corporate Affairs, New Delhi vide its Circular No 5/12/2007-CL-III dated 08th February, 2011 has granted general exemption to Holding Companies from attaching the Balance Sheet(s) of Subsidiary Company(ies) concerned as required under Section 212 of the Companies Act, 1956. In view of the above, the Board of Directors of the Company has by resolution 30th May, 2013 accorded consent to not attaching Annual Accounts of the financial year ended on 31st March, 2013 of all the Company''s subsidiaries. A statement showing holding Company''s interest in subsidiaries as required under Section 212 (3) of the Companies Act, 1956 is annexed to the Directors Report.

6. AUDITORS'' REPORT

The notes forming part of the accounts are self-explanatory and do not call for any further clarifications under Section 217(3) of the Companies Act, 1956.

7. AUDITORS

Members are requested to appoint Auditors for the current year and to fix, or authorise the Board to fix, their remuneration. The Auditors, M/s. Patankar & Associates, retire and offer themselves for re-appointment. Due notice has been received from them that their appointment, if made, will be in accordance with the limits specified in Section 224 (1B) of the Companies Act, 1956.

8. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

In compliance with the requirements of Clause 49(V), a certificate from the Managing Director and Director and Group Head (Corporate Finance) of the Company, who are responsible for the finance function, was placed before the Board.

All the Board Members and Senior Management Personnel of the Company had affirmed compliance with the Code of Conduct for Board and Senior Management Personnel. A declaration to this effect duly signed by the Managing Director is enclosed as a part of the Corporate Governance Report.

9. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to the matters contained therein is given by way of an Annexure to this Report.

10. PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed there under, the names and other particulars are set out in the Annexure to the Directors'' Report. In terms of the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the Shareholders of the Company excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of the Company. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

11. SUSTAINABLE DEVELOPMENT ACTIVITIES

The Company undertakes sustainable development work as part of its ongoing efforts to improve the quality of life of the people in the areas surrounding its plant. Your company has spent around Rs 75.23 lakhs in the last financial year on these initiatives. Diligent and sincere efforts in this direction have had a positive and lasting impact on the neighbouring community. During the year, the Company has had its Corporate Social Responsibility initiatives certified by Ernst and Young.

12. SAFETY, HEALTH AND ENVIRONMENT

Safety, health and environment have been of prime concern to the Company and necessary efforts were made in this direction in line with the safety, health and environment policy laid down by the Company. The Company has achieved certification of ISO: 14001:2004 (Environment Management System) and ISO 18001:2007 (Occupational Health and Safety Management System) for its Ranjitnagar Unit. Health of employees is being regularly monitored and environment has been maintained as per statutory requirements.

13. INSURANCE

The Company''s property and assets have been adequately insured.

14. ACKNOWLEDGEMENT

Your Directors express their gratitude to all other external agencies for the assistance, co-operation and guidance received. Your Directors place on record their deep sense of appreciation for the dedicated services rendered by the workforce of the Company.

By Order of the Board of Directors

Noida DK Jain Vivek Jain

30th May, 2013 Director Managing Director


Mar 31, 2012

To the Members of GUJARAT FLUOROCHEMICALS LIMITED

The Directors take pleasure in presenting to you their Twenty-Fifth Annual Report for the year ended 31st March, 2012.

1. FINANCIAL RESULTS

Following are the working results for the year 2011-2012:

(Rs. in Lacs)

2011-2012 2010-2011

Continuing Operations

Net Sales / Income from Operations 206556 97897

Other operating Income 344 388

Total Income from Operations 206900 98285

Less: Total Expenses 106835 70816 Profit from operations before other income and

finance cost and excep tional items 100065 27469

Add: Other Income 5764 9953

105829 37422

Less: Finance Cost 5713 2987

Profit from ordinary activity before Taxation 100116 34435

Provision for Taxation 24816 8485

Profit for the year from Ordinary Activity 75300 25950 Discontinuing Operations

Profit / (Loss) before Tax (34927) 715

Tax Expense (2787) 301

Net Profit / (Loss) (32140) 414

Net Profit / (Loss) for the year 43160 26364

Profit brought forward from earlier year 183 292

Profit available for appropriations 43343 26656 Appropriations

Transferred to General Reserves 38500 22000

Interim Dividend 2197 1099

Proposed Dividend subject to approval of the Shareholders 1648 2746

Tax on Dividend 624 628

Balance Carried forward to Balance Sheet 374 183

43343 26656

2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

a. PTFE / Chemicals Business

Industry structure and developments

Total global PTFE market is around 140,000 tpa, of which 60% is granular and 40% is dispersion grade. In terms of supply, the industry is dominated by two kinds of players " long time, high quality big players from developed countries, who command around 60% market share, and upcoming new players from developing countries who have around 40% market share.

The Company has entered the PTFE business in 2008, and in a short span of time, become a significant player in the global market. The Company is increasingly being perceived as a high quality PTFE supplier, and with the present capacity of 12,000 tpa, planned to be increased to 18,000 tpa, is poised to cater to a significant share of the global market, putting it in the bracket of the top 3 - 4 PTFE suppliers globally.

Indian market for PTFE is around 2,500 - 3,000 tpa, and growing at a healthy 7 " 8% per annum. The Company has more than 80% market share in India, being the only significant producer in the country. There is an immense latent potential for higher PTFE demand, and the Company is working with Indian PTFE processors to develop new products and applications to spur higher growth and demand in the domestic market.

Globally, the established players are moving to higher value added polymers, leaving the space in the traditional PTFE markets for players like the Company. The Company also plans to enter the segment of higher value added polymers in the near future.

The Company enjoys a significant competitive advantage, because of its integrated operations. It is amongst the only top 2 or 3 integrated players, giving it significant cost competiveness amongst other global players. The Company has placed enormous emphasis on high and consistent quality of all PTFE grades matching the best in the business, by continuous operations and process improvements. The Company has adopted marketing strategies to be proximate with customers and provide value added services such as warehousing facilities in the US and EU markets, and technical services to drive value for customers.

Opportunities and threats

The key opportunities in the PTFE business include the vast undeveloped potential in the Indian markets that would be converted into market demand by new product and application development, and the market gaps created by established players moving to higher value added polymers. There also exist the potential to work with reputed global players of PTFE based components to expand the PTFE market in India.

Some of the significant threats include further capacity expansions in China, and the impact of such expansion on PTFE prices, as also the continued economic downturn in developed markets like Europe, that could cause demand to remain sluggish.

Segment-wise product-wise performance

Caustic Soda accounts for around 9% of the Company's sales in value terms. Caustic soda sales increased last financial year by 45% in volume terms and by 136% in value terms. Similarly, Chloromethane, which account for around 10% of the Company's sales in value terms, increased last financial year by 84% in volume terms and 66% in value terms.

PTFE accounts for around 32% of the Company's sales in value terms. PTFE sales recorded an increase of 23% in volume terms and 138% in value terms.

Around 16% of the Company's PTFE sales last financial year came from the domestic market and more than 84% of PTFE sales from the export markets. The Company witnessed a 25% growth in its PTFE exports.

A bulk of the Company's PTFE sales, more than 90%, comes from granular PTFE, with modified PTFE and compounds accounting for around 7%. Granular PTFE sales grew by around 19%, whereas modified PTFE and compounds grew by around 66% last year.

The Company expects to maintain a healthy sales growth rate going forward.

Outlook

PTFE has been witnessing a growth rate of 4 " 5% over the past 30 years globally, and it is expected that this growth rate will continue, if not increase, due to new product and application development particularly in developing countries, in the future. With established players moving away into other flour polymers, this creates a space in the market that your Company aspires to be the first choice for the market to fill.

The establishment of capacity for dispersion PTFE is expected to improve the product mix of the Company significantly. With the Company increasing focus on dispersion PTFE, and growing the modified and compounding business, the Company expects the value addition in the PTFE business to increase further.

The Company has, in addition to being the largest PTFE producer in the country, has also become the largest producer of chloromethane, and a significant player in the caustic soda business in India.

The Company is also seriously considering other product candidates in the fluor polymer space, and would be taking an investment decision in these areas shortly, after a complete evaluation of the market, technologies and economics. This would provide an avenue of substantial growth in the near future.

Risk and concerns

As indicated in the D threats D section, the key risk includes impact on demand and pricing, due to sluggish growth in markets like Europe due to the economic turndown, and pressure on prices due to capacity expansion in China.

However, the Company remains confident of being able to maintain a healthy return on investment due to the cost competiveness due to its integrated operations.

b. Carbon Credit Business

The Company has a Clean Development Mechanism (CDM) Project registered by the United Nations Framework Convention for Climate Change (UNFCCC). This project generates Certified Emission Reductions (CERs) by destruction of HFC-23, a potent greenhouse gas inevitably generated in the production process of HCFC-22, a refrigerant produced by the company.

A part of the expected CER generation of the Company till December 2012 have been sold under firm fixed price contracts, a part under floating price contracts with floor prices, and a part have been kept unheeded for sale in the spot market on issuance. Spot prices have softened over the past twelve months, due to supply-demand imbalance, largely caused by the European economic situation.

The key market for CERs so far has been through the European Union Emissions Trading Scheme (EU-ETS). The EU has announced that it would not buy CERs from HFC-23 destruction (as also some other technologies) after December 2012. There is also some uncertainty over the continuation of the emission reduction obligations under the Kyoto Protocol, from 2013. Hence, it is likely that the Company's CERs may not have a significant market from 2013 and onwards.

c. Wind Energy Business

The Company has floated two subsidiaries to pursue its wind energy business -Inox Wind Limited and Inox Renewables Limited. Inox Wind Limited manufactures state-of-the-art wind turbine generators, rotor blades and tubular towers, at its two manufacturing plants, one in Himachal Pradesh and one in Gujarat, with technology sourced from a leading European wind turbine technology developer. Inox Renewables Limited sets up and operates wind farms.

Pursuant to its decision to grow its wind energy business in its subsidiary, and also to enable raising non-recourse capital for the same, the Company has transferred, by way of a slump sale, its entire wind energy business, as of 30 March, 2012, comprising of 69 MW of operational capacity, and 70 MW of capacity being set up, to Inox Renewable Limited. The business plan is to set up all incremental wind generation capacity in Inox Renewable Limited going forward. The company is already in discussions with various equity and debt capital providers for funding the growth in this business.

The regulatory development in this business remains favorable, with various incentives like higher feed-in tariffs, generation based incentives, mandatory Renewable Purchase Obligations (RPOs) on distribution companies, and Renewable Energy Certificates (RECs) all adding to the revenue streams a wind energy producer can avail to improve the viability of investments in wind farms. With access to a significant pool of viable land banks, and access to efficient wind turbines, the Company's subsidiaries are well-poised to mark a significant presence in this business.

d. Internal control system and their adequacy

The company has an adequate internal audit system commensurate with its size and the nature of its business. The internal audit is carried out by independent firms of Chartered Accountants, who interact with the Audit Committee on a regular basis, with respect to the scope of audit, significant audit observations, and remedial action required, if any.

e. Discussion on financial performance with respect to operational performance

The financial performance of your Company continues to remain strong, and is expected to show an improvement in the coming years, with the higher production levels at the chemical complex at Dahej and the commencement of revenues from the Wind Energy business through its subsidiaries.

f. Material developments in human resources / industrial relations front, including number of people employed

The company has around 1500 employees on its rolls. Your company continues to have cordial and harmonious relations with all its employees.

3. RESPONSIBILITY STATEMENT

Your Directors would like to confirm that

I. in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

II. the Directors have selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the Profit or Loss of the Company for that period;

III. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. the Directors have prepared the Annual Accounts on a going concern basis.

4. DIVIDEND

Your Company has paid an Interim Dividend of Rs 2.00 per share (200%) and your Directors now recommend a final dividend of Rs 1.50 per share (150%) subject to approval of the shareholders. The total dividend pay-out (including dividend distribution tax on dividend pay-out) for the year will be Rs 4468 lacs.

5. DIRECTORS

Shri DK Jain and Shri Shailendra Swarup retire by rotation and being eligible, offer themselves for re-appointment.

The Board of Directors have re-appointed / appointed Shri DK Sachdeva, Shri JS Bedi and Shri G Arumugam as Whole- time Director /s of the Company subject to the approval of Members at the ensuing Annual General Meeting.

The Board of Directors have also re-appointed Shri Vivek Jain as Managing Director of the Company for a period of five years with effect from 01st January, 2013 subject to the approval of Members at the ensuing Annual General Meeting.

Necessary resolutions in respect of Directors seeking appointment / re-appointment and their brief resume pursuant to clause 49 of the listing agreement are provided in the Notice of the Annual General Meeting forming part of this Annual Report.

6. SUBSIDIARIES

Ministry of Corporate Affairs, New Delhi vide its Circular No 5/12/2007-CL-III dated 08th February, 2011 has granted general exemption to Holding Companies from attaching the Balance Sheet(s) of Subsidiary Company(ies) concerned as required under Section 212 of the Companies Act, 1956. In view of the above, the Board of Directors of the Company has by resolution 25th May, 2012 accorded consent to not attaching Annual Accounts of the financial year ended on 31st March, 2012 of all the Company's subsidiaries. A statement showing holding Company's interest in subsidiaries as required under Section 212 (3) of the Companies Act, 1956 is annexed to the Directors Report.

7. AUDITORS" REPORT

The notes forming part of the accounts are self-explanatory and do not call for any further clarifications under Section 217(3) of the Companies Act, 1956.

8. AUDITORS

Members are requested to appoint Auditors for the current year and to fix, or authorize the Board to fix, their remuneration. The Auditors, M/s. Patankar & Associates, retire and offer themselves for re-appointment. Due notice has been received from them that their appointment, if made, will be in accordance with the limits specified in Section 224 (1B) of the Companies Act, 1956.

9. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors" Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

In compliance with the requirements of Clause 49(V), a certificate from the Managing Director and Director and Group Head (Corporate Finance) of the Company, who are responsible for the finance function, was placed before the Board.

All the Board Members and Senior Management Personnel of the Company had affirmed compliance with the Code of Conduct for Board and Senior Management Personnel. A declaration to this effect duly signed by the Managing Director is enclosed as a part of the Corporate Governance Report.

10. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to the matters contained therein is given by way of an Annexure to this Report.

11. PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed there under, the names and other particulars are set out in the Annexure to the Directors Report. In terms of the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors Report is being sent to all the Shareholders of the Company excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of the Company. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

12. SUSTAINABLE DEVELOPMENT ACTIVITIES

The Company undertakes sustainable development work as part of its ongoing efforts to improve the quality of life of the people in the areas surrounding its plant. Your company has spent around Rs 80 lakhs in the last financial year on these initiatives. Diligent and sincere efforts in this direction have had a positive and lasting impact on the neighboring community. During the year, the Company has had its Corporate Social Responsibility initiatives certified by Ernst and Young.

13. SAFETY, HEALTH AND ENVIRONMENT

Safety, health and environment have been of prime concern to the Company and necessary efforts were made in this direction in line with the safety, health and environment policy laid down by the Company. The Company has achieved certification of ISO: 14001:2004 (Environment Management System) and ISO 18001:2007 (Occupational Health and Safety Management System) for its Ranjitnagar Unit. Health of employees is being regularly monitored and environment has been maintained as per statutory requirements.

14. INSURANCE

The Company's property and assets have been adequately insured.

15. ACKNOWLEDGEMENT

Your Directors express their gratitude to all other external agencies for the assistance, co-operation and guidance received. Your Directors place on record their deep sense of appreciation for the dedicated services rendered by the workforce of the Company.

By Order of the Board of Directors

Noida DK Jain Vivek Jain

25th May, 2012 Director Managing Director


Mar 31, 2010

The Directors take pleasure in presenting to you their Twenty-Third Annual Report for the year ended 31st March, 2010.

1. FINANCIAL RESULTS

Following are the working results for the year 2009-2010:

(Rs in lacs) 2009-2010 2008-2009 Turnover 98634.50 104452.17 Gross Profit before Interest and Depreciation 52271.98 57427.46 Less: Interest 4803.33 4999.97 Profit before Depreciation 47468.55 52427.49 Less: Depreciation and amortization for the year5703.07 4718.44 Less: Provision for diminution in value of investments 1559.84 268.09 Profit before Taxation 40205.74 47440.96 Provision for Taxation 6799.05 13427.34 Prof it for the year 33406.69 34013.62 Add: Taxation pertaining to earlier years 8.66 0 Add: Profit brought forward from previous year 169.19 80.56 33584.03 34094.18 Appropriations Capital Redemption Reserve 0 59.30 Proposed Dividend written back 0 -4.88 Transferred to General Reserve 28800.00 29372.39 Interim dividend 2197.00 0.00 Proposed Dividend subject to approval of the shareholders 1647.75 3844.75 Tax on Dividend 647.05 653.42 Balance carried to Balance Sheet 292.74 169.20 33584.03 34094.18

2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

a) Industry structure and developments

The Company makes HCFC22 - a product that is used as a refrigerant and as feedstock in the manufacture of PTFE. There are 4 major manufacturers of refrigerants in India, of which your company is the largest. Around 80% of your companys refrigerant production was being exported to around 75 countries across the globe. The Refrigerant Gas market in India comprises of two distinct customer categories - distributors, who cater to the replacement demand, and OEs, who represent requirements for new equipment. Internationally, the market is serviced

predominantly by a network of distributors. The commissioning and stabilisation of the chemical complex set up by the Company at Dahej, including the PTFE plant, will ensure a steady demand for the HCFC22 produced by the Company. ^

Your company has set up a chemical complex at Dahej, District Bharuch, Gujarat. The Company manufactures Caustic Soda, Chlorine, Chloromethanes and Poly Tetra Fluoro Ethane (PTFE) at this facility, and also operated a 28 MW gas based captive power plant and a 25 MW Coal based captive power plant. Any power generated in excess of captive requirements is sold in the market. These products add to the Companys product portfolio, improve its competitive advantage due to forward and backward integration, and provide longevity to the Companys HCFC22 production beyond the control provisions of the Montreal Protocol. After fully stabilising its existing capacities and attaining acceptable levels of product quality and capacity utilisation, the Company has decided tc invest around Rs 500 crores in increasing its plant capacity of Caustic Soda to 170000 tpa, Chloromethane capacity 1,20,000 tpa and Poly Tetra Fluoro Ethane (PTFE) to 12,500 tpa, with corresponding increase in the capacity of its captive power plant.

The Company has been successfully operating, for more than 4 years now, a Clean Development Mechanism Project which affects Greenhouse Gas Emission Reductions by Thermal Oxidation of HFC23, and earns Carbon Credits. Your Company is amongst the largest Carbon Credit generating projects in the world. Industrial installations and utilities in Europe and Japan buy these Carbon Credits for compliance under the Kyoto Protocol and / or the European Union Emissions Trading Scheme.

Your Company already has around 65 MW of installed capacity in wind power generation. Your Company has set up a subsidiary, "Inox Wind Limited" (IWL) which has set up manufacturing facilities for wind turbines at Una, Himachal Pradesh and Bawla, Gujarat and has commenced commercial production of nacelles and hubs for wind turbines at Una, in pursuance of your Companys business plans to set up and operate wind farms. Your Company is also in the process of acquiring land banks and setting up an operating team for this business.

Opportunities and threats

The Refrigerant Business of your Company is operating at near full capacity. The key threat to the Refrigerant Gas Business continues to be pressures on margins due to competition from China. However, your Companys competitive advantage has been enhanced with the stabilisation of the integration projects set up at Dahej.

The Chemical Complex at Dahej has now stabilised and attained acceptable levels of capacity utilisation and product quality. The key threats to this business are availability and cost of energy (being one of the key inputs) and your companys ability to meet the stringent quality standards of the export markets.

On the Carbon Credit Business, your Company continues its strong presence in the international markets, and the sale of Carbon Credits to European buyers has added a healthy revenue stream to your Companys operating results and is expected to do so, right upto 2012, and potentially beyond. The key threat to this business is the price volatility in the carbon markets, and your Company has implemented an effective price hedging strategy to mitigate this risk.

The Wind Energy Business is quite nascent in the country, and there is a good opportunity of creating value by identifying viable sites, a cost-effective equipment sourcing strategy and ability to raise capital efficiently. The key threat in this business is increasing costs due to supply constraints of components, wind uncertainty, and regulatory restrictions leading to inability to sell the power generated at viable tariffs.

b) Segment-wise and product-wise performance

In line with the requirements of the Accounting Standard on Segment Reporting (AS-17), the Company has disclosed performance of each segment in the Note No 22 of Notes to the Accounts of Annual Report of the Company.

c) Outlook

HCFC22 is expected to witness a growth of around 5% per annum globally, largely due to growth in PTFE demand. Your company, due to its vast marketing reach and increasing cost competitiveness, as also due to faster Montreal Protocol mandated phase-out schedules in developed countries, has been able to maintain a healthy growth rate over the past few years, and, with the stabilisation and increased production levels at the Dahej chemical complex, expects to be able to operate at near full capacity levels, into the future.

The outlook on the Chemical Complex at Dahej is quite positive, with increasing volumes due to higher capacities and improved PTFE realizations due to better product quality.

On the Carbon Credit front, it is expected that with deeper emission reduction targets contemplated by Europe, prices of Carbon Credits generated by your Company should remain firm. There is still some uncertainty about the market post 2012, over which some clarity could evolve over the next year(s).

As regards the Wind Energy Business, there continues to be a demand-supply gap for energy in general and renewable energy in particular, and regulatory framework is evolving to encourage more investments in renewable energy projects. This should provide the impetus for to further improve the viability of this business.

d) Internal control system and their adequacy

The Company has an adequate internal control system commensurate with the size and nature of its business.

The company has an adequate internal audit system commensurate with its size and the nature of its business. The internal audit is carried out by independent firms of Chartered Accountants, who interact with the Audit Committee on a regular basis, with respect to the scope of audit, significant audit observations, and remedial action required, if any.

e) Discussion on financial performance with respect to operational performance

The financial performance of your Company continues to remain strong, and is expected to show an improvement in the coming years, with the higher production levels at the chemical complex at Dahej, the firming up of Carbon Credit prices, and the commencement of revenues from the Wind Energy business.

f) Material developments in human resources / industrial relations front, including number of people employed

The company has around 900 employees on its rolls. Your company continues to have cordial and harmonious relations with all its employees.

3. RESPONSIBILITY STATEMENT

Your Directors would like to confirm that

I. in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

II. the Directors have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the Profit or Loss of the Company for that year;

III. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. the Directors have prepared the Annual Accounts on a going concern basis.

4. DIVIDEND

Your Company had already paid two interim dividends of Rs. 1.00 per equity share (100%) each.Your Directors now recommend a final dividend of Rs 1.50 per equity share (150%) subject to approval of the shareholders. The total dividend payout (including dividend distribution tax) for the year will be Rs 4491.80 lacs.

5. DIRECTORS

Shri OP Lohia and Dr S Rama Iyer retire by rotation and being eligible, offer themselves for re-appointment. During the year, Shri CP Jain who was appointed as an Additional Director on the Board had resigned with effect from 12th February, 2010.

7. SUBSIDiARIES AND JOINT VENTURE

The Balance Sheet, Profit and Loss Account, Auditors Report and Directors Report and a Statement of your Companys interest in Inox Leisure Limited, Inox Wind Limited, Inox Infrastructure Private Limited, Inox Motion Pictures Limited and Gujarat Fluorochemicals Americas LLC, as required under Section 212 of the Companies Act, 1956, for the year 31st March 2010 are annexed hereto.

The Company has entered into a joint venutre with Yeng Peng Chemical Company Limited, China for manufacture of 35000 TPA Anhydrous Hydrofulric Acid, a strategic raw material of the Company.

8. AUDITORS REPORT

The Auditors Report to the Shareholders does not contain any qualifications. The notes forming part of the accounts are self-explanatory and do not call for any further clarifications under Section 217(3) of the Companies Act, 1956.

9. AUDITORS

Members are requested to appoint Auditors for the current year and to fix, or authorise the Board to fix, their remuneration. The Auditors, M/s. Patankar & Associates, retire and offer themselves for re-appointment. Due notice has been received from them that their appointment, if made, will be in accordance with the limits specified in Section 224 (1B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

In compliance with the requirements of Clause 49(V), a certificate from the Managing Director and Director and Group Head (Corporate Finance) of the Company, who are responsible for the finance function, was placed before the Board.

All the Board Members and Senior Management Personnel of the Company had affirmed compliance with the Code of Conduct for Board and Senior Management Personnel. A declaration to this effect duly signed by the Managing Director is enclosed as a part of the Corporate Governance Report.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to the matters contained therein is given by way of an Annexure to this Report.

12. PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed thereunder, the names and other particulars are set out in the Annexure to the Directors Report. In terms of the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors Report is being sent to all the Shareholders of the Company excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of the Company. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

13. SUSTAINABLE DEVELOPMENT ACTIVITIES

The Company undertakes sustainable development work as part of its ongoing efforts to improve the quality of life of the people in the areas surrounding its plant. Your company has spent around Rs 106.92 lakhs in the last financial year on these initiatives. Diligent and sincere efforts in this direction have had a positive and lasting impact on the neighbouring community. During the year, the Company has had its Corporate Social Responsibility initiatives certified by Ernst and Young.

14. SAFETY, HEALTH AND ENVIRONMENT

Safety, health and environment have been of prime concern to the Company and necessary efforts were made in this direction in line with the safety, health and environment policy laid down by the Company. The Company has achieved certification of ISO: 14001:2004 (Environment Management System) and ISO 18001:2007 (Occupational Health and Safety Management System) for its Ranjitnagar Unit. Health of employees is being regularly monitored and environment has been maintained as per statutory requirements.

15. INSURANCE

The Companys property and assets have been adequately insured.

16. ACKNOWLEDGEMENT

Your Directors express their gratitude to all other external agencies for the assistance, co-operation and guidance received. Your Directors place on record their deep sense of appreciation for the dedicated services rendered by the workforce of the Company.

By Order of the Board of Directors Noida DK JAIN 22nd May, 2010 Chairman

 
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