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Directors Report of Kansai Nerolac Paints Ltd.

Mar 31, 2017

Dear Members,

The Directors are pleased to present the 97th Annual Report and the Audited Accounts for the year ended 31st March, 2017.

1. Financial Highlights

1st April, 2016 to

31st March, 2017

1st April, 2015 to

31st March, 2016

Rs, in Crores

Rs, In Crores

Gross Sales and Other Operating Income ....................................

4936.05

4604.36

Net Sales and Other Operating Income .......................................

4531.05

4245.52

Profit Before Interest, Depreciation and Tax .................................

730.69

579.98

Less: Depreciation ..............................................................................

69.49

67.72

Profit Before Interest and Tax ...........................................................

661.20

51 2.26

Add: Other Income ...........................................................................

98.22

27.35

Profit Before Tax .................................................................................

759.42

539.61

Exceptional Item- Profit on sale of land ........................................

-

535.34

Profit Before Tax .................................................................................

759.42

1074.95

Less: Tax (including deferred tax) ...................................................

253.48

176.10

Profit After Tax ....................................................................................

505.94

898.85

Other Comprehensive Income (Net of tax) .................................

(4.73)

(4.93)

Total Comprehensive Income for the year ...................................

501.21

893.92

2. Dividend

The Directors recommend for consideration of the Members, a normal dividend of '' 2.50 per share (250%) and a special dividend of '' 0.50 per share (50%), thus aggregating to a total dividend of '' 3.00 per share (300%) of the face value of '' 1 each for the year.

This compares with a normal dividend of '' 1.80 per share (180%) and a special dividend of '' 1.25 per share (125%), thus aggregating to a total dividend of '' 3.05 per share (305%) of the face value of '' 1 each declared last year.

[A] INTRODUCTION

Kansai Nerolac Paints Limited (KNPL) has come a long way since first being established as Gahagan Paint & Varnish Company Limited in 1920. Kansai Nerolac Paints Limited (KNPL) is a subsidiary of Kansai Paint Co. Ltd, Japan.

The Company is in the business of paints and caters to customers in Businesses Segments such as Decorative, Automotive, Auto Refinish, Wood Coatings, General Industrial, Performance Coatings and Powder Coatings. The Company has international operations in Nepal and Sri Lanka through Joint Ventures with Kansai Nepal and Capital Holdings Maharaja Group respectively.

KNPL is the market leader in the Industrial Paints Market. It takes great pride in being the vendor of choice to the major automotive companies operating in India as well as major Industrial houses. KNPL has been able to achieve this due to its relentless focus on customer satisfaction built on superior coating systems and leveraging global technology.

In the Decorative Paints segment as well, KNPL is well known for its many innovations in products, service and branding as it builds on its strong brand equity built over the decades.

KNPL has four geographically spread manufacturing facilities working round the clock to produce paint of the highest quality and need located at Lote in Maharashtra, Bawal in Haryana, Jainpur in UP and Hosur in Tamil Nadu. To boost the production capability, KNPL is creating new production facilities at Saykha in Gujarat, Amritsar in Punjab and Vishakhapatnam in Andhra Pradesh. The new state of the art plants built using modern production technologies will strengthen the reach and capability of the Company thus helping KNPL to serve its customers in both the Industrial and Decorative divisions in the year ahead.

KNPL prides itself to be at the forefront of New Product Innovations, and has a state of the art R&D centre in Mumbai. A new R&D centre is set to open at Vashi in Navi Mumbai, which will help KNP maintain its edge in innovation.

KNPL has always considered IT as strategic. Since 2013, the Company has been making rapid progress on driving the digitalization agenda across the Company bringing with it benefits in customer responsiveness, efficiency, speed and productivity. This year the entire decorative sales force has been migrated to the mobility platform of SAP thus making them more agile in the market.

With a tagline of Healthy Home Paints, KNPL demonstrates its commitment to environmental preservation and sustainable manufacturing. The Company commits resources towards ensuring high standards of Environment, Health and Safety (EHS) across its manufacturing facilities. The Company publishes an Annual Sustainability Report every year.

Various customer awards as well as industry awards bestowed on KNPL serves to motivate us to strive even harder to ensure that our products, solutions and operations offer unique value to our esteemed customers and our stakeholders.

[B] INDUSTRY PROGRESS

2016-17 was a year with moderate growth for the paint industry. Growth picked up pace during the second quarter of this fiscal, owing to a good monsoon and a positive investment climate in the country. However, due to the Demonetization activity undertaken by the government, pace of growth was impacted in both the Decorative and Industrial Markets in the third and fourth quarter.

Post demonetization, the Automotive Industry is gradually seeing a revival. Consumer demand has also picked up signaling a stabilization of the economy.

The first half of the year saw a deflationary trend, which lead to a reduction in raw material prices. From the second half of the year, the industry has been witnessing an inflationary trend. This trend is expected to accelerate in the new financial year further putting pressure on costs.

The rupee remained volatile, oscillating between frequent highs and lows due to an uncertain global landscape and changing conditions in the domestic economy. This volatility is expected to continue to create challenges for the industry.

Going forward, GST is expected to impact the industry. GDP is growing at a steady pace and will outpace major economies of the world. Policy decisions taken by the government in recent times to boost consumer and infrastructure demand are expected to impact the industry positively.

[C] MARKETING - OUTLOOK

Decorative

Marketing is an integral part of the Decorative paints business which aims to make the consumer aware of products available, as well as attracting them to the value proposition that KNPL offers - Healthy Home Paints.

This year saw many media campaigns across marketing channels to strengthen the Nerolac Brand. Television campaigns across channels and products were run periodically throughout the year. Regional advertisements were run during important events in West Bengal. Focus was put on products that are important to a particular region.

Excel Mica Marble, India''s first acrylic emulsion with Mica particles and marble boosters, a new premium offering which is targeted at consumers who want their exterior paint to last long and provide additional protective and aesthetic properties, was well received in the market. Pan India as well as regional marketing campaigns was conducted to effectively communicate the Product Value proposition.

KNPL showcased its innovation capabilities by launching a first of its kind product, ReadyMix (Primer Putty). This product eliminates the need to apply primer and putty on the wall separately, resulting in significant cost savings for the customer and increased ease of application.

KNPL launched Alkali Prime and Construction Chemicals during the year and increased distribution of the newly launched range of Soldier Paints.

KNPL associated with the IPL Team Gujarat Lions, in the 2016 IPL edition, a first for any Paint Company in India. To tie all the promotional activities surrounding IPL 2016 together, KNPL coined a new hash tag - #aShadeBetter. This Hash Tag was promoted heavily on Social media through contests like "Predict and Win", "Colour me Orange" and a Nerolac & Gujarat Lions Dubsmash activity - #GameKiRaunak.

In soccer, KNPL associated with the ISL team North East United FC in the Soccer League ISL 2016 edition.

Nerolac Premium Painter program has been a very successful initiative for the Company over the years, and this year, the Company was able to build on the success of the previous years as well.

Industrial

KNPL is the market leader in industrial coatings, and has endeavored to strengthen its leadership position over the years owing to innovative product and service offerings to industrial customers.

Despite numerous challenges in the business environment during the year, KNPL has not only maintained its leadership position, but also increased its market share. KNPL has added value to its customers and shareholders by its cutting edge technology and unique market offerings.

Technology has always been the cornerstone of KNPL solution to customers and KNPL has continued to focus on technology providing High Quality, Cost Effective and Sustainable Solutions to its automotive customers. Quality standards have been consistently enhanced by the Auto OEMs in their crusade to provide better value to their consumers. Client interaction and business acquisition remained high this year, with the Company bagging repeat business from its esteemed clients, as well as winning new business from clients.

KNPL has worked closely with the Auto Industry and this year has introduced enhanced products like a superior Mar and Scratch Resistant Clear Coat and Medium Solid Base Coats. KNPL also enhanced its range of colours for Car Interior Coatings, which are eco-friendly, free of

Hazardous Air Pollutants (HAPs) and meet international coating standards.

KNPL has introduced Monocoat Metallic System for Two Wheeler industry, replacing existing two coat system. In addition, KNPL worked closely with raw material suppliers for innovative product development and this year we have developed Super Weather ability Monocoat Product with enhanced properties as per customer requirements. We have also introduced Water Based Top Coat for Two wheelers frame which has helped in elimination of one baking cycle.

The Company has introduced a next generation CED with better corrosion resistance, high throwing power, low baking loss and reduction in consumption. With such sustained innovations and product improvements, KNPL managed to maintain its market leadership in the CED segment, with many new CED lines added this year.

KNPL had pioneered the practice of providing Technical service on Customer Production lines. It has further strengthened its capability on this front. KNPL has worked extensively on this front to deliver maximum value to its customers. The Company provides its Industrial customers with Value Additions and Value Engineering ideas aimed towards quality improvement and cost reduction. This year KNPL has also added value to its customers by imparting valuable trainings.

KNPL continued the thrust on traditional segments like Oil & Gas, Power, Infra, Metals and Chemical Plants to drive the growth. The focus was also on new segments like Floor, Railways and Coil Coating where KNPL has increased its presence.

The Company works closely with Industry organizations like NACE (National Association of Corrosion Engineers) and SSPC (Society for Surface Protective Coatings). The Company was well represented at NACE, SSPC and CII events which ensured visibility and connect with key industry stakeholders.

KNPL has a majority stake in OEM business catering to segments like Fans, Drum & Barrels, Construction Equipment, Helmet, LPG etc. KNPL continues to enjoy the majority market share in above segments with new product developments like water base coatings, DTM coatings etc.

KNPL is a leader in the Powder Coating Segment and this year too, the Company has further strengthened its share in segments like Auto Ancillaries, Furniture, White Goods. This year KNPL was able to leverage its tie up with Protech, Canada for introducing new products.

KNPL is the fastest growing Company in the Auto Refinish Business. KNPL provides complete range of products in the Auto Refinish market. The Company has a stabilized growth both in terms of retail customers as well as winning body shop business. Its strong focus in this industry and teamwork helped in building network across the length and breadth of the country.

It is engaging in providing multiple technical programs to develop the skills and knowledge of their customers. The Company is now focusing in water borne system and other future technology in the auto refinish segment.

[D] OPPORTUNITIES AND THREATS

Opportunities

- GST

The introduction of GST is expected to be a game changer for Indian Industry.

- Favorable demographics

India''s young population represents a huge opportunity as more and more young Indians join the workforce and will have disposable income available. The trend towards nuclear family augurs well for the paint Industry.

- Per Capita Paint Consumption

Per capita consumption of Paint in India is much lower than the global average, and that of developed nations. Along with favorable demographics this represents a significant opportunity for the paint industry.

- Infrastructure focus

With infrastructure sector reforms being the top priority of the current government and keeping in mind its Smart City initiatives, demand for coatings from the infrastructure sector is going to see healthy growth.

- Growing Auto Market

Automotive Paints Division is a significant part of KNPL, and this Sector is expected to continue to grow in the years to come. This translates into a long term opportunity for KNPL as well which KNPL being the market leader can capitalize on.

- Real Estate Sector & Interest Rates

The Real Estate sector witnessed stagnancy during the last year and demonetization affected the sector sentiment further. However, after demonetization, coupled with low Housing loan interest rates, this sector is poised to grow and activity is expected to increase.

Threats

- New Competitors

New Competitors are entering the Indian Paint Market, in both Decorative and Industrial Divisions, as they have realized the growth potential that India has to offer. KNPL endeavors to be proactive in countering any challenges that may arise due to increased competition in the market.

- Inflation

Over the past few months, inflation is showing an increasing trend which can be a threat to KNPL in the new financial year.

- Below-par monsoon

A below par monsoon due to the El Nino effect could have an adverse impact on customer spending, ultimately impacting paint consumption in a negative way.

[E] SEGMENT WISE PERFORMANCE

The Company has only one segment of activity named paints, in accordance with the definition of "Segment" covered under Indian Accounting Standard (Ind AS) 108 on Operating Segments. The performance of the Company is discussed in this Report.

[F] RISKS AND CONCERNS

In a business environment that is constantly under churn, Risk Management becomes a top priority for KNPL in order to guard against any eventuality, while at the same time, being able to extract maximum benefit out of favorable conditions.

The Company follows a Risk Management framework, where the risk committee meets regularly to identify imminent and potential risks, as well as documenting risk mitigation measures to eliminate or reduce the event impact.

The Company has classified its risks under the following heads.

- Strategic Risk

These risks relate to risks around brand, technology, industry dynamics like takeovers and alliances. These risks have the potential to impact future business plans of the Company. Identifying and mitigating these are a strategic priority at KNPL.

- Operational Risks

Operational Risks for KNPL include risks related to delivery, service and quality which could impact KNPL''s capability to serve its customers. KNPL has a strict review mechanism to ensure these risks do not pose a threat to the Company. In addition to this, supplier risks as well as market risks are monitored carefully.

- Statutory Risk

With a network spanning across India and overseas, KNPL makes sure that the business operates within the ambit of law and necessary legal compliances are followed. Combining in-house expertise and knowledge of statutory compliances along with professional legal services, KNPL ensures that there are no lapses on the regulatory front, and the Company functions within the legal and statutory framework.

- Financial Risks

Finance risks originating out of currency fluctuations and market volatility have the potential to affect Company bottom line directly. Thus, these risks are dealt with advance planning, taking necessary steps for hedging against such outcomes.

- System risk

With all operations conducted using business software, ensuring high availability of systems as well as proper controls to ensure that operations are not compromised remains a top management priority. The Company takes many steps proactively to ensure that potential risks are minimized.

- People Risk

Retaining existing talent and attracting new talent takes centre stage as KNPL aims to grow aggressively. The Company has a structure in place for mitigating this risk.

This year the Company has been able to automate the Risk Management framework into a dashboard which helps track the risks more effectively.

[G] RESEARCH And DEVELOPMENT

Innovation through Research & Development is one of the key Objectives at KNPL which has also been incorporated into the Company''s Vision statement. KNPL''s aim is to leverage the global technical know-how available with the Kansai group for innovation.

New products were developed for the Automotive division including new shade development. High Solid/ Medium Solid products, anti-corrosive primer, monocot metallic’s, Acrylic/Epoxy Red CED, Super Petrol Taping Lacquer for the two wheeler industry, heavy metal free Epoxy Paint for Auto Ancillaries were a few of the innovative products developed during the financial year.

In the Automotive Refinish segment, the Company has enhanced its shade range and portfolio to strengthen its offering.

New products were also introduced in the Decorative division such as Excel Mica Marble, ready mix primer cum putty, Excel alkali Primer and Impression Glitter -Gold and Silver. Similarly the wood coating range was enhanced.

Optimization of formulation was done by undertaking Value Engineering leading to optimum mix for cost savings. Research and Development continues to be in focus and innovation still remains the driving force behind Customer service.

[H] INFORMATION TECHNOLOGY

For 2016-17, Digitization, mobility and security were the three core IT initiatives. All these initiatives were leveraged to design improved performance and faster decision making to all the core functions in the organization.

Continuing from the last year digitization initiative, exploiting the IT investment done in the "in-memory" computation capabilities, various business processes were re-engineered and systematized in the area of Marketing, supply chain, manufacturing and finance. This would enable deeper insight; enhance the service capabilities of the supply chain, quicker response to the markets and influencers and real time information to the customers.

KNPL has always believed into data being a strategic asset. The decision capabilities were given a boost by providing next generation exception analytics at an individual employee level across the organization which has helped provide visibility into the impact of action on the Key Performance indicator that they are responsible for.

As part of our mobility initiative this year our decorative sales team was moved to the mobility platform. In addition off-line digital content mobile application was developed for the sales team. The work towards making KNPL GST ready continued in the current year. Being conscious about the changing IT environment and to safeguard against the vulnerabilities, the Company has implemented various security solutions.

[I] PEOPLE

At KNPL, we believe that people are essential part of the organization, as they provide inspiration, creativity, vision and motivation that keeps us going. People provide the skills and competencies necessary to make organizational strategies work. With the advancements in technology, the significance of people gets augmented multi-fold. Many efforts are taken to engage the energies and enthusiasm of our people in the most effective way.

This year too, we continued with our Endeavour to maintain a ‘Performance driven, fair and transparent'' culture. The Organizational Business Plan is aligned with the Key Result Areas for each position. The performance review mechanism has now been digitalized to ensure greater transparency and accuracy. The daily performance dashboard is available to all the employees and it enables every employee to remain focused on the priorities and continue to contribute to the organization''s goals. We have made progress on focused initiatives and have grown on our key performance indicators over the year 2016-17. This has complimented our commitment to provide a high quality of service to our customers.

KNPL treats the development of its employees with utmost importance. New training programs for frontline staff in both the Decorative and Industrial Divisions were conducted in order to skill them with new sales techniques and drive the top-line of the Company. We also introduced a new training program called "Leap" for our Decorative sales force with an objective to rejuvenate the workforce with sales techniques that would enhance their performance. Assessment & Development centers were conducted to objectively evaluate the managerial potential of select personnel.

In order to enhance employee engagement, we also introduced an employee recognition platform called GEMS. GEMS is a framework for employees to acknowledge support and help by colleagues in their day to day interaction. It is a company-wide rewards program that fosters an environment of appreciation. In-house training workshops on people management, excellence and KNPL competency framework, have been designed and conducted by HR.

KNPL strongly believes in Healthy living, and adopted the theme of "Be Healthy, Be Better" for the sales team. KNPL encouraged employees to make small changes in their lifestyle to lead a fit and healthy life.

HR has leveraged IT to bring about a culture of excellence by focusing on increased personal effectiveness. This was done through several digital Interventions like opinion polls, interactive quiz, extending attendance system to field, e-exit module, inviting new ideas through idea management campaigns, amongst others.

The in-house knowledge management portal is leveraged to foster a learning work culture. Through this the employees can learn from each other and keep up the momentum of a learning organization. KNPL continues with its good practices of Corporate Governance through the Whistle Blower Policy, encouraging growth of individuals irrespective of gender, religion, caste or community and policy on "Appropriate Social Conduct at Workplace". All these policies add up to a congenial work environment to drive performance that is free from threat or fear.

The above mentioned HR initiatives at KNPL attempt to support and uphold organization''s goals by fostering an engaging work environment in the dynamic business scenario.

All the above-mentioned initiatives have helped us retain key talent. Our employee strength is 2697 on 31st March, 2017.

[J] AWARDS AND RECOGNITION

Awards by External Agencies:

- KNPL Technical Wins 3rd Prize in Indian Paint Association (IPA) Technical Paper Competition.

- Mr. H M Bharuka, MD, KNPL was awarded the Best CEO in the Chemicals category by Business Today at the 4th edition of the Business Today - Best CEO Awards in December 2016.

- KNPL Quality Team - Bawal won the Silver Award at "Quality Circle Forum of India".

- Lote plant was awarded Certificate of Merit in the Paints & Allied Products Sector on 6th December, 2016 by Bureau of Energy Efficiency, Ministry of Power for its initiatives done under ENCON (Energy Conservation) in last 3 years.

- Bawal Plant secured Runner-up position in QIMPRO Convention - All India level under Improvement category.

- KNPL, Lote was awarded "Certificate of Merit" from National Safety Council (NSC) for the 4th consecutive year - Maharashtra chapter for achieving Zero Accident Frequency Rate in the year 2015.

- Bawal Quality Team won the Silver Category Award from the Quality Circle Forum of India.

- Lote plant received the Certification of Appreciation from NSC in group B under chemical manufacturing industries for appreciable achievement in Occupational safety and health.

- Jainpur Plant (PE) won an award for "Excellence in Coating Developments - Industry Research & Promotion" in 13th International Symposium on Surface Engineering & Paint Coatings.

Awards by Customers:

- Daimler India Commercial Vehicles, Chennai (DICV) has presented a memento to KNPL in September 2016 as an appreciation of our contribution.

- Kansai Nerolac Paints received 4 awards from Mahindra & Mahindra:

1) Innovation Award for Automotive and Farm Sector.

2) Award for ‘The Tough and Stylish TUV 300''.

3) Award for ‘KUV 100''.

4) Award for ‘Technologically Advanced Mahindra Yuvo''.

- KNPL has been honored with best vendor award in paints category by Suzuki Motorcycles India Pvt Ltd.

- Best supplier Award to Hosur Plant by Toyota Kirloskar Motor Limited.

- Awarded "Best Vendor" in Paints category by M/s Plastic Omnium.

[K] community development

Corporate Social Responsibility (CSR) is generally understood as the way through which a Company can achieve balance of economic, environmental and social imperatives. Thus, it can be said that the CSR approach is holistic and integrated with the core business strategy for addressing social and environmental impacts of businesses. Now, it is a well-known fact that CSR needs to address well-being of all the stakeholders and not just the Company''s shareholders.

At KNPL, we undertake several outreach programs under the umbrella of Environment, Health, Education, Community Living, Livelihood and Skill Enhancement and protection of Heritage sites.

These CSR initiatives are largely done through the involvement and participation of a large section of employees thereby instilling a sense of pride and purpose amongst the employees beyond the conduct of day to day business activities.

Many of the CSR activities are carried out in partnership with government and other stakeholders so as to create a meaningful impact in the society and improve overall quality of life of people in general and of rural community in particular.

KNPL in collaboration with SBI, conducted several Basic painting training programs to the unemployed rural youth, thereby enabling them to not only be self-employed but also giving rise to entrepreneurs.

KNPL also carries out various CSR activities under Rural/ Community development Program thereby contributing to make civil society strong and to extend hand in providing basic amenities to the needy. These programs include Health camps in rural area, construction of toilets, bore wells, financial assistance to various educational Institutes to meet their educational requirements, Environmental sustenance etc. Preference is given to the local area, where the Company operates, viz. near Plant locations and sales depots.

KNPL will continue to support National and State programs and partner with local and government bodies so as make a impactful and effective contribution to society at large, with the involvement and engagement of its employees in the process.

Nerolac launched its first ever ‘Cyclathon'' across 46 cities to commemorate the second anniversary of the Swachh Bharat campaign. The event brought both ‘Swaasth'' or health & ‘Swachhata'' or cleanliness into focus as it included cycling for around 5 km followed by a painting activity at a school. The event was a fun activity involving Nerolac''s local teams, painters and dealers rallying together as a community to champion health.

[L] ENVIRONMENT, HEALTH & SAFETY

Environment, Health & Safety (EHS) is of utmost importance for KNPL. Fire prevention, emergency preparedness and response and safety at workplace come under the aegis of Safety. Last year, KNPL focused on enhancing safety awareness amongst its employees through specially designed "Danger Experience Training program". Employees were provided with practical experience of safety hazards involved in various paint manufacturing processes at the safety laboratory. The Company intends to continue this experiential training program in the coming year and strengthen "Safety First" culture. KikenYochi Training (KYT) is being exercised aggressively on shop floor to gather employee feedback on safety hazards in their respective work areas and increase awareness level to avoid unsafe acts. In addition to this, the Company has invested in up gradation of fire-fighting installations at its plants to strengthen emergency preparedness.

Occupational health is one of the important factors of Safety. To cater to employee health, all KNPL manufacturing sites are equipped with dedicated Occupational Health Centre (OHC) and Ambulance for an emergency situation. The Company facilitates periodic medical check-up for its employees. Last year, Company enhanced focus on employee visits to OHC (Occupational Health Center).

Internal training to healthcare workers is arranged at all the manufacturing units of the Company. Training is focused on ensuring compliance with respect to Bio-Medical Waste Management Rules, 2016. It includes key topics such as bio-medical waste segregation, packaging, transportation, safe handling and storage and its disposal methods etc. 18 personnel were provided training during the year 2016-17. 8 personnel will be provided training in the forthcoming year.

Under environmental domain, Reduction and recovery of material losses is one of the key focus areas for KNPL.

KNPL focuses immensely on water conservation through its water reuse, reduce and recycle themes. The Company has embraced water efficient technologies in its process to help reduce water consumption at source. Zero effluent discharge facilities at our plants led us to re-utilize whole treated water back into processes.

On the sustainability front, Energy Management is key focus area for the Company. In order to curtail energy consumption, KNPL has invested in energy efficiency measures as well as in up gradation of machine utilities. KNPL has been proactive in substitution of nonrenewable energy sources by renewable energy sources. The Company continued to harness solar energy through various initiatives like solar plant, sola tubes amongst others. Further, it switched to renewable energy sources through mechanisms such as power purchase agreement and wind wheeling. In upcoming years, the Company would extend the proportion of renewable energy used.

The Company publishes its Environmental and social performance through Sustainability report which is available on the website of the Company.

[M] supply chain

Supply Chain is an integral and a vital cog in the wheel of KNPL and this year saw increased focus on optimizing processes in this area.

This year also saw an increase in the number of depots, which has enhanced the reach of KNPL and will help serve customers better. Besides being a nodal point for material transfer, depots also serve as a check point to connect to the consumers and influencers directly.

Tinting is a vital element of the paint manufacturing process. The Company has combined IT with paint manufacturing technology to develop a system to address this element of the manufacturing process.

[P] FINANCIALS

Gross sales and other operating income for the year aggregated toRs,4936.05 Crores reflecting a growth of 7.2% over the previous year.

Depreciation for the year isRs,69.49 Crores as againstRs,67.72 Crores in the previous year.

Other Income was substantially higher atRs,98.22 Crores as compared toRs,27.35 Crores for the previous year mainly due to surplus funds arising out of gain on sale of Chennai land in March 2016, deployed in mutual funds during the year.

The Company continued with its initiatives to reduce procurement cost and to reduce operational costs. These initiatives helped the Company in the current year to keep the operational costs under control and improve the bottom line.

Profit Before Depreciation, Interest and Tax (PBDIT) for the year is higher atRs,730.69 Crores compared toRs,579.98 Crores last year reflecting a growth of 26%. Profit Before Tax (PBT) for the year isRs,759.42 Crores as compared toRs,539.61 Crores (before extraordinary income) of the previous year which is a growth of 40.7% over previous year.

The Company spentRs,6.46 Crores towards Corporate Social Responsibility compared toRs,5.29 Crores in the previous year.

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, during the year.

There are no significant or material orders passed by any Regulators, Courts or Tribunals against the Company which could impact the going concern status and Company''s operations in future.

There has been no change in the nature of business during the year.

There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Cautionary Statement

Statements in this Management Discussions and Analysis Report describing the Company''s objectives, estimates and expectations may be “forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

4. Unclaimed Dividend

During the year, dividend amounting toRs,3.67 lacs that had not been claimed by the shareholders for the year ended 31st March, 2009, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2017, dividend amounting toRs,87.68 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrar, TSR Darashaw Ltd., for unclaimed dividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 22nd June, 2016 (date of the last Annual General Meeting) on the website of the Company, www.nerolac.com. The same is also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

6. Overseas Operations:

a. Operations in Nepal

During the year, the name of our subsidiary

company in Nepal was changed from Kansai

Paints Nepal Pvt. Ltd. to KNP Japan Private Limited.

For the financial year ended 31st March, 2017, the

Turnover of KNP Japan Private Limited increased toRs,53.95 Crores as compared toRs,40.16 Crores for the financial year ended 31st March, 2016.

Profit Before Tax has increased toRs,6.87 Crores as compared toRs,4.09 Crores last year. Profit After Tax has increased toRs,5.12 Crores as compared toRs,3.05 Crores last year.

Consolidated financial statement of the Company and of the subsidiaries, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of KNP Japan Private Limited is part of this Annual Report.

Annual Audited Accounts of KNP Japan Private Limited are available on the website of the Company.

b. Operations in Srilanka

Our subsidiary in Srilanka, Kansai Paints Lanka Pvt. Ltd. has commenced its operations on 26th April, 2017.

Consolidated financial statement of the Company and of the subsidiaries, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of Kansai Paints Lanka Pvt. Ltd. is part of this Annual Report.

Annual Audited Accounts of Kansai Paints Lanka Pvt. Ltd. are available on the website of the Company.

7. New Projects

The Shareholders were informed last year that the Company undertook a comprehensive review of its manufacturing capacities and had started setting up of a paint manufacturing unit at Saykha Industrial Estate in Gujarat and also a paint manufacturing unit at Goindwal Sahib near Amritsar in Punjab. It was also informed that the Company had started setting up a Global R & D Centre at Vashi, Navi Mumbai.

The construction of manufacturing unit at Saykha Industrial Estate in Gujarat and at Goindwal Sahib near Amritsar in Punjab and also the construction of Global R & D Centre at Vashi, Navi Mumbai are in process as per the planned schedule.

The Company has initiated a project at Achutapuram, Visakhapatnam district in Andhra Pradesh to set up a paint manufacturing unit having a capacity of 60,000 KL per year, which is expandable in phases, at an estimated cost ofRs,304 crores.

8. Cost Audit

The Ministry of Corporate Affairs (MCA), vide Notification dated 14th July, 2016, amended the Companies (Cost Records and Audit Rules) 2014, through Companies (Cost Records and Audit) Amendment Rules, 2016. As per the Amendment Rules, 2016, the Company is required to conduct cost audit of the cost records of its products - Thinners and Resins. The Board of Directors has appointed D. C. Dave & Co., Cost Accountants as the Cost Auditor to conduct cost audit of the cost records of products - Thinners and Resins for the financial year 2016-17 and financial year 2017-18.

The remuneration of the Cost Auditor as recommended by the Audit Committee and approved by the Board of Directors is required to be ratified subsequently by the Shareholders. Hence the resolutions at Item nos. 6 and 7 of the Notice of the Annual General Meeting (AGM).

9. Directors

In accordance with Articles of Association of the Company, Mr. Masaru Tanaka and Mr. Hidenori Furukawa retire by rotation at this Annual General Meeting and being eligible offer themselves for re-appointment.

Mr. Shinji Asatsuma, a nominee of Kansai Paint Co. Ltd., Japan, resigned from the Board of Directors of the Company with effect from 29th July, 2016. The Board of Directors has placed on record its sincere appreciation and gratitude for the valuable and outstanding contribution made by Mr. Asatsuma during his association with the Company as a Director.

Mr. Katsuhiko Kato, a nominee of Kansai Paint Co. Ltd., Japan was appointed as a Director with effect from 29th July, 2016, in the casual vacancy caused by the resignation of Mr. Shinji Asatsuma. Mr. Kato holds office till the ensuing Annual General Meeting. Notices in writing have been received from some Shareholders of the Company proposing his candidature for the office of the director.

Mr. D. M. Kothari, Vice Chairman has retired from the Board of Directors of the Company with effect from the close of business on 2nd May, 2017. The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Mr. Kothari during his long and fruitful association with the Company as a Director, then as the Managing Director and subsequently as the Vice Chairman of the Company.

Mr. H. M. Bharuka, Managing Director, is now appointed as the Vice Chairman and Managing Director of the Company for the period from 3rd May, 2017 to 31st March, 2022, subject to the approval of the Shareholders at the ensuing Annual General Meeting to be held on 21st June, 2017. The material terms of appointment of Mr. Bharuka are stated in the explanatory statement to the Notice of the AGM at item no. 8.

None of the Directors is disqualified for appointment/ re-appointment under Section 164 of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors'' Report.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Companies Act, 2013.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

Mr. H. M. Bharuka, Managing Director, is a member of the Global Steering Committee of Kansai Paint Co. Ltd., Japan, the holding company. Mr. H. M. Bharuka received a remuneration ofRs,73.10 lacs during the year as a member of the Global Steering Committee.

10. Key Managerial Personnel

As required under Section 203 of the Companies Act,

2013, the Company has noted that Mr. H. M. Bharuka, Managing Director, Mr. P. D. Chaudhari, Whole-time Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary are the Key Managerial Personnel of the Company.

11. Board Evaluation

The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Report on Corporate Governance in this Annual Report. The Board noted the evaluation results that were collated and presented to the Board.

12. Remuneration Policy

The Board of Directors of the Company has adopted a Remuneration Policy for determining qualifications, positive attributes and independence of a Director and criteria for Director''s appointment and remuneration. The features of the Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Companies Act, 2013.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall company performance.

13. Risk Management Policy

Risk profiling is put in place for all the areas of operations in the Company and well integrated in the business cycle. The Company has identified the risk areas in its operations along with its probability and severity, department wise. The various risks to which the Company is exposed are as mentioned in the Management and Discussion Analysis Report under the relevant heading. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk.

The Risk Management Framework comprises of Risk Management Committee and the Risk Officers. The Risk Management Committee of our Company consists of the Management Committee and the Chief Risk Officer. The Managing Director, the Executive Director and the functional heads constitute the Management Committee. The Company Secretary is the Chief Risk Officer. The Risk Officers have been appointed by the functional heads and represent the various functions. The requirements of Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with regard to the constitution of a Risk Management Committee are not applicable to our Company as this Regulation is applicable only to top 100 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year. The Board of Directors and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals.

The functions of the Risk Management Committee includes preparation of company-wide framework for risk management, fixing roles and responsibilities, communicating the risk management objective, allocating resources, drawing action plan, determining criteria for defining major and minor risks, deciding strategies for escalated major risk areas, updating company-wide Risk register and preparing MIS report for review of Audit Committee.

The Risk Management Framework aims to:

(a) address our Company''s strategies, operations and compliances and provide a unified and comprehensive perspective;

(b) establish the risk appetite;

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication;

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response;

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources;

(f) develop a mechanism to manage risks.

Through the Risk Management framework, system and process are set to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Dividend Distribution Policy

The Dividend Distribution Policy of the Company has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board will assess the Company''s financial requirements, including present and future organic and inorganic growth opportunities and other relevant factors as mentioned in this policy before declaring dividend in any financial year.

The Board may consider not declaring dividend or may recommend a lower payout for a given financial year, after analyzing the prospective opportunities and threats or in the event of challenging circumstances such as regulatory and financial environment.

The Dividend (including interim and/or final) for any financial year shall be declared or paid by the Company for any financial year out of the profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 and remaining undistributed, or out of both. The Company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company. The Company shall follow the provisions of the Companies Act and all the relevant rules and regulations of the Companies Act and/or any regulatory enactment(s) as may be applicable while declaring and paying dividend for any financial year.

The rate of Dividend shall be fixed by the Board of Directors of the Company. Final dividend proposed by the Board of Directors, if any, would be subject to the approval of the shareholders at the Annual General Meeting.

The Board of Directors shall recommend dividend in compliance with this policy, the provisions of the Companies Act, 2013 and Rules made there under and other applicable legal provisions.

The Company will consider various internal and external factors, including but not limited to the following before making any recommendation for dividend:

(i) Internal factors:

a. Profitable growth of the Company and specifically, profits earned during the financial year as compared with previous years and internal budgets;

b. Cash flow position of the Company;

c. Accumulated reserves;

d. Stability of earnings;

e. Future cash requirements for organic growth/ expansion and/or for inorganic growth;

f. Contingent liabilities;

g. Deployment of funds in short term marketable investments and/or long term investments;

h. Capital expenditure(s); and

i. The ratio of debt to equity.

(ii) External factors:

a. Economic environment;

b. Cost and availability of alternative sources of financing;

c. Inflation rate;

d. I ndustry outlook and stage of business cycle for underlying businesses;

e. Prevailing Taxation Policy or any amendments expected thereof, with respect to Dividend distribution;

f. Changes in the Government policies, industry specific rulings & regulatory provisions; and

g. Any other relevant factors that the Board may deem fit to consider before declaring Dividend.

Apart from the above, the Board also considers past dividend history and track record of previous Dividends distributed by the Company. The Board may additionally recommend special dividend in special circumstances.

Subject to applicable regulations, the Company''s retained earnings shall be applied for:

- Funding inorganic and organic growth needs including working capital, capital expenditure, repayment of debt, etc.

- Buyback of shares subject to applicable limits

- Capitalization of shares

- Issue of Bonus shares

- Payment of Dividend in future years

- Investment in new business(es) and/or additional investment in existing business(es)

- General corporate purposes, including contingencies

- Any other permissible usage as per law.

The Company currently has only one class of shares, viz. Equity shares, for which this policy is applicable. The policy will be subject to review if and when the Company issues different classes of shares.

The Dividend Distribution Policy of the Company is also available on the website of the Company at https://nerolac.com/financial/policies.html#scroll

15. Corporate Social Responsibility

The Board has constituted a Corporate Social Responsibility (CSR) Committee as per the provisions of Section 135 of the Companies Act, 2013. The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII of the Act;

(b) recommend the amount of expenditure to be incurred on the activities referred to in Clause (a); and

(c) monitor the CSR policy of the Company from time to time.

The members of the CSR Committee are Mr. D. M. Kothari, Mr. H. M. Bharuka, Mr. N. N. Tata and Mrs. Brinda Somaya. Mr. D. M. Kothari is the Chairman of the CSR Committee. The independent Directors on the CSR Committee are Mr. D. M. Kothari, Mr. N. N. Tata and Mrs. Brinda Somaya.

With effect from 3rd May, 2017, the CSR Committee will be re-constituted as follows:

Mr. H. M. Bharuka (Chairman), Mr. N. N. Tata and Mr. P. D. Chaudhari.

The CSR Committee meetings held during the year and attendance of the members of the CSR Committee at the meetings are as follows:

Date of Meeting

Members Present at the Meeting

29-07-2016

Mr. D. M. Kothari Mr. H. M. Bharuka Mr. N. N. Tata Mrs. Brinda Somaya

27-03-2017

Mr. D. M. Kothari Mr. N. N. Tata Mrs. Brinda Somaya

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee. The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014, including a brief outline of the Company''s CSR Policy, total amount to be spent under CSR for the financial year, amount unspent and the reason for the unspent amount, is set out at Annexure-1 forming part of this Report.

16. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the financial statements provided in this Annual Report.

17. Related Party Transactions

All transactions entered into with the Related Parties in terms of Section 2(76) and Section 188 of the Companies Act, 2013 read with Regulation 2(zc) and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year were in the ordinary course of business and on arm''s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no Material Related Party Transactions during the year. Thus, disclosure in Form AOC-2 is not required.

18. Audit Committee

The Company has an Audit Committee in place, constituted as per the provisions of Section 177 of the Companies Act, 2013. The members of the Audit Committee, its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee is mentioned in the Corporate Governance Report under the appropriate heading.

19. Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The implementation of the Whistle Blower Policy has been mentioned in the Report of Corporate Governance.

20. Prevention of Sexual Harassment at workplace

The Company has adopted a policy with the name "Policy on Appropriate Social Conduct at Workplace".

The policy is applicable for all employees of the organization, which includes corporate office, branches, depots and manufacturing locations etc.

The policy is applicable to non-employees as well i.e. business associates, vendors, trainees etc.

A Complaints Committee has also been set up to redress complaints received on sexual harassment as well as other forms of verbal, physical, written or visual harassment.

During the financial year under review, the Company has not received any complaints of sexual harassment.

21. Corporate Governance

As required by Schedule V(C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

22. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

23. Business Responsibility Report

Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended with effect from 1st April, 2016, requires that in case of the top 500 listed companies based on market capitalisation, the Annual Report shall contain a Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, in the format specified by SEBI. The Business Responsibility Report in the format suggested by SEBI forms part of the Annual Report.

24. Particulars regarding Employees Remuneration

The statement containing particulars of employees as required under Section 197(12) of the Companies Act,

2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure-2.

25. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 the Directors hereby state that:

(i) i n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(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 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 this Act 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;

(v) the Directors 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

(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

26. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-3 to this Report.

27. Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure-4 to this Report.

28. Statutory Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, have been appointed for a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions of Section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of B S R & Co. LLP, as Auditors of the Company for a period of 5 years shall be subject to ratification by shareholders at every AGM. Accordingly, the appointment of B S R & Co. LLP, as the Auditors of the Company from this AGM till the conclusion of next AGM is put forth for your approval.

The Auditors'' Report is clean and there are no qualifications in their Report.

29. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company had appointed M/s Ragini Chokshi & Co., Practicing Company Secretaries, as the Secretarial Auditor of the Company for the year 2016-17 to conduct secretarial audit and to ensure compliance by the Company with various Acts applicable to the Company. The Secretarial Audit Report for the financial year 2016-17 issued by M/s Ragini Chokshi &. Co., is annexed to this Report as Annexure-5. There are no qualifications or adverse remarks in their Report.

30. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

P. P. Shah Chairman

Mumbai, 2nd May, 2017


Mar 31, 2015

Dear Members,

The Directors are pleased to present the 95th Annual Report and the Audited Accounts for the year ended 31st March, 2015.

1. Financial Highlights

1st April, 2014 1st April, 2013 to to 31st March, 2015 31st March, 2014 Rs. in Crores Rs. in Crores

Sales & Operating Revenue. 4211.64 3739.02

Net Sales/Income from operations (Net of excise and discounts) 3532.41 3145.77

Other Income 21.79 10.33

Profit before Interest, Depreciation, Tax and Appropriation 466.61 372.42

Interest 0.02 0.45

Depreciation 67.69 64.98

Profit Before Exceptional Item 398.9 306.99

Exceptional Item - -

Profit Before Tax. 398.9 306.99

Tax 127.23 100.42

Profit After Tax 271.67 206.57

Balance brought forward from previous year. 931.52 814.97

Balance available for appropriations 1203.19 1021.54

Appropriations:

Proposed Dividend 75.45 59.28

Tax on proposed dividend 15.78 10.08

General Reserve 27.17 20.66

Amount spent towards Corporate Social Responsibility Activities under Section 135 of the Companies Act, 2013. 4.51 -

Impact of depreciation pursuant to adoption of useful lives as per Part C of Schedule II of the Companies Act, 2013 and management estimate of useful lives 3.49 —

Deferred tax impact on the above 1.19 —

Balance retained in Profit and Loss Account. 1077.98 931.52

1203.19 1021.54

2. Dividend

The Directors recommend for consideration of the Members, a dividend of Rs. 1.40 (140%) per equity share of the nominal value of Rs. 1 each for the year ended 31st March, 2015 as against Rs. 11.00 per equity share (110%) paid last year on every equity share of the face value of Rs. 10 each.

4. Unclaimed Dividend

During the year, dividend amounting to Rs. 2.74 lacs that had not been claimed by the shareholders for the year ended 31st March, 2007, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2015, dividend amounting to Rs. 57 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrar, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 20th June 2014 (date of the last Annual General Meeting) on the website of the Company (www.nerolac.com), as also on the website of the Ministry of Corporate Affairs (www.mca.gov.in).

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

6. Subsidiary in Nepal

The Company has 8,84,000 equity shares constituting 68% of the paid-up equity share capital of Kansai Paints Nepal Pvt. Ltd., Nepal (Kansai Paints Nepal).

Pursuant to provisions of Section 2(87) of the Companies Act, 2013, Kansai Paints Nepal is the subsidiary of our Company.

For the financial year ended 31st March, 2015, the Gross Turnover of Kansai Paints Nepal increased to Rs. 39.36 Crores as compared to Rs. 30.43 Crores for the financial year ended 31st March, 2014. Profit before Tax rose to Rs. 4.60 Crores from Rs. 2.95 Crores. Profit after Tax rose to Rs. 3.52 Crores from Rs. 2.20 Crores.

Consolidated financial statement of the Company and of the subsidiary, Kansai Paints Nepal, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of Kansai Paints Nepal is part of this Annual Report.

Annual Audited Accounts of Kansai Paints Nepal are available on the website of the Company.

7. Proposed Joint venture in Sri Lanka

The Company has entered into a Joint Venture agreement with Capital Holdings Maharaja Pvt. Ltd., a group Company in Maharaja Group. Maharaja Group is a diversified group in Sri Lanka having presence in Businesses like Media, Hardware, FMCG products etc. The Company seeks to take advantage of Maharaja Group''s strong presence in hardware outlets. Our Company now intends to start a JV by incorporating a Company. The total project cost is estimated to be 65 Crores LKR. The equity contribution of the Company in this proposed JV would be 60% amounting to around 39 Crores LKR (INR 18.4 Crores).

8. Cost Audit

The Ministry of Corporate Affairs (MCA) vide Notification dated 31st December, 2014 made amendment in the Companies (Cost Records and Audit) Rules 2014, through Companies (Cost Records and Audit) Amendment Rules, 2014. As per the Amendment Rules, our Company is exempted from the requirement to conduct Cost Audit. Our Company has availed the exemption granted by the MCA.

9. Directors

During the year under review, Mr. Hidenori Furukawa and Mr. Shinji Asatsuma have been appointed as

Additional Directors of the Company with effect from 22nd July, 2014 and 30th January, 2015, respectively. Mr. Hidenori Furukawa and Mr. Shinji Asatsuma shall hold office of Director upto the date of the forthcoming Annual General Meeting. The Company has received letters from shareholders recommending the appointment of Mr. Hidenori Furukawa and Mr. Shinji Asatsuma as Directors of the Company. The proposal of their appointment has been put forth for approval of the shareholders of the Company in the Notice of the AGM. A brief resume of the Directors seeking appointment at the forthcoming Annual General Meeting and other details as required to be disclosed in terms of Clause 49 of the Listing Agreement forms part of the Notice.

Mrs. Brinda Somaya was appointed as an Additional Director with effect from 22nd July, 2014. Thus the Company has complied with the requirement of Section 149 of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, in regard to the appointment of a Woman Director. Mrs. Somaya also satisfies the criteria for being an Independent Director of the Company and has given a declaration to the Company of her independence as required under Section 149 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement. In pursuance of Section 149 (10) of the Companies Act, 2013, read with Clause 49 of the Listing Agreement, Mrs. Brinda Somaya has been appointed as an Independent Director for a term of 5 years from 22nd July, 2014 to 21st July, 2019 vide shareholders'' approval obtained through Postal Ballot.

In pursuance of Section 149 (10) of the Companies Act, 2013, read with General Circular No. 14/ 2014 dated 9th June, 2014 issued by the Ministry of Corporate Affairs (MCA) and Clause 49 of the Listing Agreement :

(a) Mr. P. P. Shah, Independent Director on the Board of the Company has been appointed for a term of 5 years from 30th January, 2015 to 29th January, 2020, vide shareholders approval obtained through Postal Ballot;

(b) Mr. N. N. Tata, Independent Director on the Board of the Company has been appointed for a term of 5 years from 30th January, 2015 to 29th January, 2020, vide shareholders approval obtained through Postal Ballot.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under section 149(6) of the Companies Act, 2013.

In accordance with Articles of Association of the Company, Mr. P. D. Chaudhari and Mr. Masaru Tanaka retire by rotation at this Annual General Meeting and are eligible for re-appointment.

Dr. J. J. Irani retired from the Board with effect from 20th June, 2014.

Mr. H. Nishibayashi, nominee of Kansai Paint Co., Ltd., Japan, on the Board, resigned from the directorship with effect from 22nd July, 2014.

Mr. Y. Takahashi, nominee of Kansai Paint Co., Ltd., Japan, on the Board, resigned from the directorship with effect from 30th January, 2015.

The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Dr. J. J. Irani, Mr. H. Nishibayashi and Mr. Y. Takahashi during their association with the Company as Directors.

None of the Directors is disqualified for appointment/ re-appointment under Section 164 of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors'' Report.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

Mr. H. M. Bharuka, Managing Director, is a member of the Global Steering Committee of Kansai Paints Co. Ltd., Japan, the holding Company. Mr. H. M. Bharuka received a remuneration of Rs. 57.61 lacs during the year as a member of the Global Steering Committee.

10. Key Managerial Personnel

As required under Section 203 of the Companies Act, 2013, the Company has noted that Mr. H. M. Bharuka, Managing Director, Mr. P. D. Chaudhari, Wholetime Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary are the Key Managerial Personnel of the Company.

11. Board Evaluation

The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Report on Corporate Governance in the Annual Report. The Board noted the evaluation results that were collated and presented to the Board.

12. Remuneration Policy

The Board of Directors of the Company has adopted a Remuneration Policy for determining qualifications, positive attributes and independence of a Director and criteria for Director''s appointment and remuneration. The features of the Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company. Devote sufficient time and attention to his professional obligations for informed and balanced decision making. Assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Companies Act, 2013 and Clause 49 of the Listing Agreement concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Companies Act and the Listing Agreement.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

13. Risk Management Policy

Risk profiling is put in place for all the areas of operations in the Company and well integrated in the business cycle. The Company has identified the risk areas in its operations along with its probability and severity, department wise. The various risks to which the Company is exposed are as mentioned in the Management and Discussion Analysis Report under the relevant heading. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk.

The Risk Management Framework comprises of Risk Management Committee and the Risk Officers. The composition of the Risk Management Committee and its functions are mentioned in the Report on Corporate Governance under the heading "Risk Management". The Risk Officers have been appointed by the functional heads and represent the various functions. The Board of Directors and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals. The composition and functions of the Risk Management Committee are given in the

Report on Corporate Governance forming part of the Annual Report.

The Risk Management Framework aims to:

(a) address our Company''s strategies, operations and compliances and provide a unified and comprehensive perspective;

(b) establish the risk appetite;

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication;

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response;

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources; and

(f) develop a mechanism to manage risks.

Through the Risk Management Framework, system and process are set to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Corporate Social Responsibility

The Board has constituted a Corporate Social

Responsibility (CSR) Committee as per the provisions of Section 135 of the Companies Act, 2013. The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII of the Act;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the CSR policy of the Company from time to time.

The members of the CSR Committee are Mr. D. M. Kothari, Mr. H. M. Bharuka, Mr. N. N. Tata and Mrs. Brinda Somaya. Mr. D. M. Kothari is the Chairman of the CSR Committee. The Independent Directors on the CSR Committee are Mr. D. M. Kothari, Mr. N. N. Tata and Mrs. Brinda Somaya.

The CSR Committee meetings held during the year and attendance of the members of the CSR Committee at the meetings are as follows:

Date of Meeting Members Present at the Meeting

22nd October, Mr. D.M. Kothari 2014 Mr. H.M. Bharuka

Mr. N.N. Tata Mrs. Brinda Somaya

12th December, Mr. D.M. Kothari 2014 Mr. H.M. Bharuka

Mr. N.N. Tata Mrs. Brinda Somaya

9th March, 2015 Mr. D.M. Kothari Mr. N.N. Tata Mrs. Brinda Somaya

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee. The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014 including a brief outline of the Company''s CSR Policy, total amount to be spent under CSR for the financial year, amount unspent and the reason for the unspent amount, is set out at Annexure-1 forming part of this Report.

15. Sub-division of share capital of the Company

In order to improve the liquidity of the Company''s shares in the Stock market and to make it affordable to the small investors, the Company has subdivided each equity share of the Company from face value of Rs.10 each to 10 equity shares of face value of Rs. 1 each vide shareholders approval obtained through Postal Ballot. The old shares having face value of Rs. 10 are no longer tradable on the Stock Exchanges. The shareholders holding share certificates in physical form have been issued new share certificates with face value of Rs. 1 each. Credit is given with the amount of sub-divided shares to the demat account of the shareholders holding shares in demat mode. The revised structure of the Authorised Capital, Subscribed Capital and Paid-up capital of the Company is reflected in the financial statements. Consequential amendments to the Clause V of the Memorandum of Association and Article 3 of the Articles of Association of the Company is also made to give effect to the subdivision of shares of the Company vide approval of shareholders obtained by the Company through Postal Ballot.

16. Particulars of Loans, Guarantee or Investments under Section 186 of the Companies Act, 2013

Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the financial statements provided in this Annual Report.

17. Internal Financial Controls

The Board of Directors of the Company has laid down adequate internal financial controls which are operating effectively. During the year, policies and procedures are adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, safeguarding of its assets, the prevention and detection of its frauds and errors, the accuracy and completeness of the accounting records and the timely preparations of reliable financial information.

18. Related Party Transactions

All transactions entered into with the Related Parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on arm''s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no Material Related Party transactions during the year. Thus, disclosure in Form AOC-2 is not required.

19. Audit Committee

The Company has an Audit Committee in place, constituted as per the provisions of Section 177 of the Companies Act, 2013. The members of the Audit Committee, its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee is mentioned in the Corporate Governance Report under the appropriate heading.

20. Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The implementation of the Whistle Blower Policy has been mentioned in the Report of Corporate Governance.

21. Postal Ballot

During the year, pursuant to the provisions of Section 110 of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, the Company has passed certain resolutions through Postal Ballot. In pursuance of the provisions of Clause 35 B (i) of the Listing Agreement, the shareholders were also provided with the facility of e-voting through CDSL for the Postal Ballot.

Mrs. Ragini Chokshi, Partner of Ragini Chokshi & Co., Practicing Company Secretaries, was appointed as the Scrutinizer for conducting the Postal Ballot/e-voting process in a fair and transparent manner. The Postal Ballot Notice dated 30th January, 2015 was dispatched to all the shareholders on 12th February, 2015. The e-voting period was open from 14th February, 2015 to 15th March, 2015. The Postal Ballot forms received upto the close of working hours on 15th March, 2015 were considered and the Results of Postal Ballot were announced on 16th March, 2015 at the Registered Office of the Company.

The resolutions passed by Postal Ballot with requisite majority are as under:

1. Ordinary Resolution for sub-division of 1 Equity Share of the face value of Rs. 10 into 10 Equity Shares of face value of Rs. 1 each.

2. Special Resolution for alteration of Capital Clause of Memorandum of Association to facilitate sub-division of shares.

3. Special Resolution for alteration of Capital Clause of Articles of Association to facilitate sub-division of shares.

4. Ordinary Resolution for appointment of Mr. Pradip P. Shah as an Independent Director for a term of five consecutive years from 30th January, 2015 to 29th January, 2020.

5. Ordinary Resolution for appointment of Mr. Noel N. Tata as an Independent Director for a term of five consecutive years from 30th January, 2015 to 29th January, 2020.

6. Ordinary Resolution for appointment of Mrs. Brinda Somaya as an Independent Director for a term of five consecutive years from 22nd July, 2014 to 21st July, 2019.

22. Corporate Governance

As required by the existing Clause 49(X) of the Listing Agreement entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

23. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

24. Particulars regarding Employees Remuneration

The statement containing particulars of employees as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure-2.

25. Directors'' Responsibility Statement

As stipulated in the provisions contained in Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Directors hereby state that:

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

(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 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 this Act 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;

(v) the Directors 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

(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

26. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-3 to this Report.

27. Extract of Annual Return

In accordance with Section 134 (3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure-4 to this Report.

28. Statutory Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, have been appointed for a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions of Section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of B S R & Co. LLP, as Auditors of the Company for a period of 5 years shall be subject to ratification by shareholders at every AGM. Accordingly, the appointment of B S R & Co. LLP, as the Auditors of the Company from this AGM till the conclusion of next AGM is put forth for your approval.

The Auditors'' Report is clean and there are no qualifications in their Report.

29. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company has appointed M/s Ragini Chokshi & Co., Practicing Company Secretaries, as the Secretarial Auditor of the Company for the year 2014-15 to conduct secretarial audit and to ensure compliance by the Company with various Acts applicable to the Company. The Secretarial Audit Report for the financial year 2014-15 issued by M/s Ragini Chokshi & Co. is annexed to this Report as Annexure-5. There are no qualifications or adverse remarks in their Report.

30. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

P. P. Shah Chairman

Mumbai, 8th May, 2015


Mar 31, 2014

Dear Members,

The Directors are pleased to present the 94th Annual Report and the Audited Accounts for the year ended 31st March, 2014.

1. Financial Highlights

1st April, 2013 1st April, 2012 to to 31st March, 2014 31st March, 2013 Rs. in Million Rs. in Million

Sales & Operating Revenue 37390.18 33756.49

Net Sales/Income from operations (Net of excise and discounts) 31543.54 28566.19

Other Income 103.31 163.17

Profit before Interest, Depreciation, Tax and Appropriation 3724.18 3524.15

Interest 4.51 0.16

Depreciation 649.76 471.07

Profit Before Exceptional Item 3069.91 3052.92

Exceptional Item (Reversal of excess depreciation in respect of earlier years) - 1,149.25

Profit Before Tax 3069.91 4202.17

Tax 1004.20 1280.35

Profit After Tax 2065.71 2921.82

Balance brought forward from previous year 8149.65 6213.57

Balance available for appropriations 10215.36 9135.39

Appropriations:

Proposed Dividend 592.81 592.81

Tax on proposed dividend 100.75 100.75

General Reserve 206.57 292.18

Balance retained in Profit and Loss Account 9315.23 8149.65

10215.36 9135.39

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 11 (110 %) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2014 as against Rs. 11.00 per equity share (110%) paid last year.

3. Unclaimed Dividend

During the year, dividend amounting to Rs. 0.34 million that had not been claimed by the shareholders for the year ended 31st March, 2006, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2014, dividend amounting to Rs. 4.84 million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

4. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

5. Subsidiary in Nepal

The Company has 8,84,000 equity shares constituting 68% of the paid up equity share capital of Kansai Paints Nepal Pvt. Ltd., Nepal. Pursuant to provisions of section 2(87) of the Companies Act, 2013, as well as section 4 (1) (b) (ii) of the Companies Act, 1956, Kansai Paints Nepal Pvt Ltd. is the subsidiary of our Company.

The Ministry of Corporate Affairs through their General Circular No. 8/ 2014 dated 4th April, 2014 have notified that the financial statements (and documents required to be attached thereto) in respect of financial year 2013-2014 shall be governed by the relevant provisions/schedules/ rules of the Companies Act, 1956.

Pursuant to provisions of Section 212 (8) of the Companies Act, 1956, read with Circular no. 2/ 2011 dated 8th February, 2011 of the Ministry of Corporate Affairs, the Board of Directors of the Company has passed the requisite resolution and consented for not attaching the balance sheet of the subsidiary with the Annual Report of the Company. However the Annual Accounts of the subsidiary and the related detailed information shall be available to the shareholders of our Company as well as the shareholders of the subsidiary seeking such information at any point of time. The annual accounts of the subsidiary company are available for inspection by any shareholder of our Company as well as of the subsidiary company at the registered office of the Company on any working day except Saturday during the business hours of the Company. The consolidated financial statements are presented in this Annual Report.

6. Auditors'' Report

The Auditors'' Report is clean and there are no qualifications in their Report.

7. Cost Audit

The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2012-13. The due date for fling the Cost Audit Report with the Ministry of Corporate Affairs was 27th September, 2013. The Cost Audit Report was fled with Ministry of Corporate Affairs on 25th September, 2013.

The Company is seeking the ratification of the Shareholders for the appointment of N.I. Mehta and Co., Cost Accountants as the Cost Auditors of the Company for the financial year 2014-15 vide resolution No. 6 of the Notice of AGM.

8. Directors

In accordance with the Articles of Association of the Company, Dr. J. J. Irani, Mr. D. M. Kothari and Mr. H. Nishibayashi retire by rotation at this Annual General Meeting and are eligible for re-appointment.

Dr. J. J. Irani has informed the Board that he does not seek re-appointment. The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Dr. J. J. Irani during his association with the Company as a Director and then as the Chairman.

However Mr. D. M. Kothari and Mr. H. Nishibayashi offer themselves for re-appointment. In terms of Section 149, 150, 152 and other applicable provisions of the Companies Act, 2013, Mr. Kothari being eligible and offering himself for appointment, is proposed to be appointed as an Independent Director for a term of five consecutive years from the date of this Annual General Meeting.

Mr. H. Ishino, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 31st May, 2013. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr. Ishino during his tenure as a Director.

None of the Directors of the Company is disqualified under Section 274(1) (g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors'' Report.

In accordance with provisions of section 149 of the Companies Act, 2013 and the Listing agreement with the Stock Exchanges, Dr. J. J. Irani, Mr. D. M. Kothari, Mr. P. P. Shah and Mr. N. N. Tata have given a declaration to the Company that they meet the criteria of independence as mentioned in Section 149 (6) of the Companies Act, 2013 read with Clause 49 (I) (A) (iii) of the Listing Agreement.

9. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

10. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

11. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

12. Directors'' Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) that 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 of the Company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

13. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

14. Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re- appointment. In accordance with Section 139 (1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, it is proposed to appoint B S R & Co. as statutory auditors of the Company for a term of 5 consecutive years at this Annual General Meeting.

15. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Irani

Chairman

Mumbai, 30th April, 2014


Mar 31, 2013

Dear Members, The Directors are pleased to present the 93rd Annual Report and the Audited Accounts for the year ended 31st March, 2013. 1. Financial Highlights 1st April, 2012 1st April, 2011 to to 31st March, 2013 31st March, 2012 Rs. in Million Rs. in Million Sales & Operating Revenue 33756.49 30198.84 Net Sales/Income from operations (Net of excise and discounts) 28566.19 26005.72 Other Income 163.17 242.66 Profit before Interest, Depreciation, Tax and Appropriation 3524.15 3615.67 Interest 0.16 0.86 Depreciation 471.07 563.53 Profit Before Exceptional Item 3052.92 3051.28 Exceptional Item (Reversal of excess depreciation in respect of earlier years) 1149.25 - Profit Before Tax 4202.17 3051.28 Tax 1280.35 892.43 Profit After Tax 2921.82 2158.85 Balance brought forward from previous year 6213.57 4959.59 Balance available for appropriations 9135.39 7118.44 Appropriations: Proposed Dividend 592.81 592.81 Tax on proposed dividend 100.75 96.17 General Reserve 292.18 215.89 Balance retained in Profit and Loss Account 8149.65 6213.57 9135.39 7118.44 2. Dividend The Directors recommend for consideration of the Members a dividend of Rs. 11.00 (110%) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2013 as against Rs. 11.00 per equity share (110%) paid last year. 3. Unclaimed Dividend During the year, dividend amounting to Rs. 0.19 Million that had not been claimed by the shareholders for the year ended 31st March, 2005, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2013, dividend amounting to Rs. 4.46 Million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend. 4. Collaboration The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings. The Company also has Technical Assistance Agreements with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with Cashew Co. Ltd., Japan for coatings products MICRON and Thinner for MICRON. The Directors record their appreciation for the co-operation from these collaborators. 5. Subsidiary in Nepal During the year, the Company acquired 8,84,000 equity shares constituting 68% of the paid up equity share capital of Nepal Shalimar Paints Pvt. Ltd., Nepal, now known as Kansai Paints Nepal Pvt. Ltd. amounting to Rs. 78.63 Million. The Company has also advanced loan to Kansai Paints Nepal Pvt. Ltd. amounting to Rs. 63.81 Million to fund its working capital requirement. Pursuant to provisions of section 4(1)(b)(ii) of the Companies Act, 1956, Kansai Paints Nepal Pvt. Ltd. has become the subsidiary of our Company. Pursuant to provisions of section 212 (8) read with Circular no. 2/2011 dated 8th February, 2011 of the Ministry of Corporate Affairs, the Board of Directors of the Company has passed the requisite resolution and consented for not attaching the balance sheet of the subsidiary with the Annual Report of the Company. However the Annual Accounts of the subsidiary and the related detailed information shall be available to the shareholders of our Company as well as the shareholders of the subsidiary seeking such information at any point of time. The annual accounts of the subsidiary company are available for inspection by any shareholder of our Company as well as of the subsidiary company at the registered office of the Company on any working day except Saturday during the business hours of the Company. The consolidated financial statements are presented in this Annual Report. 6. Auditors' Report The Auditors' Report is clean and there are no qualifications in their Report. 7. Cost Audit Report The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2011-12. The due date for filing the Cost Audit Report with the Ministry of Corporate Affairs was 31st January, 2013. The Cost Audit Report was filed with Ministry of Corporate Affairs on 4th January, 2013. 8. Directors In accordance with the Articles of Association of the Company, Mr. P. P. Shah, Mr. N. N. Tata and Mr. Y. Takahashi retire by rotation and being eligible, offer themselves for re-appointment. Mr. M. Tanaka, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed as an Additional Director on the Board from 4th May, 2013. Pursuant to section 260 of the Companies Act, 1956, Mr. Tanaka holds office till the ensuing Annual General Meeting but being eligible, offers himself for re-appointment and the Company has received notices in writing from some Shareholders proposing his candidature for the office of Director of the Company. None of the Directors of the Company is disqualified under Section 274(1 )(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors' Report. 9. Corporate Governance As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance. The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India. 10. General Shareholder Information General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report. 11. Particulars regarding Employees Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company. 12. Directors' Responsibility Statement As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) that 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 of the Company for that period; (iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a going concern basis. In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company. 13. Energy, Technology Absorption & Foreign Exchange Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed. 14. Auditors The Company Auditors, M/s B S R & Co., Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re- appointment. 15. Acknowledgements Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large. Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company's consistent growth would not have been possible, despite the challenging environment. For and on behalf of the Board J. J. Irani Chairman Mumbai, 4th May, 2013


Mar 31, 2012

The Directors are pleased to present the 92nd Annual Report and the Audited Accounts for the year ended 31st March, 2012.

1. Financial Highlights

1st April, 2011 1st April 2010 to to 31st March, 2012 31st March, 2011 Rs in Million Rs in Million

Sales & Operating Revenue 30198.84 24957.01

Net Sales/Income from operations (Net of excise and discounts) 26005.72 21412.39

Other Income 242.66 225.44

Profit before Interest, Depreciation, Tax and Appropriation 3615.67 3132.56

Interest 0.86 1.35

Depreciation 563.53 493.55

Profit Before Exceptional Item 3051.28 2637.66

Exceptional Item - 253.67

Profit Before Tax 3051.28 2891.33

Tax 892.43 831.48

Profit After Tax 2158.85 2059.85

Balance brought forward from previous year 4959.59 3732.07

Balance available for appropriations 7118.44 5791.92

Appropriations:

Proposed Dividend 592.81 538.92

Tax on proposed dividend 96.17 87.43

General Reserve 215.89 205.98

Balance retained in Profit and Loss Account 6213.57 4959.59

7118.44 5791.92

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs 11.00 (110%) per equity share of the nominal value of Rs 10 each for the year ended 31st March, 2012 as against Rs 10.00 per equity share (100%) paid last year.

4. Unclaimed Dividend

During the year, dividend amounting to Rs 0.13 million that had not been claimed by the shareholders for the year ended 31st March, 2004, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2012, dividend amounting to Rs 5.46 million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA ( formerly Ameron International Performance Coatings and Finishes ) for High Performance Coatings. The Directors record their appreciation for the co-operation from these collaborators.

6. Auditors' Report

The Auditors' Report is clean and there are no qualifications in their Report.

7. Cost Audit Report

The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2010-11. The due date for filing the Cost Audit Report with the Ministry of Corporate Affairs was 27th September, 2011. The Cost Audit Report was filed with Ministry of Corporate Affairs on 27th September, 2011.

8. Directors

In accordance with the Articles of Association of the Company, Dr. J.J. Irani and Mr. D.M. Kothari retire by rotation and being eligible, offer themselves for re-appointment.

Mr. H. Nishibayashi, a nominee of Kansai Paint Co. Ltd., Japan, was appointed as a Director on the Board in casual vacancy caused by the resignation of Mr. Y. Tajiri with effect from 30th July, 2010. Pursuant to Section 262 read with section 256 of the Companies Act, 1956, Mr. Nishibayashi holds office till the ensuing Annual General Meeting but being eligible, offers himself for re-appointment and the Company has received notice in writing from some Shareholders proposing his candidature for the office of Director of the Company.

None of the Directors of the Company is disqualified under Section 274(1)(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors' Report.

9. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

10. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

11. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

12. Directors' Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that 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 of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

13. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

14. Auditors

The Company Auditors, M/s. B S R & Co., Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment.

15. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company's consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Irani

Chairman

Mumbai, 2nd May, 2012


Mar 31, 2011

The Directors are pleased to present the 91st Annual Report and the Audited Accounts for the year ended 31st March, 2011.

1. Financial Highlights

1st April, 2010 1st April 2009 to to 31st March, 2011 31st March, 2010 Rs. in lacs Rs. in lacs

Gross Sales 249319.23 197170.53

Net Sales/Income from operations (Net of excise and discounts) 213873.02 170638.36

Other Income 2346.09 2038.2

Profit before Interest, Depreciation, Tax and Appropriation 31396.34 28406.9

Interest 84.28 119.99

Depreciation 4935.48 4425.98

Profit Before Exceptional Item 26376.58 23860.94

Profit on Sale of Associate Company 2536.65 —

Profit Before Tax 28913.23 23860.94

Tax 8314.78 7310.89

Profit After Tax 20598.45 16550.05

Balance brought forward from previous year 37320.73 27143.88

Balance available for appropriations 57919.18 43693.93

Appropriations:

Proposed dividend 5389.20 4041.89

Tax on proposed dividend 874.26 671.3

General Reserve 2059.85 1660.00

Balance retained in Profit and Loss Account 49595.87 37320.73

57919.18 43693.93

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 10 (100 %) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2011 on the enhanced share capital after the Bonus Issue of 1:1 in June 2010 as against Rs. 15.00 per equity share (150%) paid last year.

3. Issue of Bonus Shares

During the year, the Company issued Bonus Shares in the proportion of one New Equity Share for every one Equity Share held. The approval of the Shareholders for the issue of Bonus Shares was obtained by means of postal ballot.

5. Fixed Deposits

The Company has not accepted any Fixed Deposits (FD) during the year. The Company has refunded all the deposits, which were due for payment as on 31st March, 2011. During the year, unclaimed deposits amounting to Rs.0.85 lacs were transferred to the credit of the Investor Education and Protection Fund (IEPF) as required under Section 205C of the Companies Act, 1956.

6. Unclaimed Dividend

During the year, dividend amounting to Rs. 1.31 lacs that had not been claimed by the shareholders for the year ended 31st March, 2003, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2011, dividend amounting to Rs. 43.60 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

7. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality

improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new ines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA (formerly Ameron International Performance Coatings and Finishes) for high Performance Coatings. The Directors record their appreciation for the co-operation from these collaborators.

8. Auditors Report

The Auditors Report is clean and there are no qualifications in their Report.

9. Directors

In accordance with the Articles of Association of the Company, Mr. H. Ishino, Mr. N. N. Tata and Mr. P D. Chaudhari retire by rotation and being eligible, offer themselves for re-appointment.

Mr Y . Tajiri, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 30th July, 2010. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr Tajiri during his tenure as a Director. With effect from 30th July 2010, Mr H. Nishibayashi, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed on the Board in the casual vacancy caused by the resignation of Mr Y . Tajiri.

None of the Directors of the Company is disqualified under Section 274(1)(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors Report.

10. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

11. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

12. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining

a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

13. Directors Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that 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 of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

14. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

15. Auditors

The Company Auditors, M/s B S R & Co., Chartered Accountants, retire at the conclusion of the forth- coming Annual General Meeting and are eligible for re-appointment.

16. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Companys consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Iran Chairman

Mumbai, 28th April, 2011


Mar 31, 2010

The Directors are pleased to present the 90th Annual Report and the Audited Accounts for the year ended 31st March, 2010.

1. Financial Highlights

1st April, 2009 1st April, 2008 to to 31 st March, 2010 31st March, 2009

Rs. in lacs Rs. in lacs

Gross Sales............. 197170.53 166373.85 Net Sales/ Income from operations

(Net of excise and discounts)............... 170638.36 137451.92

Other Income............. 2038.21 2219.50 Profit before Interest, Depreciation,

Tax and Appropriation...... 28406.91 17963.20

Interest................... 119.99 183.80

Depreciation............... 4425.98 3760.50

Profit Before Tax.......... 23860.94 14018.90

Tax........................ 7310.89 4160.00

Profit After Tax........... 16550.05 9858.90 Balance brought forward from previous year.......... 27143.88 22053.93

Balance available for appropriations............... 43693.93 31912.83 Appropriations: Proposed Dividend............ 4041.89 3233.52 Taxon Proposed Dividend...... 671.31 549.54

General Reserve............... 1660.00 985.89

Balance retained in Profit and Loss Account............ 37320.73 27143.88

43693.93 31912.83

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 15.00 (150%) per equity share of the nominal value of Rs. 10 each for the year ended 31 st March, 2010 as against Rs. 12.00 per equity share (120%) paid last year.

3. Bonus Shares

The Directors have recommended, subject to the approval of the Shareholders and such other approvals as may be required, an issue of Bonus Shares in the proportion of one New Equity Share for every one Equity Share held on a Record Date to be advised later. The approval of the Shareholders for the proposed issue of Bonus Shares is being sought by means of postal ballot.

4. New manufacturing facility at Hosur

During the last quarter of the year, commercial production commenced at the Companys green-field state-of-the-art paint manufacturing facility at Hosur.

6. Fixed Deposits

The Company has not accepted any Fixed Deposits (FD) during the year. Deposits aggregating to Rs. 1.75 lacs, due for re-payment have not been claimed by the FD holders as on 31st March, 2010. Barring these, the Company has refunded all the deposits, which were due for payment as on 31st March, 2010. During the year, unclaimed deposits amounting to Rs. 0.20 lac were transferred to the credit of the Investor Education and Protection Fund (IEPF) as required under Section 205C of the Companies Act, 1956.

7. Unclaimed Dividend

During the year, dividend amounting to Rs. 1,21,955 lacs that had not been claimed by the shareholders for the year ended 31st March, 2002, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2010, dividend amounting to Rs. 43.90 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

8. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA (formerly Ameron International Performance coatings and Finishes) for High Performance coatings. The Directors record their appreciation for the co-operation from these collaborators.

9. Auditors Report

The Auditors Report is clean and there are no qualifications in their Report.

10. Directors

In accordance with the Articles of Association of the Company, Mr. D. M. Kothari, Mr. S. M. Datta and Mr. P. P. Shah retire by rotation and being eligible, offer themselves for re-appointment.

Mr. Y Kawamori, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 26th March, 2010. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr. Kawamori during his tenure as a Director. With effect from 26th March, 2010, Mr. Y. Takahashi, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed as an Additional Director on the Board. Mr. Takahashi holds office upto the date of the Annual General Meeting, but being eligible, offers himself for re-appointment.

None of the Directors of the Company is disqualified under Section 274(1 )(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors Report.

11. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

12. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

13. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. As per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

14. Directors Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that 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 of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

15. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

16. Auditors

The Company Auditors, M/s BSR & Co. Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment.

17. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Companys consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J.J. Irani Chairman Mumbai, 3rd May, 2010.

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