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Directors Report of Tamilnadu Petroproducts Ltd.

Mar 31, 2015

The Directors have pleasure in presenting the Thirtieth Annual Report on the business and operations of the Company and the audited Statement of Accounts for the year ended 31st March 2015.

FINANCIAL RESULTS (Rs in crore)

Description 2014-15 2013-14

Loss Before Interest and Depreciation (31.22) 7.09

Interest (19.57) (32.27)

Depreciation (20.60) (30.43)

Loss Before Tax (71.39) (55.60)

Tax expenses (18.32) (18.30)

Loss after tax (53.07) (37.30)

OPERATIONAL HIGHLIGHTS AND PRODUCT-WISE PERFORMANCE

During the year under review, revenue from operations was Rs. 949.87 crore vis-a-vis Rs. 1051.82 crore in FY 2013-14. The loss for the year was higher at Rs. 53.07 crore against Rs.37.30 crore in the previous year. Also, the Company made an operating loss of Rs. 17.55 crore against operating profit of Rs. 7 crore in FY 2013-14. It may be recalled that through concerted efforts the operations improved during the first six months of the year under review and the Company recorded an operating profit of Rs. 18.12 crore against the operating loss of Rs. 14.13 crore in the corresponding period in the previous year. The unexpected fall in the crude prices during the 3rd quarter of the year resulted in sharp and sudden drop in the prices of Linear Alkyl Benzene (LAB) in the domestic market which was unprecedented. The crude prices remaining low for a long time, the high cost inventory held by the Company had to be sold at the lower prices to avoid compounding of the cash flow issues. This resulted in huge cash losses during the 3rd and 4th quarter.

Large scale import of cheaper LAB continued to wean away the domestic customers. The increase in power cost coupled with uncertainties in uninterrupted supply was also another limiting factor to recover the fixed costs in full, adding to the losses. Due to inconsistency in the supply of power from the EB grid, CPP had to be operated continuously to avoid frequent interruptions, the cost of heavy re-start and also to meet the customer commitments.

The Chlor Alkali Division producing Caustic Soda and Chlorine had to be operated at a reduced load due to lower demand and also storing and disposal issues of Chlorine. The imports of caustic soda into India increased from 3.74 lakh tons in 2013-14 to over 5 lakh tons during the year under review. The high cost of power which is the major production cost for the Division further reduced the margins and the Division continued to incur losses. The operations of the ECH Division continued to remain suspended and the effluent treatment services to Petro Araldite Private Limited, the joint venture company was also stopped as the latter also ceasing operations during the 2nd half of the year.

FINANCIAL REVIEW

During the year 2014-15 there were moderate changes in interest rates and the bank rate came down from 9% in March 2014 to 8.5% in March 2015. There was decline in the overall bank credit growth and also aggregate of bank deposits. The inflation also declined sharply mainly on account of lower crude oil prices and other steps taken by the regulators.

During the year under review the finance cost was lower at Rs. 19.57 crore against Rs. 32.27 crore during the previous year. This was made possible through lower borrowings and repayment of long term loans out of the proceeds from sale of property. CARE reaffirmed the rating at BBB, signifying the current capacity of the Company to meet its debt obligations.

DIVIDEND

In view of the losses incurred, the Board of Directors expresses its inability to recommend any dividend for the year.

The Industrial relations are cordial.

The manpower strength as on 31 st March 2015 was 392 and none of the employees of your Company was in receipt of remuneration exceeding the sum prescribed under Section 198 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Details of Loans, guarantees or investments

During the year under review the Company purchased 2,20,735 equity shares of Rs. 10/- each in OPG Power Generation Private Limited to become a Group Captive Consumer of the power generated by the said company.

Audit Committee

The details are furnished under CGR annexed to this Report. All the recommendations of the Committee were accepted by the Board.

Vigil Mechanism

As required under S. 177 of the Act and Clause 49 of the Listing Agreement, the Company has established a vigil mechanism for directors and employees to report genuine concerns through the whistle blower policy of the Company as published in the website of the Company. As prescribed under the Act and the Listing Agreement, provision has been made for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.

Fixed Deposits

Your company has not accepted any deposits from the public during the year under report.

Related Party Transactions

During the year under review, there were no transactions with related parties referred to in S.188(1) of the Act. The other transactions with such parties were not material in terms of the policy framed by the Audit Committee of the Company as published in the website viz., http://tnpetro.com/Financials/finapolicies.asp

Board of Directors and related disclosures

The Board comprises of twelve directors of whom six are independent including a woman director. All the Independent Directors have furnished necessary declarations under Section 149 (7) of the Act and as per the said declarations they meet the criteria of independence as provided in Section 149 (6) of the Act.

The Board met five times during the year under review and the relevant details are furnished in the CGR.

The Board has approved the Remuneration Policy as recommended by the Nomination and Remuneration Committee (NRC) which inter alia contains the criteria for determining the positive attributes and independence of a director as formulated by the NRC. The policy on remuneration to directors is disclosed in the CGR annexed to this Report.

Mr. Sanjiv Ralph Noronha (DIN: 01905639) resigned as a Director effective from 11th August 2014

At the Board Meeting held on 12th August 2014, Mr. Kulbir Singh (DIN: 00204829) and Ms. Sashikala Srikanth (DIN: 01678374) were appointed as Additional & Independent Directors of the Company for a period of five years under Section 149 of the Act. Approval of the members for the same under Sections 150, 152, 160 read with Schedule IV to the Act will be considered at the ensuing AGM.

Mr. Ashwin C Muthiah, (DIN 00255679) Vice Chairman retires by rotation and being eligible offers himself for re-election.

At the meeting held on 27th May 2014, Mr. K R Anandan was appointed as the Chief Financial Officer under Section 203 of the Act who separated from the Company on 30th June 2015. Ms. R Deepti was appointed as the Company Secretary in the place of Mr. R. Kothandaraman from 1st June 2014.

Annual Evaluation of the Board, Committees and Directors

The formal evaluation of the Board and its Committees was done taking into account the various parameters such as their roles and responsibilities, composition and the adequacy, decision making processes and related practices, focus on important and critical issues, progress monitoring, governance and the like.

The evaluation of the individual directors, including the independent directors was done taking into account their qualification and experience, understanding of their respective roles (as a Director, Independent Director and as a member of the Committees of which they are Members/Chairpersons), adherence to Codes and ethics, conduct, attendance and participation in the meetings, etc.

In compliance with the requirements of Schedule VII to the Act and Clause 49 of the Listing Agreement, a separate meeting of the Independent Directors was held during the year.

During the year, the company had conducted familiarization programme for the Independent Directors and the details of the same are made available in the website of the company viz., http://tnpetro.com/Financials/Finacorp.asp

Directors' Responsibility Statement

Pursuant to the requirement of sub-sections 3 (c) and 5 of Section 134 of the Act it is hereby confirmed that

(a) in the preparation of the annual accounts for the financial year ended 31st March 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were 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 loss of the Company for the year under review.

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

(d) the Directors had prepared the accounts for the financial year ended 31 st March, 2015 on a "going concern" basis.

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

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

Corporate Governance

Your Company has complied with the requirements of Corporate Governance stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges. A Report on Corporate Governance is made a part of this Report and a Certificate from the Auditors regarding compliance with the requirements of Corporate Governance is given in Annexure -1.

Auditors

M/s. Deloitte Haskins & Sells, Chartered Accountants, Chennai were appointed as the Auditors of the Company at the 29th Annual General Meeting held on 12th August 2014 to hold office till the conclusion of 31st Annual General Meeting. As required under Section 139 of the Act, ratification of their appointment to hold office from the conclusion of the 30th AGM till the conclusion of the 31st AGM will be taken up at the ensuing AGM.

Reply to qualification in the Report of the Auditors on the Consolidated Financial Statement:

As regards the short term advance of Rs. 3419.54 lakh carried in the Consolidated Financial Statement (CFS), it has been confirmed that as on date the subsidiary has recovered the entire dues in full.

As regards the Long Term Loans and Advances of Rs. 1249.80 lakh in the CFS, which represent the advance paid to the technology partner for knowhow, there is time till December 2016 to avail the same. It is also being explored if the rights can be transferred to other interested parties and hence at present no adjustment is deemed necessary.

In the light of the above, it is expected that these matters will have no impact on the Consolidated Financial Statement.

Secretarial Audit Report

As required under Section 204 of the Act, the Secretarial Audit Report issued by Mrs. B Chandra, Company Secretary in practice is given in Annexure - II. As regards the observation of the Secretarial Auditor it is clarified that all the directions of the CPCB have been duly complied with and the inspection has also been completed.

Cost Audit

Mr. P.R.Tantri, Cost Accountant, Bengaluru was appointed as the Cost Auditor of the Company by the Board for the financial year 2014-15 on a remuneration of Rs. 1.25 lakh plus applicable taxes and reimbursement of out of pocket expenses.

As required under S. 148 of the Act, read with the relevant Rules, ratification of the members for the remuneration to the Cost Auditor for 2014-15 will be considered at the ensuing AGM of the Company.

Adequacy of Internal Financial Controls

Your company has in place adequate internal financial control systems combined with delegation of powers and periodical review of the process. The control system is also supported by internal audits and management reviews with documented policies and procedures. The system was also reviewed by an external agency, and no major weaknesses were reported.

Conservation of Energy and other disclosures

As required under Section 134 of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, information on conservation of energy, technology absorption, foreign exchange earnings and outgo, to the extent applicable are given in Annexure - III and form part of this Report.

Extract of the Annual Report

The extract of the Annual Report is given in Annexure - IV, in the prescribed format.

Particulars of Employees and other disclosures

The disclosures prescribed under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure - V to this Report. It is hereby affirmed that the remuneration to the employees are as per the remuneration policy of the company.

CSR Policy and related Disclosures

The details are furnished in Annexure - VI

Acknowledgement

Your Directors are grateful to the Government of India, the Government of Tamilnadu, financial institutions, banks, other lending institutions, promoters, technical collaborators, suppliers, customers, joint venture partners and marketing agents for their assistance, co-operation and support. The Directors thank the shareholders for their continued support.

The Directors also place on record their appreciation for the contributions by all cadres of employees of the company.

Disclaimer

The Management Discussion and Analysis contained herein is based on the information available to the Company and assumptions based on experience in regard to domestic and global economy, on which the Company's performance is dependent. It may be materially influenced by changes in economy, government policies, environment and the like, on which the Company may not have any control, which could impact the views perceived or expressed herein.

For and on behalf of the Board of Directors

Muthukrishnan Ravi Ashwin C. Muthiah

4th August 2015 DIN:03605222 DIN:00255679

Chennai - 600 068 Managing Director Vice Chairman


Mar 31, 2014

TO THE SHAREHOLDERS

The Directors have pleasure in presenting the Twenty Ninth Annual Report on the business and operations of the Company and the audited Statement of Accounts for the year ended 31st March 2014.

FINANCIAL RESULTS (Rs. in crore)

Description 2013-14 2012-13 Revenue from Operations 1051.82 1281.42 Earnings before Interest Depreciation 7.09 (0.34) and Tax Less: Finance Cost (32.27) (31.83) Less: Depreciation (30.43) (38.62) Less: Exceptional Item - (1.74) Loss before tax (55.60) (72.53) Tax expenses (18.30) (21.97) Loss after tax (37.30) (50.56) Balance carried to Balance Sheet 2.88 40.19

OPERATIONAL HIGHLIGHTS AND PRODUCT-WISE PERFORMANCE

During the year under review, revenue from operations was Rs.1051.82 crore vis a vis Rs. 1281.42 crore in FY 2012-13. The los s for the year was lower at Rs. 37.30 crore against Rs. 50.56 crore in the previous year. Also the Company made an operating profit of Rs. 5 crore against operating loss of Rs. 34 lakhs in FY 2012-13. These could be achieved through concerted efforts to cut the cost and also ensure the best possible market realization, given the tough conditions faced by the Company due to unabated imports of LAB and Caustic Soda into India during the year under review.

Capacity utilization of Linear Alkyl Benzene (LAB) facilities was lower due to the domestic customers opting for imports in large scale. Increase in crude price and increase in power cost coupled with uncertainities in uniterrupted supply continued to be limiting factors to recover the fi xed costs in full, resulting in losses. In order to bring down the cost of production, use of Captive Power Plant (CPP) was curtailed on trial basis. However, due to inconsistency in the supply of power from the EB grid, the CPP had to be operated continuously to avoid frequent interruptions and the cost of heavy re-start. In spite of the cost of power from CPP being higher on account of increased fuel prices, TPL had no alternative but to resort to such a measure to meet customer commitments bringing down the margins further.

The Chlor Alkali Division producing Caustic Soda and Chlorine was operated at a reduced load to optimize the cost of production forcing a dip in capacity utilization. However, the better quality of the output reduced the erosion of margins to some extent.

The ECH Plant, operation of which has been suspended since the beginning of the year on account of the huge and perpetual losses, continued to provide effl uent treatment services to Petro Araldite Private Limited, the joint venture company.

FINANCIAL REVIEW

The fi nance cost as a ratio of total operating income was higher at 3.07% against 2.48% mainly on account of dip in the revenue by 22%. Due to the poor fi nancial performance over the lasttwo years, the Company has been facing diffi culties in raising the required funds, as the lenders are not inclined to look at any further exposures. In fact some of them have resorted to reduction in the limits, compounding the cash fl ow issues further. Under these circumstances, in order to sustain the operations, the Company had to arrange long term funds only through divestment of its major non-core asset, the TPL House for which agreement has been entered into during the year. A part of the payment consideration has been received and used to fund the working capital requirements.

Owing to losses, the CARE downgraded the rating from BBB to BBB, signifying that the Company has current capacity to meet its debt obligations. The average cost of fi nance was slightly higher than the last year mainly due to the above revision in the rating. During the year under review, there were no defaults either in servicing or repayment of debts.

DIVIDEND

In view of the losses incurred, the Board of Directors expresses its inability to recommend any dividend for the year.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Your Company has three manufacturing units viz., Linear Alkyl Benzene (LAB), Chlor Alkalis comprising Caustic Soda & Chlorine and Epichlorohydrin (ECH).

LAB, a colorless organic compound is an intermediate chemical used in the manufacture of household and industrial cleaning agent and enjoys a good demand from the detergent industry as its basic raw material. Based on application, the LAB market can be broadly segmented into Linear Alkylbenzene Sulfonate (LAS) and other applications. A major portion of the global LAB production is utilised for the production of LAS. The applications for LAS have been further segmented on the basis of the end use namely heavy-duty laundry liquids, light-duty dishwashing liquids, and laundry powders, industrial and household cleaners. Heavy-duty laundry liquids are mainly used for commercial laundry purposes and are the most dominant application segment for LAS. It has been reported that the demand for household cleaners is expected to exhibit the fastest growth rate amongst all the application segments. Other niche applications of LAB include ink solvents, agricultural herbicides, wetting agents, emulsion polymerization, electric cable oil and the paint industry.

All the major manufacturers of LAB in India, including TPL, have adopted the technology from UOP, USA, which is considered superior to the other processes involving chlorination. The cost of production of LAB in India had been relatively higher than the international standards mainly on account of higher cost of kerosene and quality issues relating to the feedstock.

Till recently, the domestic demand for LAB was being met fully through indigenous sources and a substantial quantity was being exported. However, from the year 2012-13, there has been a sudden spurt in import of LAB into India, mainly attributable to global economic slowdown and creation of new capacities in the Middle East. The imports during 2013-14 was more than 2.20 lakh tons against 1.15 lakh tons in the previous year. The sharp decline in the rupee value during the year also hit the profitability, though this led to lower imports during the period and TPL could regain some lost ground.

In sum, with very high crude price and rupee depreciation the cost of production of LAB was went up substantially but such higher cost could not be passed on in full to the customers, due to competition from overseas suppliers.

Caustic Soda, a most commonly used industrial chemical, fi nds wide application in Textile, Pulp & paper, Aluminium, Soaps & detergents industries in India. The capacity in India was about 31.34 lakh ton in March 2013 with a capacity utilization of around 81%. The capacity is expected to increase to 34.5 lakh ton by March 2015. India has enough capacity to meet the domestic demand but due to dumping from overseas, the capacity utilization has been low.

Chlorine, a co-product of Caustic Soda is widely used in sectors like Vinyl chloride, CPW, pulp and paper, water purifi cation, chlorinated solvents, etc. Since this is a co-product of Caustic Soda, the prices take a dent when the demand for caustic soda increases and hence the pricing of the product has been affected considerably.

ECH is used as a key raw material in the manufacture of epoxy resins, pesticides and certain pharmaceutical formulations. Though there has been good demand for the product at global level, most of the top manufacturers use their entire capacity for captive consumption. The market is already reeling under supply - demand mismatch and new capacities created across the globe, especially in China, have worsened the situation.

Traditionally, ECH has been produced through petro-based feedstock, viz., propylene. However, glycerine, a bio-based feedstock obtained easily as byproduct from biodiesel production, is slowly replacing propylene. It is expected that the increasing availability of bio-based glycerine from biodiesel production would make it possible to produce bio-based ECH, at a lower cost.

OPPORTUNITIES AND THREATS

Over the past few years there has been a marked improvement in awareness about hygiene and also the standard of living has shown considerable improvement in India. This has helped the detergent markets to make inroads into remote areas, with the help of visual advertisements. Therefore the production of detergents is expected to grow further, paving way for higher off- take of LAB in the years to come. However, the surplus capacity creater overseas has resulted in dumping of materials in to India leading to price war. This constraints the Company''s ability to realise the price in full.

Caustic Soda continues to be an important industrial intermediary fi nding application in many industries. With the demand for textiles and apparels increasing on account of urbanization and more spending on personal effects, the market for Caustic Soda is expected to grow further. However, unabated increase in cost of power is curbing the profitability of the domestic manufacturers. Also the ever increasing imports has been affecting the margins and the profitability of domestic players.

The per capita consumption of Chlorine in India is stated to be around 1.85 kg vis a vis 13 kg in China and hence there exists good growth opportunities. However, this could happen only if substantial investments are made in the vinyl industry, the key end-user of the product. Downstream PVC Industry in India is growing @ 14% (YOY in 2012-13) but not utilizing domestic chlorine due to non-availability of petro-chemical feedstock. India is one of the largest importers of EDC & VCM i.e. indirect imports of chlorine leading to low utilization of domestic chlorine. The problems of storage and disposal of Chlorine during peak demand for Caustic Soda are the major limiting factors for both Caustic Soda and Chlorine.

OUTLOOK

LAB

Import of LAB is increasing year on year which will impact the margins of TPL further. During the year 2013-14, the imports doubled to 2.15 lakh tons which were over 1 lakh ton in 2012-13. This trend may continue in the current year. TPL has established itself as a major player in the LAB market and hence the customer base is expected to be retained, in spite of competition through imports. To overcome the increase in input cost, various energy saving measures have been taken up and modifi cation in pre- fractionation unit has been initiated. As a step forward, TPL is also looking at increasing the NP capacity to bringdown imports.

Caustic Soda / Chlor alkali

The Global Caustic Soda growth is expected to be 3.2% by 2018. Alumina and Pulp & Paper sectors, major consumers of Caustic Soda have been impacted by the global economic outlook. It has been stated that the growth in many of developed regions will be slow. On the other hand based on the ongoing expansion projects, the caustic soda availability from the USA, Asia and Middle East will be more, threatening to further increase the imports into India, which is already affected by huge and ever-increasing imports. The imports have doubled in about 3 years at 3.79 lakh tons in 2013-14 from 1.87 lakh tons in 2010-11. The imports during April 2014 alone were over 56,000 tons, against 24,000 tons in the corresponding period in the previous year. It has been reported that the Indian industry is capable of meeting its domestic demand but because of high input costs and poor infrastructure, is not competitive internationally. It also faces dumping of cheap imports from other countries like Iran, Saudi, Korea RP, Japan, etc. where power is available at a lower price. To overcome this, focus will have to be on zero liquid discharge and reduction in power consumption which will need more of integrated plants. However, under the present conditions TPL may not be able to go for integration and hence the long term survival of the HCD would depend on the success of the cost cutting efforts taken by the Company.

ECH

TPL is looking at alternate options for using the ECH facility which at present remains moth-balled. It is being explored if the facilities can be modifi ed for the manufacture of Propylene Oxide so that the Company would be able to use the Chlorine as well and contribute to the overall operations.

RISKS AND CONCERNS

As stated earlier, the import of LAB, Caustic Soda and indirect form of Chlorine is the major risk faced by TPL. The average realization continues to be low and the efforts of the Company to curtail the imports through combined action of the domestic manufacturers did not materialize.

TPL is a power intensive industry and hence the renewable purchase obligation, which is being challenged by the Company at the appropriate forum, could be a dampener in its efforts to bring down the power cost. Also, the cost of salt and transportation are going up due to various factors. If the oil subsidy is marginalized, the input cost for TPL could go up substantially and the survival of the Chlor Alkali Division in the long run could be a major concern to be addressed by the Company.

SAFETY, HEALTH & ENVIRONMENT

Adequate safety standards have been prescribed and followed by the Company without compromise. Prime importance is given to protection of the employees, plant & machinery and environment at all times.

During the year a mock drill operation was held to show-case the preparedness of the Company to meet emergencies. The program was organized as a part of the Conference on Chemical (Industrial) Disaster Management held under the aegis of the National Disaster Management Authority and FICCI at Chennai during November 2013. More than 120 delegates from all over the country participated in the programme in addition to the dignatories from various government agencies who were appreciative of the systems and procedures being practiced by the Company. Your Company has planted saplings in and around the factory premises as part of its green initiatives and to promote carbon offset.

SUBSIDIARIES

Certus Investment and Trading Ltd., and its wholly owned subsidiaries

Your Company established Certus Investment and Trading Ltd. (CITL), Mauritius as its Wholly Owned Subsidiary (WOS) to serve as a Special Purpose Vehicle (SPV) to set up LAB and NP projects in Middle East and South East Asia. CITL in partnership with Saudi Offset Limited Partnership (SOLP) promoted Gulf Petroproduct Co. EC (GPC) to implement a LAB project in the Middle East. The project was affected due to varied factors, mainly regulatory issues in Bahrain. Therefore the project had to be abandoned and the company was liquidated voluntarily. CITL also established CITL (S) Pte. Ltd. in Singapore to function as a coordinator for TPL''s overseas procurement and marketing activities.

Proteus Petrochemical Private Ltd. (Proteus) is a subsidiary of CITL formed for setting up a Normal Paraffi n Project in Singapore. The proposal is to establish a green-fi eld Normal Paraffi n (NP) project plant along with associated utilities and off-sites. The project has run into certain problems and hence there has been delay in completing the same as per schedule. The Company is examining further action to be taken in this regard.

Information under Section 212

A statement pursuant to Section 212 of the Companies Act, 1956 (the Act) giving information on the subsidiary companies is attached hereto. In terms of the general exemption granted by the Ministry of Corporate Affairs under Section 212 of the Act, vide General Circular No. 2/2011 dated 8th February 2011 copies of the fi nancial statements and other documents of the subsidiary companies have not been attached to this Report. The Consolidated Financial Statements presented herewith include the fi nancial information of the subsidiaries, as required under Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India.

The annual accounts of the subsidiary companies and the related detailed information will be made available to the shareholders of the Company and the subsidiary companies seeking such information and shall also be available for inspection at the Registered Offi ce of the Company and the subsidiaries.

JOINT VENTURE

Petro Araldite Pvt. Ltd. (PAPL)

PAPL was set up in the year 1996 to manufacture basic resins for epoxy applications and the present JV Partner is Vantigo. PAPL has facilities to manufactuer of Basic Liquid Resin, Solid Resin and Formulated products.The performance of the JV has been cyclical, but in the recent past PAPL has been incurring losses due to changed market scenario.

With the conditions not improving, PAPL has closed down their Basic Resins manufacturing facilities during the 2nd half of the year and is now operating only its'' formulations plant.

As per the unaudited fi gures furnished by PAPL, the total revenue during the year was Rs. 219.54 crore compared to Rs. 354.54 crore during 2012-13. The company incurred a loss of Rs. 8.29 crore against Rs. 14.45 crore in the previous year.

HUMAN RESOURCES

Management strongly believes that the strength of your Company is directly proportional to the strength of its employees in terms of the knowledge, experience, analytical and decision making skills. Your Company has been practicing various HR initiatives such as recognition, empowerment, personality development, decentralization of delegation of powers etc., to retain the talents and to enhance their enabling capabilities. A balanced staffi ng system has been judiciously adopted in your Company wherein competent fresh talents have been engaged to infuse young blood into the steam of experienced hands.

The training needs of employees have been identifi ed at regular intervals through performance appraisal systems and necessary training is being imparted through in-house and external programmes. Apart from the routine, job related training for personality development and leadership skills are imparted to enhance the administrative capabilities of employees.

The wage settlement dispute with LAB/ECH wokmen pending since 2005 was settled through negotiations. However, this has not helped restoring the cordial industrial relations owing to the indifference and unfair practices of the workmen. A stiff resistance by the workmen to the various measures taken by the Management to cut-down cost and increase productivity is snow-balling and the Management is adopting a wait and watch approach to avoid precipitating the issues further for the overall benefi t of all the stakeholders.

The man power strength as on 31st March 2014 was 429 and none of the employees of your Company was in receipt of remuneration exceeding the sum prescribed under Section 217(2A) of the Act.

DIRECTORS

The Board at the meeting held on 29th October 2013 recorded the resignation of Mr N S Palaniappan, IAS, Director & Chairman. The Board places on record its appreciation for the invaluable services rendered by Mr. Palaniappn during his association with the Company.

Mr Hans Raj Verma, IAS, Chairman and Managing Director of TIDCO was transfered and consequently he resigned as a Director of TPL which effective from 18th June 2014. The Board places on record its appreciation for the invaluable services rendered by Mr. Verma during is association with the Company.

Mr C V Sankar, IAS appointed as Director & Chairman by the Board at the meeting held on 29th October 2013 holds offi ce upto the date of the ensuing Annual General Meeting.

Mr. M Pazhaniandy Pillai was appointed as an Additional Director under Section 152 of the Act and Whole-time Director (Operations) by the Board at the meeting held on 27th May 2014. His appointment as a Director liable to retire by rotation under Section 160 of the Act and approval for his appointment as Whole-time Director (Operations) and his remuneration will be considered at the ensuing AGM.

At the aforesaid meeting of the Board, Mr. C Ramachandran, IAS, (Retd.), Mr. N R Krishnan, IAS (Retd.), Dr. K U Mada and Mr. Dhananjay Mungale have been appointed as Independent Directors under Section 149 of the Companies Act, 2013 (the new Act) and are not liable to retire by rotation. As per the provisions of the new Act, their appointment are to be approved by the shareholders in the general meeting and hence the same is proposed to be considered at the ensuing AGM.

Mr. R Karthikeyan, Director, retires by rotation and being eligible, offers himself for re-election.

DIRECTOR RESPONSIBILITY STATEMENT

In compliance with the provisions of Section 217(2AA) of the Act, your Directors hereby confi rm that: -

(i) In preparing the Annual Accounts for the year ended 31st March 2014, all the applicable accounting standards have been followed; (ii) Prescribed accounting policies were adopted and applied consistently and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2014 and of the loss of the Company for year ended on that date; (iii) Proper and suffi cient care for the maintenance of adequate accounting records have been taken in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and irregularities; and (iv) The Annual Accounts have been prepared on a "going concern" basis.

ADEQUACY OF INTERNAL CONTROLS

Your company has in place adequate internal control systems combined with delegation of powers and periodical review of the process. The control system is also supported by internal audits and management reviews with documented policies and procedures.

CORPORATE GOVERNANCE

Your Company has complied with the requirements of Corporate Governance as required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges. A Report on Corporate Governance is made a part of this Report and a Certifi cate from the Auditors regarding compliance with the requirements of Corporate Governance is attached to this report.

AUDITORS

M/s. Deloitte Haskins & Sells, appointed as the Auditors of the Company at the 28th Annual General Meeting held on

5th August 2013 hold offi ce till the conclusion of 29th Annual General Meeting and are eligible for re-appointment. As per Section 139 of the new Act, they can hold offi ce from the conclusion of the 29th AGM till the conclusion of the 31st AGM. Their re-appointment will have to be ratifi ed by the Members at the AGM, each year. In compliance with the requirements of the new Act, it is proposed to appoint the retiring Auditors to hold offi ce till the conclusion of the 31st AGM to be held in the year 2016 and subject to ratifi cation at the 30th AGM.

COST AUDIT

The Cost Audit Report for the year ended 31st March 2013, duly certifi ed by Mr. P R Tantri, Cost Accountant, was fi led on the due date i.e. on 27th September 2013. Mr. P.R. Tantri, Cost Accountant has been appointed as the Cost Auditor of the Company for the fi nancial year 2013-14 pursuant to Section 233B of the Act.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public during the year under report.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 217(1)(e) of the Act, are attached, to the extent applicable, and form part of the Report.

ACKNOWLEDGEMENT

Your Directors are grateful to the Government of India, the Government of Tamilnadu, fi nancial institutions, banks, other lending institutions, promoters, technical collaborators, suppliers, customers, joint venture partners and marketing agents for their assistance, co-operation and support. The Directors wish to thank the shareholders for their continued support. The Directors also place on record their appreciation for the contributions by the employees.

DISCLAIMER

Estimates and expectations stated in the Reports of the Directors and Management Discussion and Analysis may be "forward- looking" statements within the meaning of applicable securities laws and regulations. Actual results could materially differ from those expressed or implied in these reports on account of any change economic conditions affecting demand / supply and price of the products, input cost, in the domestic and international markets, changes in the Government regulations, tax laws, statues and other incidental matters over which the Company has no direct or indirect control.

For and on behalf of the Board of Directors 1st July 2014 C V SANKAR, IAS Chennai - 600 068 Chairman


Mar 31, 2013

To The Shareholders

The Directors have pleasure in presenting the Twenty Eighth Annual Report on the business and operations of the Company and the audited Statement of Accounts for the year ended 31!l March 2013.

FINANCIAL RESULTS

(Rs. in crore)

Description 2012-13 2011-12

Revenue from Operations 1281.42 1248.19

Profit / (Loss) before Depreciation (0.34) 75.30

and Finance Cost

Less: Finance Cost 31.83 31.66

Less: Depreciation 38.62 37.19

Less: Exceptional Item 1.74

Profit / (Loss) before tax (72.53) 6.45

Tax expense (21.97) 0.51

Profit/(Loss) after tax (50.56) 5.94

Balance carried to Balance Sheet 40.19 90,75

OPERATIONAL HIGHLIGHTS AND PRODUCT-WISE PERFORMANCE

During the year under review, revenue from operations was Rs. 1281 crore vis a vis Rs. 1248 crore in FY 2011-12. Though there was some increase in the topline, the profitability was impacted severely primarily on account of astronomical increase in input cost, depreciation of rupee value and imported goods flooding the market. The Company could not pass on the additional costs to the customers due to intense competition from overseas suppliers and hence the results were negative.

During the year under review, there was a marginal dip in the capacity utilization of Linear Alky! Benzene (LAB) due to fall in demand from domestic users. Crude price increases and higher exchange rate, coupled with additional cost for alternate power to meet energy shortage resulted in lower margins. To overcome these, steps have been taken to bring down the input cost through implementation of Advanced Process Control System and energy audits.

The Captive Power Plant (CPP), run on furnace oil, was operated at a higher capacity to meet the residual power requirements. However due to increased fuel costs, the cost of power from the CPP also went up, bringing down the margins further. In order to moderate the power cost, the Company has gone for purchase of power from third parties.

During the year under review, the Chlor Alkali Division producing Caustic Soda and Chlorine performed well, recording a 95% capacity utilization. However, due to increased cost of production and Chlorine prices continuing to be low, there was a reduction in margins, with resultant erosion in profits.

The operations of Epichlorohydrin (ECH) division were also hampered due to higher input cost and surge in imports, bringing down the market prices sharply. The Company could not even recover the product cost in full, resulting in heavy cash losses during the year. Under the circumstances, the Unit was operated only to honour contractual commitments to Petro Araldite Private Limited, (PAPL) the Joint Venture Company.

FINANCIAL REVIEW

The year 2012-13 witnessed moderate changes in interest rates. The repo rate increases during the year 2011-12 resulted in steep increase in lending rates of banks and other operators. However, during the year under review, Reserve Bank of India retained these rates at the previous year''s level in the first half which were slightly brought down during the second half, to induce economic growth. On the forex front, there was a sharp decline in rupee value by about 6.7%.

The Company maintained its financial rating at BBB from Credit Analysis and Research Limited (CARE) during the year under review. This rating coupled with favorable key financial ratios, enabled the Company to obtain additional working capital limits for operations and financing cost was maintained at the previous levels through proactive steps.

During the year under review, there were no defaults either in servicing or repayment of debts. The proceeds from dis-investment of shares in SPIC Electric Power Corporation Private Limited (SEPC) were utilized as long term source for operations.

DIVIDEND

In view of the losses incurred, the Board of Directors expresses its inability to recommend any dividend for the year.

CORPORATE GOVERNANCE

Your Company has complied with the requirements of Corporate Governance as required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges. A Report on Corporate Governance is made a part of this Report and Auditors'' Certificate regarding compliance with the requirements of Corporate Governance is attached to this Report.

AUDITORS

M/s. Deloitte Haskins & Sells, appointed as the Auditors of the Company at the 27th Annual General Meeting held on 18th September 2012 hold office till the conclusion of 28* Annual General Meeting and are eligible for re-appointment.

COST AUDIT

The Cost Audit Report for the year ended 31st March 2012, duly certified by Mr. A.N. Raman, Cost Accountant, the then Cost Auditor was filed on 1st February 2013 against the extended due date of 28* February 2013. Mr. P.R. Tantri, Cost Accountant has been appointed as the Cost Auditor of the Company for the financial year 2012-13 pursuant to Section 233B of the Companies Act, 1956.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 217(1) (e) of the Companies Act, 1956, are attached, to the extent applicable, and form part of the Report.

ACKNOWLEDGEMENT

Your Directors are grateful to the Government of India, the Government of Tamilnadu, financial institutions, banks, other lending institutions, promoters, technical collaborators, suppliers, customers, joint venture partners and marketing agents for their assistance, co-operation and support. The Directors wish to thank the shareholders for their continued support and also place on record their appreciation for the consistent good work put in by all cadres of employees.

DISCLAIMER

Estimates and expectations stated in the Reports of the Directors and Management Discussion and Analysis may be "forward-looking" statements within the meaning of applicable securities laws and regulations. Actual results could materially differ from those expressed or implied in these reports on account of any change economic conditions affecting demand / supply and price of the products, input cost, in the domestic and international markets, changes in the Government regulations, tax laws, statues and other incidental matters over which the Company has no direct or indirect control.

For and on behalf of the Board of Directors

22nd April 2013 N.S. PALANIAPPAN, IAS

Chennai - 600 068 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Twenty Seventh Annual Report on the business and operations of your Company and the audited Statement of Accounts for the year ended 31st March 2012.

FINANCIAL RESULTS (Rs. in crores)

2011-12 2010-11

Revenue from Operations 1309.35 1066.46

Profit before Depreciation and Finance 75.30 73.68 Cost

Less: Interest and Finance Cost 31.66 28.54

Less: Depreciation 37.19 37.99

Add: Exceptional Item - 22.22

Profit before tax 6.45 29.38

Provision for tax 0.51 -0.09

Profit/(loss) after tax 5.94 29.47

Balance carried to Balance Sheet 90.75 90.04

FINANCIAL REVIEW

The year 2011-12 witnessed vast changes and volatility in interest rates and forex markets making the cost of funds dearer. Your Company has been constantly working towards achieving interest reduction despite unfavourable macro economic factors. The efforts taken by your Company helped to restrict the weighted average Cash Credit interest to 14.64% as against 16.50% being the average lending rate for the Financial Year. This was possible due to improvement in the financial rating by Credit Analysis and Research Limited (CARE) during the year under review to BBB plus. Your Company also leveraged on the Buyers credit arrangements with Banks to save on interest cost.

Your Company was supported by additional working capital limits from working capital lenders which enabled to achieve budgeted production and sales of the three divisions. There was no additional term loan borrowing during the year, while one of the term loans was repaid in full.

With the forex markets remaining extremely volatile during this period your Company managed to mitigate partly the currency exposure risks by a combination of natural hedge of exports against imports and through appropriate forward covers.

DIVIDEND

Your Company has achieved a net profit after tax of Rs. 5.94 crores for the year 2011-12 as against Rs. 29.47 crores during 2010-11. Your Company came back into the dividend paying stream two years ago in 2009-10 after a gap of 3 years. In order to continue paying dividend and reward the shareholders, the Board of Directors, despite lower profits, take pleasure in recommending payment of dividend of 5% (0.50 paise per equity share) on the paid up equity share capital of your Company.

OPERATIONAL HIGHLIGHTS Linear Alkyl Benzene (LAB)

The performance of LAB operations continued to be good throughout the year and comparable with the previous year. LAB production was maintained at high levels during the year due to the installation of new molecular sieves in 2010.

Crude prices continued to be unstable. The acute power shortage in the State of Tamilnadu and the obligation on the part of the HT consumer to buy Renewable Energy Certificates has increased the cost of power. However, every effort is taken through energy audit, advance process control, etc., to reduce the energy consumption and optimal use of raw material. This has helped in controlling the cost of production. The first phase of Prefrac revamp was completed during end March 2012 and the benefit will be realised from the second quarter of 2012-13 onwards.

Continuous efforts are being made to identify and develop new markets. Your Company continues to meet sizeable demand of the domestic market for LAB and supplies to major international detergent manufacturers.

Epichlorohydrin (ECH)

The ECH unit has performed reasonably well compared to the previous year. The capacity utilisation was about 85%. The crude price variation has impacted the raw material prices largely. However, the finished product price also moved directionally in line with raw material price. Your Company continues to supply majority of the volume to the joint venture company M/s Petro Araldite Private limited. Large quantities of imported ECH and Epoxy resin are landing into the country from European sources due to sluggish demand in those places. The impact on cost of production due to power cut and rupee appreciation is partly being mitigated by carrying out energy optimisation and process optimisation.

Caustic Soda/ Chlor Alkali

The Chlor Alkali Division performance was better during the year over the previous year. The capacity utilisation was above 90%. However, the acute power shortage in the State of Tamilnadu has increased the power cost heavily. Due to high crude prices, the fuel oil prices increased and so the energy cost. The caustic market was very attractive with better realisation. However, the chlorine market has taken a beating as chlorine has to be disposed at throw away prices because of lower demand. The increase in cost of production due to energy cost rise is being combated by introducing various energy conservation and optimisation measures.

SAFETY, HEALTH & ENVIRONMENT

Your Company continuously follows adequate process safety standards to run the plants safely. Protection of employees, plant and machinery and the environment is accorded prime importance at all times. Your Company has won safety award from National Safety Council of India during 2011 for LAB plant. Safe operating days of 396, 1769 and 862 in LAB, ECH and CAD plants respectively were achieved as on 31st March 2012. Health of the employees is taken care bestowing fullest attention. As part of corporate social responsibility, your Company is preparing inventory of green house gases in the plants, to achieve carbon emission reduction. Your Company also provided class room amenities to a Primary School in Manali.

RESEARCH & DEVELOPMENT

On the R&D front main focus was given to improve the finished product quality. Studies related to improvement of production processes and development of new products using existing by-products as raw materials was also carried out. R&D wing also focussed environment performance assessment and source identification.

SUBSIDIARIES

SPIC Electric Power Corporation Private Ltd. (SEPC)

SEPC has been pursuing with various agencies to move forward on the 525 MW Thermal Power Plant at Tuticorin (the Project). During the year, M/s VO Chidambaranar Port Trust permitted SEPC to enter upon the alternate land for starting the Project work as SEPC had paid the lease rent dues and also obtained Environmental Clearance. SEPC therefore commenced various site development work such as Joint Physical Survey, Corner stone laying work, Name Board installation and site leveling work. With regard to the allocations / permissions for the foreshore facilities comprising of Coal jetty, Conveyor routing and Pump-house, SEPC had held discussions with VOCPT

In response to the petition filed by SEPC before Hon'ble TNERC during April 2010, an order was delivered on 9.5.2011 informing that there is no impediment in implementing the Project and further directed certain amendments to the PPA already executed by SEPC and TANGEDCO. Subsequently, SEPC and TANGEDCO negotiated and signed the amendments to the PPA on 10.1.2012 as ordered and submitted the same to Hon'ble TNERC. Consent to Establish the Project to be given by

Tamilnadu Pollution Control Board is in the advanced stage of issuance. SEPC would be continuing with its efforts so that the financial closure could be achieved early.

Certus Investment and Trading Ltd., and its Wholly owned Subsidiaries

Your Company established M/s. Certus Investment and Trading Ltd. (CITL) Mauritius as a Wholly Owned Subsidiary (WOS) of TPL to serve as a Special Purpose Vehicle (SPV) and set up LAB and NP projects in regions with encouraging demand potential viz., Middle East and South East Asia. M/s CITL in partnership with M/s. Saudi Offset Limited Partnership (SOLP) established a Company viz., M/s Gulf Petroproduct Co., EC (GPC) to set up a LAB project in the Middle East. Pre-project activities are in progress.

Proteus Petrochemical Private Ltd.(Proteus)

Proteus is a subsidiary of CITL formed for setting up a Normal Paraffin Project in Singapore. The proposal is to establish a green-field Normal Paraffin (NP) project plant along with associated utilities and off-sites.

A statement pursuant to Section 212 of the Companies Act, 1956, giving information on the subsidiary companies is attached hereto. The consolidated financial statements presented by your Company include the financial information of its subsidiaries, as required under Accounting Standard AS-21, issued by the Institute of Chartered Accountants of India.

In terms of the general exemption granted by the Ministry of Corporate Affairs under Section 212(8) of the Companies, Act, 1956 during February 2011, copies of the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies that are required to be attached to the Balance Sheet of your Company have not been attached. The Annual Accounts of the subsidiary will be made available to the shareholders and the subsidiary company investors who seek such information. The Annual Accounts of the subsidiary companies will also be kept for inspection by any investor at the Registered Office of TPL and of the subsidiary company concerned.

STATUS OF ACTIVE INVESTMENTS

Petro Araldite Pvt. Ltd. (PAPL)

In 2011-12, PAPL produced a total of 29,510 MTs (as against 30,536 MTs in 2010-11) comprising of Basic Liquid Resin, Solid Resin and Formulated products. Sales during the year was Rs.339.57 crores compared to Rs.327.42 crores during 2010-11.

During the financial year 2011-12, PAPL incurred a net loss of Rs.7.49 crores (unaudited) as against a net profit of Rs.10.11 crores during the previous year. The reason for the dip in performance was mainly due to sluggish demand for epoxy resins. PAPL declared a dividend of 10% on the paid up equity share capital for the year 2010- 11 and your Company received a dividend of Rs.136.80 lacs on its equity investment.

Henkel India Limited (HIL)

Your Company after the sale of 14.90% of the equity share capital of HIL to M/s. Jyothy Laboratories Ltd. (JLL) terminated the Shareholders' Agreement with Henkel AG & Co., KGaA on 6th April 2011. Subsequently, your Company sold the balance holding of 1.76% of the equity share capital of HIL to JLL on 2nd August 2011.

EMPLOYEES

Management strongly believes that the strength of your Company is directly proportional to the strength of its employees in terms of the knowledge, experience, analytical and decision making skills. Your Company has been practicing various HR initiatives such as recognition, empowerment, personality development, decentralization of delegation of powers etc., to retain the talents and to enhance their enabling capabilities. A balanced staffing system has been judiciously adopted in your Company wherein competent fresh talents have been engaged to infuse young blood into the steam of experienced hands.

Effective communication system prevalent in your Company facilitates the employees positioned at various levels in various functions to be a large vibrant cohesive team. Regular flow of upward communication to the top Management by way of MIS from various functions and percolation of Management messages, corporate goals and objectives of your Company to the junior most team member contributes to a great extent to the efficiency of the employees with perfection.

To improve the efficiency of manpower, a scientific system of performance planning and review system has been established to bring about a healthy competition among the employees by motivating them through recognition by way of rewards linked with progressions/promotions based on performance scores. Your Company has introduced a scheme titled as "Best Employee of the Quarter" to identify the Best Employee. The Best Employee is identified in each unit viz., LAB/ECH and HCD for every quarter and suitable reward is given with the title of - "The Best Employee of the Quarter".

The training needs of employees have been identified at regular intervals through performance appraisal systems and necessary training are imparted through in-house and external programmes. Apart from the routine job related training for personality development and leadership skills are imparted to enhance the administrative capabilities of employees.

The HR Management systems and procedures are constantly bench marked to excel in all the HR activities and to take care of internal and external challenges in the rapidly changing business scenario.

The wage settlement for LAB/ECH is pending from 1.1.2005. The case was referred to Industrial Tribunal (IT). The IT have given award for LAB / ECH division. However, the Management challenged the Award in the Madras High Court. The Madras High Court stayed the award with the condition of matching the salary as per 18(1) settlement to the unsigned employees and deposit 50% of the Industrial Tribunal award in the Court. The Management duly fulfilled the order of the High Court and the main case is in trial. In the meanwhile, talks are also going on to complete the settlement.

During the year, no employee of your Company was in receipt of remuneration exceeding the sum prescribed under Section 217(2A) of the Companies Act, 1956. Hence, furnishing of particulars under the Companies (Particulars of Employees) Rules, 1975 does not arise.

DIRECTORS

Since the date of the last Directors Report, Thiru K. Dhanavel, I.A.S. was appointed as an additional Director of your Company representing TIDCO at the Board Meeting held on 26th April 2012.

Pursuant to the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Tvl. Dhananjay N. Mungale, T.K. Arun, Directors and V. Ramani, Director & Chief Financial Officer shall retire by rotation and being eligible, offer themselves for re-election.

The term of office of Thiru K. Dhanavel, IAS, shall be upto the date of the ensuing Annual General Meeting. Notice in writing pursuant to Section 257 of the Companies Act, 1956 has been received from TIDCO proposing the candidature for appointment as Director of your Company liable to retirement by rotation.

DIRECTORS' RESPONSIBILITY STATEMENT

In compliance with the provisions of Section 217(2AA) of the Companies Act, 1956 (the Act), your Directors hereby confirm that: -

(i) in preparing the Annual Accounts for the year ended 31st March 2012, all the applicable accounting standards have been followed;

(ii) prescribed accounting policies were adopted and applied consistently and judgements and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2012 and of the profit or loss of the Company for year ended on that date;

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

(iv) the Annual Accounts have been prepared on a "going concern" basis.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Report on Corporate Governance with Auditors' Certificate on compliance with the conditions of Corporate Governance and a Management Discussion and Analysis Report have been attached to form part of the Annual Report.

AUDITORS

M/s. Deloitte Haskins & Sells, appointed as Statutroy Auditors at the 26th Annual General Meeting held on 16th September 2011 retire at the conclusion of 27th Annual General Meeting and are eligible for re-appointment.

COST AUDITORS

Thiru A.N. Raman, Cost Accountant was appointed as the Cost Auditor of your Company for the financial year 2011-12 pursuant to Section 233B of the Companies Act, 1956 to carry out the audit of your Company's cost records of its three products viz. Linear Alkyl Benzene, Epichlorohydrin and Chlor Alkali. The Cost Audit Report for the year ended 31st March 2011, was duly certified by Thiru A.N. Raman, Cost Auditor and filed within the due date with the Ministry of Corporate Affairs on 12th September 2011.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 217(1)(e) of the Companies Act, 1956, are attached to form part of the Report.

ACKNOWLEDGEMENT

The Management is grateful to the Government of India, the Government of Tamilnadu, the Reserve Bank of India, financial institutions, banks, other lending institutions, insurance companies, promoters, shareholders, technology suppliers, raw material suppliers, valued customers, joint venture partners, statutory auditors, contractors, marketing agents and vendors for their continued support and co-operation.

The Directors also wish to place on record their appreciation of the persistent efforts, involvement and contribution of all the employees which have been instrumental for the improved performance.

For and on behalf of the Board of Directors

Chennai - 600 068 DR N. SUNDARADEVAN

26th April 2012 Chairman


Mar 31, 2010

The Directors have pleasure in presenting the Twenty Fifth Annual Report on the business and operations of your Company and the audited Statement of Accounts for the year ended 31 st March 2010.

FINANCIAL RESULTS (Rupees in crores)

2009-10 2008-09

Sales (Gross) 973.49 1052.40

Profit before Depreciation and interest 65.44 60.17

Less: Interest and Financial charges 21.29 25.68

Profit after Interest 44.15 34.49

Less: Depreciation 30.82 32.58

Profit before tax 13.33 1.91

Provision for tax 2.56 (4.63)

Profit after tax 10.77 6.54

Balance carried to Balance Sheet 71.02 65.52

FINANCIAL REVIEW

Your Company was able to garner support from its bankers on account of improved performance during the year. This facilitated your Company to obtain additional working capital limit both fund and non fund based, besides availing one time credit facility to meet the urgent working capital needs. Your Company has been continuously working to reduce the overall interest cost and as a means to achieve the same during 2008-09, sale of non-core assets were made to pre pay high cost debt. Despite non-acceleration of debt repayment during 2009-10, the overall interest cost reduced from Rs. 25.68 crores in 2008-09 compared to Rs. 21.28 crores during current year, primarily due to reduction in working capital interest.

Your Company availed term loan from two of its existing bankers for replacement of Adsorbent chamber internals and Molecular Sieves in LAB plant molex section at interest rates below the prime lending rate of the respective banks and with a longer tenor. In view of the incremental revenues arising from the increased captive paraffin production, the loan can be liquidated without strain. The support extended by the working capital lenders and the extended credit support by suppliers helped your Company to tie up raw materials required to maintain production schedules for 2009-10.

DIVIDEND

Your Company declared dividend for the financial year 2005-06 and thereafter could not reward the shareholders

considering the loss incurred. The good turnaround performance during the year under review ended up with a net profit after tax of Rs. 10.77 crores. The Board of Directors therefore considers it imperative to declare dividend for 2009-10 and have recommended payment of dividend of 5% (Rs.0.50 per equity share) on the paid up equity share capital.

OPERATIONAL HIGHLIGHTS

During the year your Company has completed 25 years, since its inception in 1984. Over the years, your Company has grown to be recognized as one of the major Petrochemical manufacturers in India. At this juncture, your Company has redefined its vision to sustain and excel foreseeing the opportunities and threat considering the dynamic and highly competitive business environment.

Linear Alkyl Benzene (LAB)

The performance of the LAB operations during the year showed signs of reasonably improved margins and profitability in view of a fairly steady oil price scenario and with the specific consumption of key raw materials being maintained within the norms. LAB production during the year was higher at 85,068 MTs compared to the previous year. However the capacity utilization could have been higher but forthe plant turnaround during January 2010 for replacement of adsorbent chamber internals and sieves in the Molex unit. The sieves replacement is expected to restore the captive normal paraffin production to installed capacity levels thereby reducing the imports substantially in future. Your Company continues to enjoy the benefits of process efficiency and energy optimization gained through Advanced Process Control implemented earlier. LAB imports from the Middle-east countries are still a matter of concern as imports are increasing year after year. Your Company has therefore taken up the matter with the Government of India to impose anti dumping duty from specific countries which are trying to dump LAB into India at very low prices. Despite this scenario, your Company continues to be the sole supplier to Procter & Gamble and Henkel, KGaA, the leading international detergent manufacturers for their domestic requirements.

Epichlorohydrin (ECH)

The performance of the ECH operations during the year showed a reduced loss. Though the Sales quantity improved compared to the previous year, the realization has not been commensurate in view of subdued international price of ECH. The rising trend of input costs and particularly, the energy cost coupled with theinverted duty structure has greatly affected the margins. M/s. Petro Araldite Private Ltd. continues to source their ECH requirements from your Company.

Caustic Soda / Chlor Alkali

The performance of Chlor Alkali operations during the year diminished considerably due to various extraneous factors. The profitability was greatly affected due to increased variable costs consequent to high cost of captive power consumption in view of severe power cut imposed in Tamilnadu, which prevailed for most part of the year coupled with depressed caustic soda price due to cheaper imports. Your Company therefore decided to operate the plant at optimum capacity levels to the extent of using grid power and hence the capacity utilization was not comparable with the previous years level of production. This strategy however helped to minimize the loss of the division. Imposition of safeguard duty by the Government on temporary basis has not provided the desired relief to realize better margins.

SAFETY, HEALTH & ENVIRONMENT

Your Company has been maintaining safety standards required for the safety of employees and the society. During the year, your Company has won awards from the Factories Inspectorate for safe operations of the plant for the years 2006 and 2007. The safe days of operation achieved in the LAB, ECH and Chlor Alkali plant as on 31st March 2010 are 4997, 1038 and 133 respectively. Adequate care and attention is bestowed towards the health of the employees and the environment in and around the plant.

RESEARCH & DEVELOPMENT

Research and Development activities were mainly focused on quality improvement of products. Attention was paid towards process improvements to achieve specific consumptions of new bench mark levels. Focus was also on studies related to improving over all environmental performance of the organization. A few activities towards value addition of side stream products were carried out during the year.

SUBSIDIARIES

SPIC Electric Power Corporation Private Ltd. (SEPC)

The efforts to develop the 525 MW Thermal power project atTuticorin has gained momentum with the signing of the Shareholders and Share Subscription Agreement during last year with an investor company, Goldstone Exports Ltd. (name changed as Trinity Infraventures Ltd.). The investor company has been infusing funds and has so far contributed Rs. 1.51 crores.

A joint committee consisting of representatives from Central Electricity Authority (CEA) / Tamilnadu Electricity Board (TNEB) / Tuticorin Port Trust (TPT) has recommended an alternative site for locating the power project. SEPC after making preliminary investigations has found the land suitable. Thereafter the alternate site has been approved by TNEB/TPT/CEA. Consequent to the above development, the Arbitration proceedings initiated earlier to settle the dispute between SEPC and TPT over the earlier land allocation have been kept in abeyance.

Certus Investment and Trading Ltd. and its Wholly owned Subsidiaries Taking cognizance of its core strength in LAB business,your Company envisioned to be a dominant global producer by building new capacities in regions with promising growth potential viz. Middle East and South East Asia for setting up of LAB & Normal Paraffin projects. With the perspective of setting up such Projects overseas on joint venture basis, your Company established M/s. Certus Investment and Trading Limited (CITL), Mauritius, as a Wholly owned Subsidiary Company (WOS) of TPL, to serve as a Special Purpose Vehicle (SPV). CITL, in partnership with M/s Saudi Offset Limited Partnership (SOLP), established a company, M/s Gulf Petroproduct Co. to set up a LAB Project in the Middle East.

The Project proposal is to construct a 80,000 MT per annum standalone LAB Plant together with associated offsite facilities in Yanbu Industrial City, Kingdom of Saudi Arabia. The equity investment in the Project company would be made through Gulf Petroproduct Co. (GPC) in which CITL, the wholly owned subsidiary of TPL, has 50% shareholding.

The Project Company is in discussion with M/s Shell to finalize the terms of Feedstock Agreement, proposed to be supplied from the Pearl Shell Gas to Liquids (GTL) Project under construction in Qatar, with whom a Heads of Agreement (HoA) has earlier been executed in 2008. The feedstock supply will be made available from Pearl Shell GTL Projects 2nd phase which is slated for completion in 2012.

Based on the Information Memorandum & Financial Model of the Project, an investment bank in Middle East has evinced interest in Equity participation. A firm investment decision is expected from the investor after approval from their Board. Renewal of Investment license from Saudi Arabian General Investment Authority (SAGIA) & request for Site allocation will be initiated subsequent to firming of Feedstock supply Agreement with M/s Shell and tie up of Equity partners. The Project completion schedule is revised to the last quarter of 2012, to be in line with the Feedstock availability.

CITL has also established M/s Certus Investment & Trading (S) Pte Ltd., to function as co-ordinator of TPLs procurement and marketing services for its business operations outside India.

Proteus Petrochemicals Private Ltd.

CITL has set up a subsidiary, M/s Proteus Petrochemicals Private Limited as the project company for setting up a Normal Paraffin Project in Singapore. The proposal is to establish a green-field Normal Paraffin (NP) Project plant along with the associated utilities and off-sites. The Project was originally conceived for a capacity of 100,000 Metric tons per annum and was estimated to cost USD 125 Million, to be funded on a Debt: Equity ratio of 70:30. CITL had proposed to invest 51% of the Equity, with the balance Equity contribution coming from a Foreign Investor and Singapores Economic Development Board (EDBi).

The Project Company has now firmed up feedstock tie-up with Shell Singapore at a more competitive price than the earlier arrangement, for which the final Board approval from Shell Management is expected by May 2010. In view of the superior quality of feedstock to be obtained from Shell, the production capacity will be higher for the same quantity of feedstock to be processed. Accordingly in line with the higher design of Plant Capacity for 125,000 MTs per annum, the Project cost has been revised upwards to USD 150 Million. The Debt: Equity structure of the Project has also been changed to 65:35. However, to maintain the investment amount as envisaged earlier, CITL will now take only 28% of the Equity. Singapores EDBi and another Associate Investor will be investing 5% & 22% respectively towards Equity. In view of this arrangement, the Management control will still be with TPL. Balance 45% of the Equity is to be taken up by M/s Toyota Tsusho, a group company of Toyota Motor Corporation, Japan. Presence of Toyota Tsusho is expected to add value as it will be providing guarantee for 100% of debt, besides providing marketing support by virtue of their experience in LAB/NP trading business.

The Process Licensor Agreement & Engineering Agreement with M/s UOP has been finalized and is due for execution. The Detailed Engineering Contractor too has been finalized. The Project is now scheduled to kick-off in June 2010 with a target for commencement of commercial production by June 2012.

A statement pursuant to Section 212 of the Companies Act, 1956, giving information on the subsidiary companies is attached hereto. The consolidated financial statements presented by your Company include the financial information of its subsidiaries, as required under Accounting Standard AS-21, issued by the Institute of Chartered Accountants of India.

In terms of the exemption granted to your Company by the Central Government under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies that are required to be attached to the Balance Sheet of your Company have not been attached. The Annual Accounts of the subsidiary companies and the related detailed information will be made available to the shareholders and the subsidiary company investors who seek such information. The Annual Accounts of the subsidiary companies will also be kept for inspection by any investor at the Registered Office and that of the subsidiary company concerned.

STATUS OF ACTIVE INVESTMENTS

Henkel India Limited (HIL)

Henkel India Limited achieved a turnover of Rs.509 crores for the year ended 31st December 2009 compared to Rs.508 crores in the previous year with Profit (before exceptional items) of Rs. 12.71 crores as against Profit of Rs.4.19 crores in the previous year. Henko and Mr.White, the main laundry care brands recorded a sales volume growth of 11 % and 2% respectively. Pril Utensil Cleaner registered a 22% growth in volume. In the Cosmetics and toiletries business of the Company, Soap category grew by 10.1% in value, Fa deodorant sales grew by 4% while Neem Active toothpaste witnessed a sales growth of 6.2%. The Schwarzkopf Professional Hair-Care Division (SKP) posted an impressive growth of 34%. SKP was official hair and styling partner for the Femina Miss India 2009, besides establishing a Hair-care Academy in Chennai.

Petro Araldite Pvt. Ltd. (PAPL)

During the financial year 2009-10, PAPL has earned a net profit of Rs. 13.53 crores (unaudited) *as against Rs.5.07 crores during previous year. The capacity utilization was 88% compared to 82% during the previous year. Total exports during the period was 3768 MT compared to 5030 MT during the same period last year. PAPL declared a maiden dividend of 5% on the paid up equity share capital for the year 2008-09 and your Company received a dividend of Rs.68.40 lacs on its equity investment.

FIXED DEPOSITS

During the year, the unclaimed deposit of Rs. 10,000/- was repaid to the deposit holder based on the claim received by your Company. Consequently, there is no unclaimed deposit as on 31st March 2010.

EMPLOYEES

Management is strongly committed to the belief that the sustenance and viability of the Company is commensurate with the quantity and quality of its manpower in terms of understanding, experience, decision making and problem solving skills both individually and as members of a well knit team.

In order to concretize this concept, the Company has been pursuing various HR initiatives and interventions with special focus on employee empowerment, multi- skilling and personality development both to recognize and retain the talents as well as to enhance their capabilities.

The HR Policy seeks to retain and re-orient the existing hands while infusing new blood and faces for a judicious balance. The HR department pursues a practice of continuing the Companys long built traditions, while gradually welcoming transition to newer concepts and tools in the context of globalization.

The communication system has been so structured as to enable information and messages to flow smoothly and without distortion both horizontally and vertically. Both to remove ennui and lassitude among employees, the Company has devised a system of progressions / promotions oriented to career development to ensure employee satisfaction and productivity. With a view to identify and recognize the extraordinary merits and contributions by employees, a system has been evolved to institute "The Best Employee of the Quarter" award in each and every Unit. Through a system of Performance Appraisal, employees contribution and achievements are objectively graded and suitable correctives are timely applied by purposeful training sessions and counselling.

Thanks to the approach to HR adopting the latest techniques, the disciplinary aspect and the Industrial Relations have been deftly managed impacting on production and harmony.

A statement giving information and particulars of Employees, as required under Section 217(2A) of the Companies Act, 1956, is attached to form part of this Report.

DIRECTORS

The details of changes in the composition of the Board of Directors since the date of last Directors Report are given below:

The Board of Directors on 28th January 2010

(a) recorded the withdrawal of nomination of Thiru M.F. Farooqui, I.A.S. as Director and Chairman by TIDCO. On the same day, Thiru Rajeev Ranjan, I.A.S. was co-opted as Director and appointed as Chairman vice Thiru M.F. Farooqui, I.A.S.

(b) co-opted Thiru Sunil Paliwal, I.A.S. as a Director of the Company representing TIDCO vice Tmt. Anita Praveen, I.A.S. and

(c) co-opted Thiru R. Karthikeyan as Director of the Company representing TIDCO vice Thiru T.S. Surendranath.

The Board of Directors wish to place on record their appreciation of the valuable services rendered by Tvl. M.F. Farooqui, I.A.S. as Director & Chairman, T.S. Surendranath and Tmt. Anita Praveen, I.A.S. as Directors during their tenure on the Board.

Pursuant to the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Tvl.N.R. Krishnan, Ashwin C. Muthiah and T.K. Arun shall retire by rotation and being eligible, offer themselves for re-election.

DIRECTORS RESPONSIBILITY STATEMENT

In compliance with the provisions of Section 217(2AA) of the Companies Act, 1956 (the Act), your Directors hereby confirm that: -

(i) in preparing the Annual Accounts for the year ended 31st March 2010, all the applicable accounting standards have been followed;

(ii) accounting policies were adopted and applied 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 as at 31st March 2010 and of the profit or loss of the Company for year ended on that date;

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

(iv) the Annual Accounts have been prepared on a "going concern" basis.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Report on Corporate Governance with Auditors Certificate on compliance with the conditions of Corporate Governance and a Management Discussion and Analysis Report have been attached to form part of the Annual Report.

AUDITORS

M/s. Deloitte Haskins & Sells, appointed as Statutory Auditors at the 24th Annual General Meeting held on 23rd September 2009, retire at the conclusion of the 25th Annual General Meeting and are eligible for re-appointment.

With reference to the comments contained in the Auditors Report

(a) pertaining to SPIC Electric Power Corporation (Private) Limited (SEPC), the Board of Directors wish to state that the Company, SPIC Electric Power Corporation Private Limited (SEPC) and an investor company have signed a Shareholders and Share Subscription Agreement on 28th May 2009 for implementation of Power Project. The investor company has agreed to bring in 74% of the equity and has been meeting all the expenses of SEPC since August 2007. An alternative site for the project was identified and approved by TNEB/Tuticorin Port Trust (TPT)/Central Electricity Authority. SEPC has found the land suitable for the project. Demarcations under the Coastal Zone Regulation, Contour Survey, preliminary soil investigation have been completed. The process of obtaining environmental clearance from the Ministry of Environment,and Forests for setting up the project is at an advanced stage. SEPC will pay the arrears of lease rentals on taking possession of the land. The Detailed Project Report with the revised project cost is under consideration by SEPC. Consequent to the above developments, the arbitration proceedings between SEPC and TPT over the land allotted to SEPC and sought to be repossessed by the latter have been

kept in abeyance. The Ministry of Power, Government of India has clarified by its letter dated 24th February 2010 that the change of the alternate site would not alter the legal enforceability of the already concluded Power Purchase Agreement between SEPC and TNEB. In view of the substantial progress made in respect of this power project, no provision in the value of investment and advance against equity is considered necessary as explained in Note No. 21 of Notes to the Accounts.

(b) pertaining to the Assets held by the company amounting to Rs. 2123.63 lacs and expected to be transferred to the proposed overseas project, the Board of Directors wish to state that the Company is confident that the assets which are in the form of equipment and drawings for paraffin production can be transferred to its overseas project at a value not less than their cost as explained in Note No. 22 of Notes to the Accounts.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 217(1)(e) of the Companies Act, 1956, are attached to form part of the Report.

ACKNOWLEDGEMENT

The Management is grateful to the Government of India, the Government of Tamilnadu, the Reserve Bank of India, financial institutions, banks, other lending institutions, insurance companies, promoters, shareholders, technology suppliers, raw material suppliers, valued customers, joint venture partners, statutory auditors, contractors, marketing agents and vendors for their continued support and co-operation.

The Directors also wish to place on record their appreciation of the co-operation, understanding of the corporate goals and active involvement and dedication of all the employees which enabled he Company to achieve its growth plans.

For and on behalf of the Board of Directors

Chennai - 600 068 RAJEEV RANJAN

5th May 2010 Chairman

 
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