Directors Report of Pidilite Industries Ltd.

Mar 31, 2023

Financial Performance

Comments on Financial Performance are included in Management Discussion and Analysis section.

Dividend

Your Directors recommend a dividend of '' 11.00 per equity share of '' 1/- each, (previous year '' 10.00 per equity share of '' 1/-each) amounting to '' 559.15 crores (previous year '' 508.30 crores) out of the current year''s profit, on '' 50.83 crores equity capital (previous year '' 50.83 crores). Dividend is subject to approval of members at the ensuing Annual General Meeting and shall be subject to deduction of income tax at source. The dividend payout amount has grown at a CAGR of 14.08% during the last 5 years.

Your Directors take pleasure in presenting the Fifty-Fourth Annual Report together with Audited Financial Statements for the year ended 31^st March, 2023.

Financial Results (Standalone)
	('' in crores )
	2022-23	2021-22 (Restated)$
Sales	10,545.12	8,852.31
Operating Profit	1,939.10	1,825.94
Finance Costs	(28.53)	(27.24)
Depreciation and Amortisation Expense	(221.97)	(194.38)
Net Foreign Exchange Loss	(20.88)	(13.58)
Profit Before Exceptional Items and Tax	1,667.72	1,590.74
Exceptional Items	-	-
Profit Before Tax	1,667.72	1,590.74
Current Year''s Tax	(423.05)	(39753)
Deferred Tax	12.51	(1.80)
Profit After Tax	1,257.18	1,191.41
Profit Brought Forward	4,877.86	4,123.49
Other Comprehensive Income Included in Retained Earnings (Net of tax)	1.45	(9.06)
Due to Business Combination	-	3.95
Profit Available for Appropriation	6,136.49	5,309.79
Appropriations
Dividend Paid	(508.30)*	(431.93) #
Closing balance of Retained Earnings	5,628.19	4,877.86

$ During previous year, the Company had filed two merger applications with National Company Law Tribunal (NCLT) with respect to the merger of its wholly owned subsidiaries namely Pidilite Adhesives Pvt. Ltd (PAPL) and Cipy Polyurethanes

Pvt. Ltd (CIPY). Consequent to the filing of NCLT orders approving the mergers with Registrar of Companies, mergers have become effective from the Appointed date being 1^st April 2022. The above being a common control transaction, the previous year figures have been restated for the accounting impact of the merger, as if the merger had occurred from the beginning of previous year.

* Pertaining to dividend for FY 2021-22

# Pertaining to dividend for FY 2020-21

The dividend payout is in accordance with the Dividend Distribution Policy, which is available on the website of the Company https://pidilite. com/investors/corporate-governance

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve.

Term Finance

The Company has no outstanding term loans (previous year NIL).

Capital Expenditure

The total capital expenditure during the year was '' 456.94 crores (previous year '' 377.32 crores) primarily spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on Information Technology.

Deposits

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 during the financial year 2022-23 (previous year NIL).

Subsidiaries

Investment in Subsidiaries

During the year, total investment of '' 78.59 crores (previous year '' 104.94 crores) was made in subsidiaries. Of this, '' 53.38 crores was invested in domestic subsidiaries and '' 25.21 crores in overseas subsidiaries.

The investments in domestic subsidiaries were in

Pidilite Ventures Pvt Ltd amounting to ('' 28.12 crores),

Pidilite Litokol Pvt Ltd ('' 12.22 crores) and Pidilite Grupo

Puma Manufacturing Ltd ('' 13.04 crores)

The investments in overseas subsidiaries were in

Pidilite Middle East Ltd ('' 17.03 crores) and Pidilite

International Pte Ltd ('' 8.18 crores).

During the year

a. A new Company in name of Solstice Business Solutions Pvt. Ltd (SBSPL) was incorporated on 6^th April, 2023, a wholly owned subsidiary of Pidilite Ventures Private Limited, which is a wholly owned subsidiary of the Company.

SBSPL, is intended to carry out inter alia the business of providing services, for construction, repair, renovation.

b. The Company through its subsidiary Pidilite Ventures Private Limited made investments in early-stage companies, which would augment our capabilities.

c. Plus Call Technical Services LLC, a Joint Venture, where Pidilite Middle East Limited, wholly owned subsidiary of the Company holds 40% of the share capital, was dissolved.

Amidst uncertain global economic conditions and inflationary pressures, International Subsidiaries reported moderate sales growth along with improvement in EBITDA.

Consolidated Financial Statements

In accordance with the provisions of Companies Act, 2013 (hereinafter referred to as ''the Act''), Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ''Listing Regulations'') and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2022-23, together with the Auditor''s Report, form part of this Annual Report. A statement containing the salient features of the Company''s subsidiaries and associate companies in the prescribed Form AOC- 1, are set out in Note No. 59 to the Consolidated Financial Statements.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate companies and joint venture, as approved by their respective Board of Directors except Pulvitec Do Brazil Industria e Comercio de Colas e Adesivos Ltda which has been approved by the local administrator.

The accounts of the subsidiaries are also uploaded on the website of the Company, https://pidilite.com/ investors/financials/

Directors and Key Managerial Personnel

The Board of Directors, on the recommendation of Nomination and Remuneration Committee, has recommended to the Members:

(a) re-appointment of Shri M B Parekh as the Whole Time Director designated as the Executive Chairman of the Company for a further period of 5 years with effect from 1^st August, 2023.

(b) re-appointment of Shri A B Parekh as the Whole-time Director designated as Executive Vice Chairman of the Company for a further

period of 5 years with effect from 1^st August, 2023.

Shri Piyush Pandey was re-appointed as an Independent Director of the Company by the Board on the recommendation of Nomination and Remuneration Committee for a second term of five consecutive years upto 10^th April, 2028, subject to the approval of the Members through Postal Ballot.

Shri Joseph Varghese was appointed as an Additional Director and also as a Whole Time Director designated as Director-Operations for a period of 5 years by the Board on the recommendation of Nomination and Remuneration Committee, with effect from 9^th November, 2022 and Member''s approved the said appointment through Postal Ballot on 27^th December, 2022.

Shri Sandeep Batra was appointed as an Additional Director and also as a Whole Time Director designated as Executive Director - Finance in addition to his current position as Chief Financial Officer of the Company for a period of 5 years, by the Board on the recommendation of Nomination and Remuneration Committee, with effect from 9^th November, 2022 and Member''s approved the said appointment through Postal Ballot on 27^th December, 2022.

Shri Debabrata Gupta, resigned with effect from 9^th November, 2022, as the Whole Time Director designated as Director-Operations. The Board places on record its appreciation for the services rendered by Shri Debabrata Gupta during his tenure as the Whole Time Director.

Shri N K Parekh has stepped down as the Non-Executive Vice-Chairman but continues as Non-Executive Director and Shri A N Parekh has been designated as the Executive Vice-Chairman w.e.f. 8^th May, 2023.

In accordance with the Act and the Articles of Association of the Company, Shri A N Parekh and Shri Sudhanshu Vats, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

None of the Directors of the Company are disqualified for being appointed as Directors as specified under Section 164(2) of the Act read with Rule 14(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Policy on Directors'' remuneration The policy on Directors'' remuneration is available on the website of the Company, https://pidilite.com/ investors/corporate-governance/. The remuneration paid to the Directors is as per the terms laid out in the said policy.

Directors'' Responsibility Statement

Your Directors confirm that:

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

• they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31^st March, 2023 and of the profit of the Company for that period;

• they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• they have prepared the annual accounts on a going concern basis;

• they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

• they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Annual Evaluation by the Board of its own performance, its Committees and individual Directors

The Board has put in place a mechanism for evaluation of its own performance and performance of its Committees and individual Directors. The evaluation of the Board, Committees, Directors and Chairman of the Board was conducted based on evaluation parameters, such as Board composition and structure, effectiveness of the Board, participation at meetings, domain knowledge, awareness and observance of governance, etc. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Familiarisation Programme

The Company has put in place an induction and familiarization programme for all its Directors including the Independent Directors.

The familiarization programme for Independent Directors in terms of provisions of Regulation 46(2)(i)

of the Listing Regulations is uploaded on the website of the Company.

Number of Meetings of Board of Directors

Five meetings of the Board of Directors of the Company were held during the financial year 2022-23. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that:

a. they meet the criteria of independence as laid down under the Act and the Listing Regulations;

b. they have complied with the Code of Independent Directors prescribed under Schedule IV of the Act; and

c. they have registered themselves with the Independent Directors'' Database maintained by the Indian Institute of Corporate Affairs.

Corporate Governance

The Company is committed to good corporate governance practices. The Report on Corporate Governance, as stipulated under Listing Regulations, forms an integral part of this Annual Report. The requisite certificate from M/s Parikh & Associates, Practising Company Secretaries, is attached to the Report on Corporate Governance, which forms a part of this Annual Report.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as stipulated under the Listing Regulations, is presented in a section forming part of this Annual Report. For the sake of brevity the items covered in this Report are not repeated in the Management Discussion and Analysis Report.

Committees of the Board

The following are the statutory Committees constituted by the Board and they function according to their respective roles and defined scope:

• Audit Committee

• Nomination and Remuneration Committee

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

• Risk Management Committee

There is no qualification or adverse remark in Auditors'' Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

The Board of Directors have recommended the appointment of M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No 101248W/W-100022) as the Statutory Auditors of the Company, for a term of 5 consecutive years commencing from the conclusion of 54^th AGM till the conclusion of 59^th AGM of the Company.

M/s. B S R & Co. LLP have confirmed their eligibility and qualification required under the Act for holding the office as Statutory Auditors of the Company.

Cost Auditor

The Company has maintained cost records as specified by Central Government u/s 148(1) of the Act. M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2022-23 to conduct the audit of the cost records of the Company and they have been reappointed as the Cost Auditor for the financial year 2023-24. In terms of the provisions of Section 148(3) of the Act, read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditor has to be ratified by the Members of the Company. Accordingly, at the ensuing AGM, the Board seeks ratification of the remuneration payable to the Cost Auditor for the financial year 2023-24.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Parikh & Associates, Practising Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2022-23.

The Secretarial Audit Report for the financial year 2022-23 under the Companies Act, 2013 read with Rules made thereunder and Regulation 24A of the Listing Regulations, is set out in Annexure 2 to this

report. There is no qualification or adverse remark in their Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars under Section 134 of the Act, read with the Companies (Accounts) Rules, 2014 are attached as Annexure 3 to this Report.

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance, which forms a part of this Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

Corporate Social Responsibility (CSR) Report and CSR Policy

The CSR Report as per Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014 and amendments thereto, is attached as Annexure 1 to this Report. The details of CSR Initiatives forms part of Social & Community Service Initiatives section of this Annual Report. CSR Policy can be accessed on website of the Company https://pidilite. com/investors/corporate-governance/.

Vigil Mechanism / Whistle Blower Policy

The Company has established a Vigil Mechanism and Whistle Blower Policy for its Directors and employees. The said policy has been communicated to the Directors and employees of the Company and is also posted on the website of the Company https://pidilite. com/investors/corporate-governance/. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Policy relating to Prevention of Sexual Harassment

In accordance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 ("POSH Act”) and Rules made thereunder, the Company has formulated a Prevention of Sexual Harassment Policy, which mandates no tolerance against any conduct amounting to sexual harassment of women at workplace. The Company has formed an Internal Complaints Committee to redress and resolve any complaints arising under the POSH Act. To build awareness in this area, Company has been conducting induction/ training programmes in the organisation on a periodical basis. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statutory Auditors

M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018) will complete their present term on conclusion of the ensuing 54^th AGM.

Risk Management

In compliance with Regulation 21 of the Listing Regulations, a Risk Management Committee has been constituted by the Board. The Risk Management Committee, also known as The Risk Management Oversight Committee, is entrusted with roles and powers as specified in Part D of Schedule II of Listing Regulations.

The Company has laid out a risk management policy for identification and mitigation of risks. The Company

has also constituted a Management Risk Committee which is chaired by the Managing Director and has Senior Leadership of the Company as its members.

The Management Risk Committee identifies the key risks for the Company, develops and implements the risk mitigation plan, reviews and monitors the risks and corresponding mitigation plans on a regular basis and prioritises the risks, if required, depending upon the effect on the business/reputation.

The other details in this regard are provided in the

Report on Corporate Governance, which forms a part of this Annual Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements/transactions entered into by the Company during the financial year under

review with related parties (as defined in the Act and Listing Regulations) were in the ordinary course of business and on an arm''s length basis. During the year, the Company did not enter into any contract/ arrangement/transaction with related parties, which could be considered as material in accordance with the Policy of the Company on Materiality of Related Party Transactions (RPT Policy) or which is required to be reported in Form No. AOC-2 in terms of Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

The RPT Policy, as approved by the Board, is available on the Company''s website: https://pidilite.com/ investors/corporate-governance/.

Disclosure of related party transactions with the promoter(s)/promoter(s) group which individually hold 10% or more shareholding of the Company, as per the Indian Accounting Standards, are set out in Note No. 44 of the Standalone Financial Statements of the Company.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered

under the provisions of Section 186 of the Act are given in the Notes to the Financial Statements.

Employees Stock Option Scheme

The Employees Stock Option Scheme (Scheme) is in line with SEBI (Share Based Employee Benefits) Regulations, 2014. The certificate of Secretarial Auditors regarding implementation of the Scheme is available for inspection of Members in electronic mode.

The applicable disclosure, as stipulated under

Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations,

2021, as on 31^st March, 2023 with regard to Scheme, is provided in Annexure 4 to this Report.

Annual Return

Annual Return of the Company is available on the

website of the Company viz. https://pidilite.com/ investors/general-meetings/

Business Responsibility and Sustainability Report

A Business Responsibility and Sustainability Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front, forms an integral part of this Report.

Internal Control Systems and their Adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan and periodically reviews the progress of audits as per approved audit plans along with critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/Material Orders passed by the Regulators

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

Particulars of Employees and Related Disclosures

Disclosures pertaining to remuneration as per Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 5 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Act and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any modifications, thereof) shall be made available to any shareholder, on request.

General

The Company has neither issued equity shares with differential rights nor any sweat equity shares.

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

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by the employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 8^th May, 2023 Executive Chairman

---

Mar 31, 2022

Your Directors take pleasure in presenting the Fifty-Third Annual Report together with Audited Financial Statements for the year ended 31^st March, 2022.

Financial Results (Standalone)Financial Performance

Comments on Financial Performance are included in Management Discussion and Analysis section.

Dividend

Your Directors recommend a dividend of '' 10.00 per equity share of '' 1/- each (previous year '' 8.50 per equity share of '' 1/- each) amounting to '' 508.29 crores (previous year '' 431.93 crores) out of the current year’s profit, on '' 50.83 crores equity capital (previous year '' 50.82 crores). The dividend payout amount has grown at a CAGR of 13.65% during the last 5 years.

	('' in crores )
	2021-22	2020-21
Sales	8,298.49	6,186.67
Operating Profit	1,842.38	1,623.30
Finance Costs	(26.42)	(16.99)
Depreciation, Amortisation and Impairment Expense	(175.12)	(147.10)
Net Foreign Exchange Loss	(13.35)	(2.13)
Profit Before Exceptional Items and Tax	1,627.49	1,457.08
Exceptional Items	-	(0.45)
Profit Before Tax	1,627.49	1,456.63
Current Year’s Tax	(360.95)	(375.05)
Deferred Tax	2.08	(0.12)
Profit After Tax	1,268.62	1,081.46
Profit Brought Forward	4,123.49	3,042.74
Other Comprehensive Income Included in Retained Earnings (Net of tax)	(9.07)	(0.71)
Profit Available for Appropriation	5,383.04	4,123.49
Appropriations
Dividend Paid	(431.93)#	-
Closing balance of Retained Earnings	4,951.11	4,123.49
# Pertaining to dividend for FY 2020-21

The dividend payout is in accordance with the Dividend Distribution Policy

which is available on the website of the Company

www.pidilite.com.

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve.

Term Finance

The Company has no outstanding term loans (previous year NIL).

Capital Expenditure

The total capital expenditure during the year was '' 370.45 crores (previous year '' 336.69 crores) primarily spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology.

Deposits

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 during the financial year 2021-22 (previous year NIL).

Subsidiaries

Investment in Subsidiaries

During the year, total investment of '' 104.94 crores (previous year '' 2,323.04 crores) was made in domestic subsidiaries.

The investments in domestic subsidiaries were in Madhumala Ventures Pvt Ltd amounting to ('' 54.96 crores), Pidilite C-Techos Walling Ltd ('' 1.21 crores) and Cipy Polyurethanes Private Limited (? 48.77 crores).

During the year

a. Scheme of Amalgamation of Pidilite Adhesives Private Limited (PAPL) with the Company was

Performance of Major Domestic and Overseas Subsidiaries

(? in crores)
Name of Subsidiary	Sales	Sales	% Growth	EBITDA	EBITDA	% Growth
	2021 -22	2020-21		2021-22	2020-21
Nina Percept Pvt Ltd	258.59	176.63	46.4%	(25.42)	(26.93)	5.6%
ICA Pidilite Pvt Ltd	272.12	178.21	52.7%	40.99	25.19	62.7%
CIPY Polyurethanes Pvt Ltd	126.84	89.68	41.4%	12.35	1.63	658.0%
Pidilite Adhesives Pvt Ltd	495.74	168.32*	194.5%	160.86	60.32*	166.6%
Pidilite Speciality Chemicals Bangladesh Pvt Ltd	171.74	110.80	55.0%	31.47	17.04	84.7%
Pidilite Lanka (Pvt) Ltd	59.58	42.17	41.3%	4.53	6.45	(29.8%)
Pidilite USA Inc	128.49	141.30	(9.1%)	8.24	18.61	(55.7%)
Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda	95.50	105.65	(9.6%)	1.30	23.70	(94.5%)
Pidilite Industries Egypt SAE includes PIL Trading (Egypt) Company	46.78	36.90	26.8%	(4.22)	(0.77)	(445.4%)
Pidilite Bamco Ltd includes Bamco Supply and Services Ltd (Thailand)	56.66	62.37	(9.2%)	6.86	8.76	(21.7%)
Pidilite MEA Chemicals LLC (UAE)	133.93	110.22	21.5%	1.22	(3.13)	138.9%

Overseas subsidiaries figures are at constant currency.

''Sales and EBITDA for Pidilite Adhesives Pvt. Ltd. for FY 2020-21 are from 4^th November, 2020 to 31^st March, 2021 and therefore not comparable with FY 2021-22.

approved by the Hon’ble National Company Law Tribunal, Mumbai Bench on 7^th March, 2022. The scheme is effective from 1^st April, 2022 which is the appointed date. The Company has completed the statutory requirements including filing of Form INC28 with the Ministry of Corporate Affairs and hence PAPL stands dissolved.

b. Scheme of Amalgamation of Cipy Polyurethanes Private Limited (CIPY) with the Company was approved by the Hon’ble National Company Law Tribunal, Mumbai Bench on 23^rd March, 2022. The scheme is effective from 1^st April, 2022 which is the appointed date. The Company has completed the statutory requirements including filing of Form INC28 with the Ministry of Corporate Affairs and hence CIPY stands dissolved.

c. The Company through its subsidiary Madhumala Ventures Pvt. Ltd. made investments in early-stage companies which would augment our capabilities.

d. The names of following two subsidiaries have been struck off by the Registrar of Companies u/s 248 of the Companies Act during the F Y 2021-22 in absence of any business, since their incorporation:

(i) Pidilite C-Techos Pvt. Ltd. and (ii) Pidilite Grupo Puma Pvt.Ltd.

e. ICA Pidilite Pvt Ltd, subsidiary of the Company made Buy back of shares from all shareholder’s resulting into reduction in investments of the Company

by '' 11.28 crores.

Domestic Subsidiaries in Consumer and Bazaar segment registered good sales growth and healthy margins. The Subsidiaries sales growth in Business to Business segment showed signs of revival but EBITDA remained under pressure due to higher input costs.

Pidilite Bangladesh reported strong volume-led growth across categories with healthy EBITDA margin on back of improved gross margin due to pricing actions and cost control measures.

Pidilite Lanka continued with its sales growth momentum in a very challenging economic environment. However, the profitability was significantly impacted due to socioeconomic and political crisis and steep currency devaluation.

Pidilite USA posted sales and EBITDA decline primarily due to moderation of demand in hobby and craft products in the post pandemic period as well as material cost increases.

Pidilite Brazil recorded lower sales mainly on account of overall economic slowdown and higher growth in the prior year due to fiscal stimulus. Operating profits remain low due to significant input cost inflation and competitive pricing pressure.

Our subsidiary in the Middle East reported healthy

sales performance on account of good demand from re-export market.

Consolidated Financial Statements

In accordance with the provisions of Companies Act, 2013 (hereinafter referred to as ‘the Act’), Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘Listing Regulations’) and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2021 -22, together with the Auditor’s Report, form part of this Annual Report. A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed Form AOC- 1, are set out in Note No. 59 to the Consolidated Financial Statements.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate company and joint venture, as approved by their respective Board of Directors except Pulvitec Do Brazil Industria e Comercio de Colas e Adesivos Ltda which has been approved by the local administrator and Plus Call Technical Services LLC, Dubai for which the financial statements has been approved by the management.

The accounts of the subsidiaries are also uploaded on the website of the Company, www.pidilite.com.

Directors and Key Managerial Personnel

Smt. Meher Pudumjee was appointed as an Additional Director of the Company, by the Board on the recommendation of Nomination and Remuneration Committee, with effect from 18^th May, 2022. Members’ approval is sought for her appointment as an Independent Director of the Company for a period of five years with effect from 18^th May, 2022.

Shri Sudhanshu Vats was appointed as an Additional Director designated as Deputy Managing Director, by the Board on the recommendation of Nomination and Remuneration Committee, with effect from 18^th May,

2022. Members’ approval is sought for his appointment as Whole Time Director designated as Deputy Managing Director of the Company for a period of five years with effect from 18^th May, 2022.

Shri A B Parekh Whole Time Director has been appointed by the Board as Executive - Vice Chairman with effect from 11^th August, 2021.

Shri Puneet Bansal, resigned with effect from 16^th September 2021, as the Company Secretary and Compliance Officer (Key Managerial Personnel) of the Company. Shri Pradip Menon, Chief Financial Officer (Key Managerial Personnel) of the Company, resigned with effect from 21^st December, 2021.

In terms of Section 203 of the Act and applicable provision of Listing Regulations, the Board of Directors have appointed Smt. Manisha Shetty as the Company Secretary and Compliance Officer (Key Managerial Personnel) of the Company with effect from 11^th March, 2022 and Shri Sandeep Batra as Chief Financial Officer (Key Managerial Personnel) of the Company with effect from 1^st June, 2022.

In accordance with the Act and the Articles of Association of the Company, Shri A B Parekh and Shri N K Parekh, Directors of the Company, retire by rotation and being eligible, offers themselves for re-appointment.

Amendment of Article 22 of Articles of Association of the Company

The Board of Directors have approved amendment of Article 22 of Articles of Association of the Company to increase the limit on maximum number of Directors from

existing 15 Directors to 18 Directors. As per the amended Article 22 the number of Directors of the Company shall not be less than 3 (three) and not more than 18 (eighteen). Members’ approval is sought to amend the existing Article 22 and to increase the maximum number of Directors.

Policy on Directors’ remuneration

The policy on Directors’ remuneration is available on the website of the Company, www.pidilite.com. The remuneration paid to the Directors is as per the terms laid out in the said policy.

Directors’ Responsibility Statement

Your Directors confirm that:

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

• they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31^st March, 2022 and of the profit of the Company for that period;

• they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• they have prepared the annual accounts on a going concern basis;

• they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

• they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Annual Evaluation by the Board of its own performance, its Committees and individual Directors

The Board has put in place a mechanism for evaluation of its own performance and performance of its Committees and individual Directors. The evaluation of the Board,

Committees, Directors and Chairman of the Board was conducted based on the evaluation parameters, such as Board composition and structure, effectiveness of the Board, participation at meetings, domain knowledge, awareness and observance of governance, etc. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Familiarisation Programme

The Company has put in place an induction and familiarization programme for all its Directors including the Independent Directors.

The familiarization programme for Independent Directors in terms of provisions of Regulation 46(2)(i) of the Listing Regulations is uploaded on the website of the Company. Number of Meetings of Board of Directors

Seven meetings of the Board of Directors of the Company were held during the financial year 2021 -22. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that:

a. they meet the criteria of independence as laid down under the Act and the Listing Regulations and

b. they have registered their names in the Independent Directors’ Databank.

Corporate Governance

The Company is committed to good corporate governance practices. The Report on Corporate Governance, as stipulated under Listing Regulations, forms an integral part of this Annual Report. The requisite certificate from M/s M. M. Sheth & Co., Practising Company Secretaries, is attached to the Report on Corporate Governance, which forms a part of this Annual Report.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as stipulated under the Listing Regulations, is presented in a section forming part of this Annual Report. For the sake of brevity the items covered in this Report are not repeated in the Management Discussion and Analysis Report.

Committees of the Board

The following are the statutory Committees constituted by the Board and they function according to their respective roles and defined scope:

• Audit Committee

• Nomination and Remuneration Committee

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

• Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance, which forms a part of this Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

Corporate Social Responsibility (CSR) Report and Policy

The CSR Report as per Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014 and amendments thereto, is attached as Annexure 1 to this Report. The details of CSR Initiatives forms part of Social & Community Service Initiatives section of this Annual Report. CSR Policy can be accessed on website of the Company www.pidilite.com.

Vigil Mechanism / Whistle Blower Policy

The Company has established a Vigil Mechanism and Whistle Blower Policy for its Directors and employees. The said policy has been communicated to the Directors and employees of the Company and is also posted on the website of the Company. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Policy relating to Prevention of Sexual Harassment

The Company has formulated a Prevention of Sexual Harassment Policy and has formed Internal Complaints Committee, as per statutory requirements. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statutory Auditors

In accordance with the provisions of the Act,

M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No 117366W/W-100018) have been appointed as the Statutory Auditors of the Company,

for a period of five years i.e., upto the conclusion of 54^th AGM to be held for the adoption of accounts for the year ending 31^st March 2023. Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

There is no qualification or adverse remark in Auditors’ Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

Cost Auditor

The Company has maintained cost records as specified by Central Government u/s 148(1) of the Act. M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2021-22 to conduct the audit of the cost records of the Company and they have been reappointed as the Cost Auditor for the financial year 2022-23. In terms of the provisions of Section 148(3) of the Act, read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditor has to be ratified by the Members of the Company. Accordingly, at the ensuing AGM, the Board seeks ratification of the remuneration payable to the Cost Auditor for the financial year 2022-23.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s M. M. Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2021-22. The Report of the Secretarial Auditors attached as Annexure 2 to this Report. There is no qualification or adverse remark in their Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars under Section 134 of the Act, read with the Companies (Accounts) Rules, 2014 are attached as Annexure 3 to this Report.

Risk Management

In compliance with Regulation 21 of the Listing Regulations, a Risk Management Committee has been constituted by the Board. The Risk Management Committee, also known as Risk Management Oversight Committee, is entrusted with roles and powers as specified in Part D of Schedule II of Listing Regulations.

The Company has laid out a risk management policy for identification and mitigation of risks. The Company has also constituted a Management Risk Committee which is chaired by the Managing Director and has Senior Leadership of the Company as its members.

The Management Risk Committee identifies the key risks for the Company, develops and implements the risk mitigation plan, reviews and monitors the risks and corresponding mitigation plans on a regular basis and prioritises the risks, if required, depending upon the effect on the business/reputation.

The other details in this regard are provided in the Report on Corporate Governance, which forms a part of this Annual Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements entered into by the Company during the financial year under review, with related parties (as defined in the Act and Listing Regulations) were in the ordinary course of business and on an arm’s length basis. During the year, the Company did not enter into any contract/arrangement/transaction with related parties which could be considered as material in accordance with the Policy of the Company on Materiality of Related Party Transactions (RPT Policy) or which is required to be reported in Form No. AOC-2 in terms of Section 134(3)

(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

The RPT Policy, as approved by the Board, is available on the Company’s website: www.pidilite.com.

Disclosure of related party transactions with the promoter(s)/promoter(s) group which individually hold 10% or more shareholding of the Company, as per the Indian Accounting Standards, are set out in Note No. 44 the Standalone Financial Statements of the Company.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered under the provisions of Section 186 of the Act are given in the Notes to the Financial Statements.

Employees Stock Option Scheme

The Employees Stock Option Scheme (Scheme) is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations). The certificate of Secretarial Auditors regarding implementation of the Scheme is available for inspection of Members in electronic mode.

The applicable disclosure, as stipulated under Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as on 31^st March 2022 with regard to Scheme, is provided in Annexure 4 to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is available on the website of the Company viz. www.pidilite.com.

Business Responsibility Report

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front, forms an integral part of this Report.

Internal Control Systems and their Adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan and periodically reviews the progress of audits as per approved audit plans along with critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/Material Orders Passed by the Regulators

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

Particulars of Employees and Related Disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Act, read with Rule 5(1) of the Companies

(Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 5 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Act, and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any modifications, thereof) shall be made available to any shareholder, on request.

General

The Company has neither issued equity shares with differential rights nor any sweat equity shares.

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

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by the employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 18^th May, 2022 Executive Chairman

---

Mar 31, 2021

The Members

Your Directors take pleasure in presenting the Fifty-Second Annual Report together with Audited Financial Statements for the year ended 31^st March 2021.

Financial Results (Standalone)

	(''	in crores )
	2020-21	2019-20
Sales	6,186.67	6,290.43
Operating Profit	1,623.30	1,637.28
Finance Costs	(16.99)	(13.40)
Depreciation, Amortisation and Impairment Expense	(147.10)	(125.79)
Net Foreign Exchange Loss	(2.13)	(1.86)
Profit Before Exceptional Items and Tax	1,457.08	1,496.23
Exceptional Items	(0.45)	(59.28)
Profit Before Tax	1,456.63	1,436.95
Current Year''s Tax	(375.05)	(368.65)
Profit After Current Year''s Tax	1,081.58	1,068.30
Deferred Tax	(0.12)	33.32
Profit After Tax	1,081.46	1,101.62
Profit Brought Forward	3,042.74	2,779.09
Other Comprehensive Income Included in Retained Earnings (Net of tax)	(0.71)	(11.20)
Profit Available for Appropriation	4,123.49	3,869.50
Appropriations
Dividend Paid	-	(330.18) #
Interim Dividend Paid	-	(355.61)
Tax on Dividend	-	(140.97)
Total	-	(826.76)
Closing Balance of Retained Earnings	4,123.49	3,042.74
# Pertaining to dividend for FY 2018-19

The dividend payout is in accordance with the Dividend Distribution Policy which is available on the website of the Company www.pidilite.com.

During the year

a. The Company acquired 100% share capital of Huntsman Advanced Materials Solutions Pvt. Ltd. for cash consideration of '' 2,196.46 crores. The acquisiton process was completed on

3^rd November 2020. The name of the said subsidiary has been changed to Pidilite Adhesives Pvt. Ltd. with effect from 13^th January 2021.

b. The Company acquired the balance 30% stake in its subsidiary namely Cipy Poly Urethanes Pvt. Ltd. (CIPY), by purchasing 28,249 equity shares from certain other shareholders of CIPY, for a cash consideration of '' 60.49 crores (excluding certain contingent payment). The acquisition process was completed on 22^nd April 2021. Consequent to this, CIPY became a wholly owned subsidiary of the Company.

c. The Company has completed the acquisition of the business of wholly owned entity

M/s. Nitin Enterprise, (a partnership firm having two partners, both of which are wholly owned subsidiaries of the Company).

Performance of Major Domestic and Overseas Subsidiaries						('' in crores)
Name of Subsidiary	Sales	Sales	% Growth	EBITDA	EBITDA	% Growth
	2020-21	2019-20		2020-21	2019-20
Nina Percept Pvt Ltd	176.63	267.76	(34.0%)	(26.93)	11.50	(333.9%)
ICA Pidilite Pvt Ltd	178.21	185.83	(4.1%)	25.19	24.13	4.5%
CIPY Poly Urethanes Pvt Ltd	89.68	121.38	(26.1%)	1.63	15.38	(89.4%)
Pidilite Adhesives Pvt Ltd*	168.32	-	-	60.32	-	-
Pidilite Speciality Chemicals Bangladesh Pvt Ltd	111.10	124.50	(10.8%)	17.09	19.19	(11.0%)
Pidilite Lanka (Pvt) Ltd	45.43	41.34	9.9%	6.95	2.90	139.7%
Pidilite USA Inc	140.70	119.14	18.1%	18.53	(0.45)	4,262.8%
Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda	103.84	70.14	48.0%	23.29	1.58	1,378.7%
Pidilite Industries Egypt SAE includes PIL Trading (Egypt) Company	36.73	37.93	(3.2%)	(1.00)	(0.08)	(1,133.9%)
Pidilite Bamco Ltd includes Bamco Supply and Services Ltd (Thailand)	65.41	63.37	3.2%	9.18	5.38	70.8%
Pidilite MEA Chemicals LLC (UAE)	109.81	114.69	(4.3%)	(3.12)	(4.33)	28.0%

Overseas subsidiaries figures are at constant currency.

* Figures are for the period from 4 ^th November 2020 to 31^st March 2021

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve.

Term Finance

The Company has no outstanding term loans (previous year NIL).

Capital Expenditure

The total capital expenditure during the year was '' 336.69 crores (previous year '' 369.03 crores) primarily spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology.

Deposits

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 during the financial year 2020-21 (previous year NIL).

Subsidiaries

Investment in Subsidiaries

During the year, investment of '' 2,333.82 crores (previous year '' 146.18 crores) was made in subsidiaries. Of this, '' 2,323.04 crores (including contingent consideration) was invested in domestic subsidiaries and '' 10.78 crores in overseas subsidiaries.

The investments in domestic subsidiaries were in Madhumala Ventures Pvt Ltd ('' 10.51 crores),

Nina Percept Pvt Ltd ('' 4.82 crores), Pidilite Litokol Pvt Ltd ('' 14.28 crores), Pidilite Grupo Puma Manufacturing Ltd ('' 11.71 crores), Pidilite C-Techos Walling Ltd ('' 0.60 crores) and in the newly acquired subsidiaries Tenax Pidilite India Pvt Ltd (formerly known as Tenax India Stone Products Pvt Ltd) ('' 84.66 crores) and Pidilite Adhesives Pvt Ltd (formerly known as Huntsman Advanced Materials Solutions Pvt. Ltd.) ('' 2,196.46 crores).

The investments in overseas subsidiaries were in Pidilite Middle East Ltd ('' 10.33 Crores) and Pidilite Chemical PLC ('' 0.45 crores).

Performance of domestic subsidiaries was impacted due to nationwide lock-down in the country. Performance improved during second half of the year with good sales achievement by ICA Pidilite and Pidilite Adhesives.

Performance of subsidiaries in Bangladesh, Middle East and Egypt was impacted due to lockdowns.

Pidilite Lanka continues to perform well despite challenging business environment and posted a significant increase in EBITDA margin owing to lower material costs and local manufacturing.

Pidilite USA sales and profit grew well due to higher demand of hobby & craft products during the pandemic and increased focus on e-commerce.

Pidilite Brazil reported good sales and profit growth due to operational improvements and higher economic growth due to fiscal stimulus.

The subsidiaries in Thailand reported marginal sales growth driven by project business. EBITDA improved due to softer input costs and controlled spends.

Consolidated Financial Statements

In accordance with the provisions of Companies Act, 2013 (hereinafter referred to as ‘the Act’), Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015 (hereinafter referred to as ‘Listing Regulations’) and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2020-21, together with the Auditor’s Report, forms part of this Annual Report. A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed Form AOC- 1, are set out in Note No. 59 to the Consolidated Financial Statements.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate Companies and joint venture, as approved by their respective Board of Directors except Pulvitec Do Brazil Industria e Comercio de Colas e Adesivos Ltda which has been approved by the local administrator and Plus Call Technical Services LLC, Dubai for which the financial statements has been approved by the management. The requisite applications have been filed with Ministry of Corporate Affairs for striking off the names of Pidilite C-Techos Pvt. Ltd. and Pidilite Grupo Puma Pvt. Ltd., in absence of any business, since their incorporation.

The accounts of the subsidiaries are also uploaded on the website of the Company, www.pidilite.com.

Directors and Key Managerial Personnel

The Board of Directors, on the recommendation of Nomination and Remuneration Committee, has recommended to the Members the re-appointment of Shri Vinod Dasari as an Independent Director of the Company for a second consecutive term, commencing from the conclusion of 52^nd AGM upto 31^st August, 2025.

Shri Rajeev Vasudeva was appointed as an Additional Director (Independent) of the Company by the Board on the recommendation of Nomination and Remuneration Committee with effect from 10^th September, 2020. Members’ approval is sought for his appointment as an Independent Director of the Company for a period of 5 consecutive years i.e upto 9^th September 2025.

In accordance with the Act and the Articles of Association of the Company, Shri A N Parekh and Shri Debabrata Gupta, Directors of the Company, retire by rotation and being eligible, offers themselves for re-appointment.

Policy on Directors’ Remuneration

The policy on Directors’ remuneration is available on the website of the Company, www.pidilite.com. The remuneration paid to the Directors is as per the terms laid out in the said policy.

Directors’ Responsibility Statement

Your Directors confirm that:

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

• they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31^st March 2021 and of the profit of the Company for that period;

• they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• they have prepared the annual accounts on a going concern basis;

• they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

• they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Annual Evaluation by the Board of its own performance, its Committees and individual Directors

The Board has put in place a mechanism for evaluation of its own performance and performance of its Committees and individual Directors. The evaluation of the Board, Committees, Directors and Chairman of the Board was conducted based on the evaluation parameters, such as Board composition and structure, effectiveness of the Board, participation at meetings, domain knowledge, awareness and observance of governance, etc. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Familiarisation Programme

The Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors.

The familiarisation programme for Independent Directors in terms of provisions of Regulation 46(2)(i) of the Listing Regulations is uploaded on the website of the Company.

Number of Meetings of Board of Directors

Seven meetings of the Board of Directors of the Company were held during the financial year 2020-21. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that:

a. they meet the criteria of independence as laid down under the Act and the Listing Regulations; and

b. they have registered their names in the Independent Directors’ Databank.

Corporate Governance

The Company is committed to good corporate governance practices. The Report on Corporate Governance, as stipulated under Listing Regulations, forms an integral part of this Annual Report. The requisite certificate from M/s M. M. Sheth & Co., Practising Company Secretaries, is attached to the Report on Corporate Governance, which forms a part of this Annual Report.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as stipulated under the Listing Regulations, is presented in a section forming part of this Annual Report. For the sake of brevity the items covered in this Report are not repeated in the Management Discussion and Analysis Report.

Committees of the Board

The following are the statutory Committees constituted by the Board and they function according to their respective roles and defined scope:

• Audit Committee

• Nomination and Remuneration Committee

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

• Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance, which forms a part of this Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

Corporate Social Responsibility (CSR) Report and Policy

The CSR Report as per Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014 and amendments thereto, is attached as Annexure 1 to this Report. The details of CSR Initiatives forms part of Social & Community Service Initiatives section of this Annual Report.

CSR Policy can be accessed on website of the Company www.pidilite.com.

Vigil Mechanism / Whistle Blower Policy

The Company has established a Vigil Mechanism and Whistle Blower Policy for its Directors and

employees.The said policy has been communicated to the Directors and employees of the Company and is also posted on the website of the Company.

For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Policy relating to Prevention of Sexual Harassment

The Company has formulated a Prevention of Sexual Harassment Policy and has formed Internal Complaints Committees, as per statutory requirements. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Statutory Auditors

In accordance with the provisions of the Act,

M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No 117366W/ W-100018) have been appointed as the Statutory Auditors of the Company, for a period of five years i.e. upto the conclusion of 54^th AGM to be held for the adoption of accounts for the year ending 31^st March 2023. Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

There is no qualification or adverse remark in Auditor’s Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

Cost Auditor

The Company has maintained cost records as specified by Central Government u/s 148(1) of the Act. M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2020-21 to conduct the audit of the cost records of the Company and they have been reappointed as the Cost Auditor for the financial year 2021-22. In terms of the provisions of Section 148(3) of the Act, read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditor has to be ratified by the Members of the Company. Accordingly, at the ensuing AGM, the Board seeks ratification of the remuneration payable to the Cost Auditor for the financial year 2021-22.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan and periodically reviews the progress of audits as per approved audit plans along with critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/Material Orders Passed by the Regulators

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

Particulars of Employees and Related Disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 5 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Act, and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any modifications, thereof) shall be made available to any shareholder, on request.

of Managerial Personnel) Rules, 2014, the Company has appointed M/s M. M. Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2020-21. The Report of the Secretarial Auditor is attached as Annexure 2 to this Report. There is no qualification or adverse remark in their Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars under Section 134 of the Act, read with the Companies (Accounts) Rules, 2014 are attached as Annexure 3 to this Report.

Risk Management

In compliance with Regulation 21 of the Listing Regulations, a Risk Management Committee has been constituted by the Board. The Risk Management Committee, also known as Risk Management Oversight Committee, is entrusted with roles and powers which includes (a) Review and approval of risk management plan (b) Review progress on the risk management plan (c) Propose methodology on risk classification and measurement.

The Company has laid out a risk management plan for identification and mitigation of risks. The Company has also constituted a Management Risk Committee which is chaired by the Managing Director and has Senior Leadership of the Company as its members. The Management Risk Committee identifies the key risks for the Company, develops and implements the risk mitigation plan, reviews and monitors the risks and corresponding mitigation plans on a regular basis and prioritises the risks, if required, depending upon the effect on the business/ reputation.

The other details in this regard are provided in the Report on Corporate Governance, which forms a part of this Annual Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements entered into by the Company during the financial year under review with related parties (as defined in the Act and Listing Regulations) were in the ordinary course of business and on an arm’s length basis. During the year, the Company did not enter into any contract/ arrangement/transaction with related parties which

could be considered as material in accordance with the Policy of the Company on Materiality of Related Party Transactions (RPT Policy) or which is required to be reported in Form No. AOC-2 in terms of Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

The RPT Policy, as approved by the Board, is available on the Company’s website: www.pidilite.com.

Disclosure of related party transactions with the promoter(s)/promoter(s) group which individually hold 10% or more shareholding of the Company, as per the Indian Accounting Standards, are set out in Note No. 44 of the Standalone Financial Statements of the Company.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered under the provisions of Section 186 of the Act are given in the Notes to the Financial Statements.

Employees Stock Option Scheme

The Employees Stock Option Scheme (Scheme) is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations).

The certificate of Auditors regarding implementation of the Scheme is available for inspection of Members in electronic mode.

The applicable disclosure, as stipulated under the SBEB Regulations, as on 31^st March 2021 with regard to Scheme, is provided in Annexure 4 to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is available on the website of the Company viz. www.pidilite.com.

Business Responsibility Report

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front, forms an integral part of this Report.

Internal Control Systems and their Adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

General

The Company has neither issued equity shares with differential rights nor any sweat equity shares.

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

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by the employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 12^th May 2021 Executive Chairman

---

Mar 31, 2019

To

The Members

The Directors take pleasure in presenting the Fiftieth Annual Report together with Audited Financial Statements for the year ended 31st March 2019.

Financial Results (Standalone)

	(Rs.in crores )
	2018-19	2017-18
Gross Turnover	6,048.18	5,445.67
Turnover, Net of Excise	6,048.18	5,309.11
Operating profit	1,489.74	1,430.30
Finance Costs	(7.14)	(6.06)
Depreciation, Amortisation and Impairment Expense	(99.83)	(91.48)
Net Foreign Exchange Loss	(6.32)	(1.48)
Profit Before Tax	1,376.45	1,331.28
Current Year’s Tax	(385.56)	(356.89)
Profit After Current Year’s Tax	990.89	974.39
Deferred Tax	(11.45)	(19.20)
Profit After Tax	979.44	955.19
Profit Brought Forward	2,166.95	1,504.72
Other Comprehensive Income included in retained earnings (net of tax)	(2.98)	0.13
Profit available for appropriation	3,143.41	2,460.04
Appropriations
Dividend paid	(304.69) *	(243.52) #
Tax on Dividend	(59.63) *	(49.57) #
Total	(364.32) *	(293.09) #
Closing balance of Retained Earnings	2,779.09	2,166.95
* Pertaining to dividend for FY 2017-18
# Pertaining to dividend for FY 2016-17
Dividend Your Directors recommend a dividend of Rs. 6.50 per equity share of Rs. 1/- each (previous year a dividend of Rs. 6.00 per equity share of Rs. 1/- each), out of the current year’s profit, on Rs. 50.80 crores equity capital amounting to Rs. 330.19 crores (previous year Rs. 304.69 crores on equity capital of Rs. 50.78 crores). The dividend payout amount has grown at a CAGR of 22.1% during the ast 5 years. The dividend payout is in accordance with the Dividend Distribution Policy which is given as an annexure and the same is also available on the website of the Company.

Financial Performance

On a comparable basis, after reflecting accounting impact of GST, the Net Sales grew by 14.5% with sales volume and mix growth of 10.4%. The volume growth in Consumer and Bazaar products segment was 12.2% (previous year 12.1%). However, due to competitive pressure and market conditions, the Industrial Products segment volume grew only by 1.9%, as compared to 7.6% growth in the previous year.

Operating Profit for the year at Rs. 1,489.74 crores increased by 4.2% . Further, Net Profit at Rs. 979.44 crores increased by 2.5%. The slight decline in profit margin is due to higher input cost.

The Indian Rupee was at Rs. 69.17 to a US$ as on 31st March 2019 as compared to Rs. 65.17 to a US$ as on 31st March 2018.

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve.

Term Finance

The Company has no outstanding term loans (previous year NIL).

Capital Expenditure

The total capital expenditure during the year was Rs. 186.23 crores, spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology.

Fixed Deposits

The Company has not accepted any fixed deposits during the financial year 2018-19.

Subsidiaries

Investment in Subsidiaries

During the year, investment of Rs. 61.04 crores (previous year Rs. 151.19 crores) was made in the subsidiaries. Of this, Rs. 26.24 crores was invested in the overseas subsidiaries and Rs. 34.80 crores in the domestic subsidiaries.

The investments in overseas subsidiaries were in Pidilite Middle East Ltd (Rs. 5.31 crores) and Pidilite International Pte Ltd (Rs. 4.17 crores) for onward investments in their step down subsidiaries and Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda (Rs. 9.35 crores) and in newly incorporated subsidiary Pidilite Ventures LLC (Rs. 7.41 crores).

The investments in domestic subsidiaries were in ICA Pidilite Pvt. Ltd. (Rs. 26.64 crores) and Cipy Polyurethanes Pvt. Ltd. (Rs. 8.16 crores).

During the year

a. Percept Waterproofing Services Limited (Percept)

(80% subsidiary of the Company) was merged with Nina Waterproofing Systems Private Limited (Nina) (70% subsidiary of the Company), pursuant to the Hon’ble National Company Law Tribunal, Mumbai Bench Order dated 11th January 2019 w.e.f. the appointed date i.e. 1st April 2017 and consequently, Percept stands dissolved without winding up.

Further, post the said merger w.e.f. 27th March 2019, Nina’s name was changed to AEKAM Construction Specialties Private Limited (AEKAM) and w.e.f. 15th April 2019, AEKAM is known as Nina Percept Private Limited. Accordingly, the Company’s investment in Percept is merged with Nina Percept Private Limited and the Company now holds 71.53% stake in the merged entity.

b. The Company incorporated a wholly owned subsidiairy in USA, Pidilite Ventures LLC, which shall be engaging mainly in the investments in early stage operating companies in USA.

c. Pidilite Lanka (Private) Limited (Pidilite Lanka)

(a step down subsidiary of the Company in Sri Lanka) has entered into an agreement with Nina Waterproofing Systems Private Limited now known as Nina Percept Private Limited (Nina) and Nina Lanka Construction Technologies (Pvt) Ltd (Nina Lanka) (a wholly owned subsidiary of Nina in Sri Lanka and also a step down subsidiary of the Company) to acquire up to 40% of the share capital in Nina Lanka. As on 31st March 2019, Pidilite Lanka has acquired 25.2% stake in Nina Lanka.

d. Pidilite International Pte. Ltd., a wholly owned subsidiary of the Company in Singapore, alongwith Crown Classics Limited, a company in Kenya, has promoted a joint venture company in Kenya namely Pidilite east Africa Limited (Peal) to carry on business of construction chemicals and waterproofing material. PEAL, by virtue of control, is a step-down subsidiary of the Company.

Performance of Major Domestic and Overseas Subsidiaries (Rs. in crores)

Name of Subsidiary	Sales 18-19	Sales 17-18	% Growth	Ebitda 18-19	EBITDA 17-18	% Growth
Nina Percept Pvt Ltd	305.04	239.18	27.5%	34.58	29.99	15.3%
ICA Pidilite Pvt Ltd	168.33	102.76	63.8%	1.69	1.43	18.0%
CIPY Poly Urethanes Pvt Ltd (Acquired on 8th February 2018)	155.43	26.72*	na	21.12	2.18*	na
Pidilite Speciality Chemicals Bangladesh Pvt Ltd	98.47	85.26	15.5%	17.02	15.84	7.4%
Pidilite USA Inc	103.55	113.71	(8.9%)	1.38	7.54	(81.6%)
Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda	86.77	85.67	1.3%	0.34	0.66	(47.8%)
Pidilite Industries Egypt SAE includes PIL Trading (Egypt) Company	29.44	28.13	4.7%	(1.74)	(1.52)	(14.4%)
Pidilite Bamco Ltd includes Bamco Supply and Services Ltd (Thailand)	60.08	55.79	7.7%	3.79	4.82	(21.3%)
Pidilite MEA Chemicals LLC (UAE)	99.40	89.63	10.9%	(7.45)	(10.00)	25.4%
Pidilite Lanka (Pvt) Ltd	36.83	31.28	17.7%	(0.63)	1.02	(162.0%)

Previous year figures, wherever applicable, are made comparable after reflecting impact of GST for the full year.

* For the period from 08.02.2018 to 31.03.2018

Overseas subsidiaries figures are at constant currency. Figures given above do not include Sales and EBITDA of Cyclo division of Pidilite USA Inc., which was sold by Pidilite USA Inc. in June 2017.

Nina Percept Pvt Ltd, engaged in waterproofing services, reported good sales and EBITDA growth in current year. During the year, ICA Pidilite has acquired brands and technical knowhow of certain wood finish products from the Company. Like for like sales growth after excluding these products is 26% over the last year. EBITDA was impacted by higher input cost and foreign exchange losses. Going forward, local manufacturing is expected to scale up and this should result in improvement in margins. CIPY was acquired in February 2018, hence its performance is not comparable with last year.

The subsidiary in Bangladesh reported good sales growth with healthy profitability, though the profit growth was impacted due to higher input cost.

Pidilite USA sales and EBITDA declined over previous financial year due to drop in sales of pencils and markers catering to adult colouring books mainly because of change in trend.

Pulvitec do Brasil reported marginal sales growth for current year. EBITDA declined due to competitive pressure in key products.

The subsidiaries in Egypt reported lower sales growth due to market conditions. The subsidiaries in Thailand reported modest sales growth. EBITDA in these subsidiaries declined due to lower sales growth and higher input costs. The subsidiary in UAE reported reduction in EBITDA losses due to higher sales and control on expenses.

Pidilite Lanka continued to grow in current year, however EBITDA remains under pressure due to higher input cost and forex losses.

Consolidated Financial Statements

In accordance with the provisions of Companies Act, 2013 (hereinafter referred to as “the Act”), Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “Listing Regulations”) and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2018-19, together with the Auditors’ Report, form part of this Annual Report. A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed Form AOC- 1, are set out in Note No. 59 to the Consolidated Financial Statements.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate company and joint venture, as approved by their respective Board of Directors except Pulvitec do Brazil Industria e Comercio de Colas e Adesivos Ltda. which has been approved by the local administrator and Plus Call Technical Services LLC, Dubai for which the financial statements have been approved by the management. There has been no transaction in Pidilite East Africa Ltd. from the date of formation till 31st March 2019.

The accounts of the subsidiaries are also uploaded on the website of the Company, www.pidilite.com.

Directors and Key Managerial Personnel

In terms of the Regulation 17(1A) of the Listing Regulations members have approved by passing Special Resolution by means of Postal Ballot the continuation of tenure of Directorship of Shri B S Mehta as Non-Executive Independent Director and Shri N K Parekh as Nonexecutive Director upto the conclusion of ensuing 50th Annual General Meeting (AGM).

The Board of Directors, on the recommendation of Nomination & Remuneration Committee, has recommended to the members, for re-appointment of Shri Bansi Mehta, Shri Uday Khanna and Smt. Meera Shankar as Independent Directors of the Company for a second consecutive term commencing from the conclusion of 50th AGM.

In accordance with the Act and the Articles of Association of the Company, Shri N K Parekh and Shri A N Parekh, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Smt Savithri Parekh, resigned with effect from 10th October 2018, as the Company Secretary and Compliance Officer (Key Managerial Personnel) of the Company. Shri P. Ganesh, Chief Financial Officer of the Company has resigned from the services of the Company effective 25th May 2019.

In terms of Section 203 of the Act and applicable provision of Listing Regulations, the Board of Directors has appointed Shri Puneet Bansal as the Company Secretary and Compliance Officer (Key Managerial Personnel) of the Company with effect from 20th February 2019.

Policy on Directors’ remuneration

The Policy on Directors’ remuneration is given as an annexure and is also available on the website of the Company, www.pidilite.com. The remuneration paid to the Directors is as per the terms laid out in the said policy.

Directors’ Responsibility Statement

Your Directors confirm that:

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

- 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 ended 31st March 2019 and of the profit of the Company for that period;

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis;

- the Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

- 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.

Annual evaluation by the Board of its own performance, its Committees and individual Directors

The Board has put in place a mechanism for evaluation of its own performance, its Committees and individual Directors. The evaluation of the Board, Committees, Directors and Chairman of the Board was conducted based on the evaluation parameters, such as Board composition and structure, effectiveness of the Board, participation at meetings, domain knowledge, awareness and observance of governance, etc. For further details, please refer to Corporate Governance section of this Annual Report.

Familiarisation Programme

The Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors.

The familiarisation programme for Independent Directors in terms of provisions of Regulation 46(2)(i) of Listing Regulations, is uploaded on the website of the Company.

Number of meetings of Board of Directors

Eight meetings of the Board of Directors of the Company were held during the year. For further details, please refer to Corporate Governance section of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Act and Regulation 16(1)(b) of Listing Regulations.

Corporate Governance

The Company is committed to good corporate governance practices. The Report on Corporate Governance, as stipulated under Listing Regulations, forms an integral part of this Annual Report. The requiste certificate from M/s M. M. Sheth & Co., Practising Company Secretaries, is attached to the Report on Corporate Governance.

Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under review, as stipulated under Listing Regulations, is presented in a section forming part of this Annual Report. For sake of brevity the items covered in Board’s Report are not repeated in the Management Discussion and Analysis Report.

Committees of the Board

The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee

- Nomination and Remuneration Committee

- Corporate Social Responsibility Committee

- Stakeholders Relationship Committee

- Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance, which forms a part of this Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

Corporate Social Responsibility Committee

The report as per Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as annexure 1. The details of CSR Initiatives forms part of Social & Community Service Initiatives.

Vigil mechanism / whistle Blower Policy

The Company has established a Vigil Mechanism and Whistle Blower Policy for its Directors and employees.

The said Policy has been communicated to the Directors and employees of the Company and also posted on the website of the Company. For further details, please refer to the Corporate Governance section of this Annual Report.

Policy relating to Prevention of Sexual Harassment

The Company has formulated a Prevention of Sexual Harassment Policy and has formed an Internal Complaints Committee. For further details, please refer to the Corporate Governance section of this Annual Report.

Statutory auditors

In accordance with the provisions of Act, M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No 117366W/W-100018) have been appointed as the Statutory Auditors of the Company, for a period of 5 years i.e. upto the conclusion of 54th AGM to be held for the adoption of accounts for the year ending 31st March 2023.

There is no qualification or adverse remark in Auditors’ Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

Cost auditor and Cost audit Report

M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2018-19 to conduct the audit of the cost records of the Company.

M/s V J Talati & Co., Cost Accountants, have been reappointed as the Cost Auditor for the financial year 2019-20. In terms of the provisions of Section 148(3) of the Act read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditors has to be ratified by the Members of the Company. Accordingly, at the ensuing AGM the Board seeks ratification of the remuneration payable to the Cost Auditors for the financial year 2019-20.

Secretarial auditor and Secretarial audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s M. M. Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is attached as annexure 2. There is no qualification or adverse remark in their Report.

Conservation of Energy, Technology absorption and Foreign Exchange Earnings and outgo

The particulars under Section 134 of the Act, read with the Companies (Accounts) Rules, 2014 are attached to this Report as annexure 3.

Risk management

In compliance with Regulation 21 of Listing Regulations, a Risk Management Committee has been constituted by the Board. The Risk Management Committee, also known as Risk Management Oversight Committee, is entrusted with roles and powers which includes (a) Review and approval of risk management plan (b) Review progress on the risk management plan (c) Propose methodology on risk classification and measurement.

The Company has laid out a risk management plan for identification and mitigation of risks. The Company has also constituted a Management Risk Committee which is chaired by an Executive Director and has various Functional Heads of the Company as members of the Committee. The other Business/Function heads are invited as and when required. The Management Risk Committee identifies the key risks for the Company, develop and implement the risk mitigation plan, reviews and monitors the risks and corresponding mitigation plans on a regular basis and prioritize the risks, if required depending upon the effect on the business/reputation.

The other details are provided in the Corporate Governance Report section of this Annual Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements entered by the Company during the financial year with related parties (as defined in the Act and Listing Regulations) were in the ordinary course of business and on an arm’s length basis. During the year, the Company did not enter into any contract/ arrangement/ transaction with related parties which could be considered as material.

The Policy on materiality of related party transactions and dealing with related party transactions, as approved by the Board, is available on the website: www.pidilite.com. Disclosure of related party transactions with the promoter(s)/promoter(s) group which individually hold 10% or more shareholding of the Company, as per Indian Accounting Standards, are set out in Note No. 43 of the Standalone Financial Statements of the Company.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Employees Stock option Scheme

The Employees Stock Option Scheme (Scheme) is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations). The certificate of Auditors regarding implementation of the Scheme would be placed at the ensuing AGM for inspection by Members.

The applicable disclosure, as stipulated under the SBEB Regulations, as on 31st March 2019 with regard to Scheme is provided in Annexure 4 to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is attached as Annexure 5 to this Report. It is also available on the website: www.pidilite.com.

Business Responsibility Report

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front forms an integral part of this Report.

Industry Structure and Development

There is no material change in the industry structure as was reported last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Industrial Products.

Products such as Adhesives, Sealants, Art & Craft Materials and Others, Construction and Paint Chemicals are covered under Branded Consumer & Bazaar products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices etc. Sale of these products to joineries and projects are also covered under this segment.

Industrial Products segment covers products such as industrial adhesives, synthetic resins, organic pigments, pigment preparations, surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small companies which are active regionally. Multinational companies are also present in many of the product categories in which the Company operates.

Current Year outlook

The prices of key raw materials which had increased significantly during the first half of the year under review started declining in the later part of the fiscal. Barring unforseen circumstances this trend is likely to continue during the initial months of the current year.

Continued slow down in construction industry and slow down in economic growth in recent months can impact sales growth for current year.

Major subsidiaries in India are taking initiatives to improve margins and achieve consistent sales growth in their respective businesses.

The Company’s major international subsidiaries are in USA, Brazil, Thailand, Egypt, Dubai and Bangladesh.

The Company is in the process of commissioning a second plant in Bangladesh during the year 2019.

The US subsidiary plans to increase its focus on retail and e-commerce. Various initiatives are being taken to improve sales and margin in Brazil. The business environment in some of these countries remain subdued. outlook on opportunities, Threats, Risks and Concerns The Indian economy provides a large opportunity to the Company to market its differentiated products.

Slower growth of the Indian economy and stress in sectors such as construction could impact the performance of the Company.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Financial Control Systems and their adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan and periodically reviews the progress of audits as per approved audit plans along with critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/material orders passed by the Regulators

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

Particulars of Employees and related disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Act, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as annexure 6 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Act and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any modifications, thereof) are available at the Registered Office of the Company during working hours and shall be made available to any shareholder on request.

Human Resources

The year under review saw substantial progress in people practices, as the Company continued on its journey of excellence in people management policies and processes.

The Company’s ‘Happy and Healthy’ (HAH) movement saw great participation with almost 50% of the employees engaging in various activities.

The Company enhanced the people processes like Career Navigator, Individual Development Plans and Career Paths. Signature capability-building programs like Ignite (for Marketing Managers), Ascent (for Sales Managers), Capstone (for Middle Managers) and Edge (for Young Managers) strengthened the Learning & Development initiative and were well-received by participants and leaders.

Progressive HR policies such as work from home, paternity leave, saturdays offs, etc. were introduced as part of the journey to become a great place to work. Many existing employee benefit policies were revised to make them best in class.

The Company is committed to building a “listening organization” through multiple platforms. Workplace, our in-house social network platform, has played a key role in promoting two-way communication with employees.

The new Human Resource Management System Workline introduced during the year has strengthened the online HR systems and provided employees with a better user experience.

The total number of employees as on 31st March 2019 was 5,742.

General

The Company has not issued equity shares with differential rights as well as sweat equity shares.

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

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 14th May 2019 Executive Chairman

---

Mar 31, 2018

To

The Members

The Directors take pleasure in presenting the Forty Ninth Annual Report together with Audited Financial Statements for the year ended 31^st March, 2018.

Financial Results (Standalone)

	(Rs. in crores )
	2017-18	2016-17
Gross Turnover	5445.67	5270.30
Turnover, Net of Excise	5309.11	4837.02
Operating profit	1430.30	1338.94
Exceptional items	-	94.34
Profit Before Tax	1331.28	1144.72
Current Year’s Tax	356.89	362.66
Profit After Current Year’s Tax	974.39	782.06
Deferred Tax	19.20	8.27
Profit After Tax	955.19	773.79
Profit Brought Forward	1504.72	763.76
Other comprehensive income (net of tax)	0.13	(1.98)
Profit available for appropriation	2460.04	1535.57
Appropriations
Dividend paid	243.52 *	25.63
Tax on Dividend	49.57 *	5.22
Total	293.09	30.85
Closing balance of Retained Earnings	2166.95	1504.72

* Pertaining to dividend for FY 2016-17

Financial Performance

On a comparable basis after reflecting accounting impact of GST for the full year, net sales grew by 12.0%, with sales volume and mix growth of 11.2%. Consumer and Bazaar products grew by 12.1% and Industrial Products grew by 7.6%.

The Operating Profit for the year at Rs.1430.30 crores increased by 6.8% and Net Profit at Rs.955.19 crores increased by 23.4%. Income tax for the current year at Rs.356.89 crores (including reversal of excess tax provision of Rs.46.47 crores of earlier years) is lower by 1.6%.

The Indian Rupee was at Rs.65.17 to a US $ as on 31^st March 2018 as compared to Rs.64.81 to a US $ as on 31^st March 2017.

Dividend

Your Directors recommend a dividend of Rs.6/- per equity share of Rs.1 each (previous year a total dividend of Rs.4.75 per equity share of Rs.1 each), out of the current year’s profit, on 50.78 crores equity capital of Rs.1/- each amounting to Rs.304.69 crores (previous year Rs.243.52 crores on equity capital of 51.27 crores). Dividend for the current year will be free of tax in the hands of shareholders, upto an amount aggregating to Rs.10 lacs. The dividend payout amount has grown at a CAGR of 22.68 % during the last 5 years. The dividend payout is in accordance with the Dividend Distribution Policy as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), is given as an annexure and the same is also available on the website of the Company.

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve out of the amount available for appropriation and an amount of Rs.2166.95 crores is proposed to be retained in the profit and loss account.

Term Finance

The Company has no outstanding term loans.

Capital Expenditure

The total capital expenditure during the year was Rs.131.94 crores, spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology.

Fixed Deposits

The Company has not accepted any fixed deposits during the year 2017-18.

Subsidiaries

Investment in Subsidiaries

During the year, investment of Rs.151.19 crores was made in subsidiaries. Of these Rs.33.92 crores was invested in overseas subsidiaries and Rs.21.02 crores was invested in domestic subsidiaries. The balance represents the consideration paid for the acquisition of 70% equity stake in CIPY Poly Urethanes Pvt. Ltd. (excluding fair valuation of derivative option to buy balance 30% equity stake).

The investments in overseas subsidiaries were in Pidilite Middle East Ltd (Rs.16.54 crores) and Pidilite International Pte Ltd (Rs.15.91 crores) for onward investments in their step down subsidiaries and Pidilite Chemical PLC (Rs.1.47 crores).

The investments in domestic subsidiaries were in ICA Pidilite Pvt. Ltd (Rs.20.46 crores) and Fevicol Company Ltd. (Rs.0.56 crores)

During the year

a) A petition has been filed with National Company Law Tribunal, Mumbai division (NCLT) for amalgamation of Percept Waterproofing Services Limited (Percept) with Nina Waterproofing Systems Private Limited (Nina).

The Company holds 80% equity capital in Percept and 70% equity capital in Nina and shall hold 71.53% equity capital post merger in Nina. The said petition is pending for approval by NCLT.

b) The Company acquired 70% stake in CIPY Poly Urethanes Pvt Ltd

c) Building System Solution Trading Limited Liability Company (BSST) incorporated in Qatar, ceased to be a step down subsidiary of the Company with effect from 5^th March 2018.

d) Pidilite USA Inc., a wholly owned subsidiary of the Company sold the Cyclo Division which was engaged in the business of automobile grooming, performance and maintenance products and other such products.

Some of the Trademarks used by the Cyclo Division which were owned by Pidilite International Pte Ltd., Singapore (a wholly owned subsidiary of the Company) were also assigned.

During the year CIPY Poly Urethanes Private Limited became a subsidiary of the Company.

Performance of Major Domestic and overseas Subsidiaries

Nina and Percept, domestic subsidiaries engaged in waterproofing services, reported strong sales and EBITDA growth in current year.

ICA Pidilite Private Limited (ICA Pidilite), a joint venture (JV) of the Company and ICA Spa of Italy, commenced operations in 2016-17. As a part of the Technology Transfer Agreement with ICA Spa, the JV is setting up a plant to manufacture high end wood finishes in India. Sales of ICA Pidilite for the fourth quarter was impacted by a classification dispute with regulatory authorities. The matter is being contested by the Company.

Pidilite USA sales for the year declined over previous financial year due to drop in demand of products for adult coloring segment. EBITDA for the year grew over the previous year, as the previous year results include provision for voluntary recall of Tempra and Fingerpaint products based on routine quality control inspections.

(Rs. in crores)

Name of Subsidiary	Sales 17-18	Sales 16-17	% Growth	EBITDA 17-18	EBITDA 16-17	% Growth
Nina Waterproofing Systems Pvt Ltd	183.61	150.69	21.8%	22.95	11.17	105.5%
Percept Waterproofing Services Ltd	55.58	43.64	27.4%	7.09	4.76	48.9%
ICA Pidilite Pvt Ltd	102.76	94.94	8.2%	1.43	10.30	(86.1%)
CIPY Poly Urethanes Pvt Ltd (Acquired on 8th February 2018)	26.72	-	-	2.22	-	-
Pidilite USA Inc	108.48	143.80	(24.6%)	7.05	(2.00)	452.5%
Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda	93.60	97.21	(3.7%)	0.72	5.21	(86.2%)
Pidilite Speciality Chemicals Bangladesh Pvt Ltd	85.07	75.62	12.5%	15.20	13.50	12.6%
Pidilite Industries Egypt SAE includes PIL Trading (Egypt) Company	26.34	21.40	23.1%	(1.40)	(3.32)	57.8%
Pidilite Bamco Ltd includes Bamco Supply and Services Ltd	51.33	46.66	10.0%	4.43	4.86	(8.7%)
Pidilite MEA Chemicals LLC	84.00	72.29	16.2%	(9.28)	(18.02)	48.5%
Pidilite Lanka (Pvt) Ltd	31.84	26.28	21.2%	1.03	1.80	(42.5%)

Previous year figures, wherever applicable, are made comparable after reflecting impact of GST for the full year.

Overseas subsidiaries figures are at constant currency. Figures given above do not include Sales and EBITDA of Cyclo Division of Pidilite USA as Cyclo business was sold by Pidilite USA in June 2017.

Pulvitec do Brasil sales declined due to competitive pressure in key products. The demand situation in Brazil continues to be uncertain.

The subsidiaries in Bangladesh and Thailand reported reasonable sales growth. EBITDA for subsidiaries in Thailand declined on account of higher material cost.

The subsidiaries in Egypt and UAE reported reduction in EBIDTA losses due to good sales growth and control on expenses.

Pidilite Lanka continued to report good sales growth. However, EBITDA declined due to higher investments to support future sales growth.

Consolidated Financial Statements

In accordance with the requirements of Indian Accounting Standards AS 110 (read with IND AS 28 and IND AS 31) issued by Central Government under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, the Consolidated Financial Statements of the Company are provided in the Annual Report. A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed form in Form AOC - 1 is attached.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate company and joint venture, as approved by their respective Board of Directors except Plus Call Technical Services LLC for which the financial statements have been approved by the management of the Joint Venture.

The Consolidated Financial Statements of the Company for the financial year 2017-18 are prepared in compliance with applicable provisions of the Companies Act, 2013, Indian Accounting Standards and presented in compliance with Listing Regulations. The accounts of the subsidiaries are also uploaded on the website of the Company, www.pidilite.com.

Directors and Key Managerial Personnel

Members approval is sought by way of Special Resolution for re-appointment of Shri M B Parekh as Whole Time Director for a further period of 5 yea rs with effect from 1^st August 2018. Shri M B Parekh is the Executive Chairman of the Company.

Members approval is sought for re-appointment of

(i) Shri A B Parekh, as a Whole Time Director, for a further period of 5 years with effect from 1^st August 2018 and

(ii) Shri Sabyaschi Patnaik, as a Whole Time Director, for a further period of 3 years with effect from 19^th May 2018.

In accordance with the Articles of Association of the Company, Shri A B Parekh and Shri Sabyaschi Patnaik, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Shri Ranjan Kapur, Director of the Company passed away on 27^th January 2018. He was a director in the Company since 17^th October 2000. The Directors place on record their sincere appreciation of the valuable services rendered by Shri Ranjan Kapur during his tenure as Director of the Company.

Shri Piyush Pandey was appointed as an Additional Director of the Company with effect from 11^th April 2018. Members approval is sought for appointment of Shri Piyush Pandey as an Independent Director for a period of 5 years.

In terms of Section 203 of the Companies Act, 2013, the Board has appointed Shri P Ganesh as the Chief Financial Officer (Key Managerial Personnel) of the Company with effect from 20^th November 2017.

Policy on Directors’ remuneration

The Policy on Directors’ remuneration is given as an annexure and is also available on the website of the Company, www.pidilite.com. There has been no change except an increase in the commission payable to non-executive Directors. The remuneration paid to the Directors is as per the terms laid out in the said policy of the Company.

Buyback of shares

In terms of the special resolution passed by the members, by postal ballot procedure, the Company has completed buyback of 50,00,000 (Fifty Lakhs) fully paid-up equity shares of Rs.1/- each (representing about 0.975% of the total outstanding pre buyback equity shares of the Company) at a price of Rs.1,000/- (Rupees One Thousand only) per equity share for an aggregate amount of Rs.500,00,00,000/-(Rupees Five Hundred Crores only) from the equity shareholders/ beneficial owners holding equity shares as on Record Date i.e. 12^th February 2018, on proportionate basis through the tender offer route in accordance with the provisions of the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made thereunder.

Consequent to above change, the paid up share capital of the Company has decreased from 51,28,10,330 equity shares of Rs.1/- each to 50,78,10,330 equity shares of Rs.1/- each.

Directors’ Responsibility Statement

Your Directors confirm that:

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

- 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 ended 31^st March 2018 and of the profit of the company for that period;

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis;

- the Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

- 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.

Annual evaluation by the Board of its own Performance, its Committees and Individual Directors

The Board has put in place a mechanism for evaluation of its own performance, Committee and Individual Directors. The evaluation of the Board, Committees, Directors and Chairman of the Board was conducted based on the evaluation parameters such as Board composition and Structure, effectiveness of the Board, participation at meetings, domain knowledge, awareness and observance of governance, etc.

Familiarisation Programme

The Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors.

The familiarisation programme for Independent Directors in terms of provisions of Regulation 46(2)(i) of Listing Regulations, is uploaded on the website of the Company.

Number of Meetings of Board of Directors

Seven meetings of the Board of Directors of the Company were held during the year. For further details, please refer to Corporate Governance section of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of Listing Regulations.

Corporate Governance

The Company is committed to good corporate governance practices. The Report on Corporate Governance as stipulated under Listing Regulations forms an integral part of this Report. The requiste certificate from M/s M. M. Sheth & Co., Practising Company Secretaries, is attached to the Report on Corporate Governance.

Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under review as stipulated under Listing Regulations is presented in a section forming part of Annual Report.

Items covered in Board’s Report are not repeated in the Management Discussion and Analysis Report.

Statutory auditors

The members on 25^th September 2014 had appointed M/s. Deloitte Haskins & Sells, Chartered Accountants (Firm Registration No. 117364W) for a period of 4 years upto the conclusion of the 49th Annual General Meeting of the Company. M/s. Deloitte Haskins & Sells are not seeking re-appointment as Statutory Auditors of the Company.

In accordance with the provisions of Companies Act, 2013 it is proposed to appoint M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018) (which belongs to the same network as that of existing Statutory Auditors), as Statutory Auditors of the Company, for a period of 5 years i.e. upto the conclusion of Annual General Meeting to be held for the adoption of accounts for the year ending 31^st March 2023.

M/s Deloitte Haskins & Sells LLP, Chartered Accountants, have consented to be the Auditors of the Company, if appointed by the members at the Annual General Meeting and have also confirmed that their appointment is as per the provisions of Section 141 of the Companies Act, 2013 and Rule 4 of Companies (Audit and Auditors) Rule, 2014.

There is no qualification or adverse remark in Auditors’ report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Companies Act, 2013.

Corporate Social Responsibility Committee

The details of Corporate Social Responsibility Committee has been provided under Corporate Governance section of this Annual Report and is also posted on the website of the Company.

The report as per Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure 1.

Audit Committee

The Audit Committee was reconstituted on 11^th April 2018 by appointing Shri Sanjeev Aga as a member of the Committee. Shri Ranjan Kapur ceased to be member of the Committee due to his demise. The Audit Committee comprises of Directors namely Shri B S Mehta (Chairman), Shri M B Parekh, Shri Uday Khanna and Shri Sanjeev Aga as other members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism / whistle Blower Policy

The Company has established a Vigil mechanism and Whistle Blower Policy for Directors and employees. It has been communicated to the Directors and employees of the Company and also posted on the website of the Company.

Policy relating to Prevention of Sexual Harassment

The Company has formulated a Prevention of Sexual Harassment Policy and has formed an Internal Complaints Committee. 1 complaint was received during the year and the same was resolved.

Cost auditor and Cost audit Report

M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2017-18 to conduct the audit of the cost records of the Company. M/s V J Talati & Co., Cost Accountants, have been reappointed as the Cost Auditor for the financial year 2018-19. In terms of the provisions of Section 148(3) of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditors has to be ratified by the Members of the Company. Accordingly, the Board seeks ratification at the ensuing AGM of the remuneration payable to the Cost Auditors for the financial year 2018-19.

Secretarial auditor and Secretarial audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s M.M. Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is attached as Annexure 2. There is no qualification or adverse remark in their report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo

The particulars under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are attached to this Report as Annexure 3.

Risk Management

In compliance with Regulation 21 of Listing Regulations, a Risk Management Committee has been constituted by the Board. Risk Management Committee also known as Risk Management Oversight Committee has been entrusted with roles and powers which includes: a) Review and approval of risk management plan b) Review progress on the risk management plan c) Propose methodology on risk classification and measurement.

The Company has laid out a risk management plan for identification and mitigation of risks. The Company has constituted a Management Risk Committee which is chaired by an Executive Director and has functional heads as members of the Committee. Business heads are invited as and when required. Risks (Business / Reputation) and mitigation plans are considered by this committee. The Risk Management Committee of the Board provides reasonable oversight of the risks.

The other details are provided in the Corporate Governance Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm’s length basis. During the year, the Company did not enter into any contract/ arrangement/transaction with related parties which could be considered as material.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is available on the website: www.pidilite.com.

Your Directors draw attention of the members to Note No. 44 to the standalone financial statement which sets out related party disclosures pursuant to IND AS.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Employees Stock option Scheme

The Employees Stock Option Scheme is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 [SBEB Regulations]. The certificate of auditors regarding implementation of the Scheme being in accordance with SBEB Regulations would be placed at the Annual General Meeting for inspection by Members.

The applicable disclosure, as stipulated under the SBEB Regulations, as on 31^st March 2018 with regard to Employee Stock Option Scheme is provided in Annexure 4 to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is attached as Annexure 5 to this Report.

Particulars of Employees and related disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 6 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any modifications, thereof) are available at the Registered Office of the Company during working hours and shall be made available to any shareholder on request.

Business Responsibility Report

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front forms an integral part of this report.

Industry Structure and Development

There is no material change in the industry structure as was reported last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar products and Industrial products.

Products such as Adhesives, Sealants, Art & Craft Materials and Others, Construction and Paint Chemicals as well as joineries are covered under Branded Consumer & Bazaar products segment.

These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices etc. Industrial Products segment covers products such as industrial adhesives, synthetic resins, organic pigments, pigment preparations, surfactants etc and caters to various industries like packaging, textiles, paints, printing inks, paper, leather etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small companies which are active regionally. There is a growing presence of multinationals in many of the product categories in which the Company operates.

Current Year outlook

The GST regime is stabilizing and is expected to have a positive influence on the Company’s business in the long run.

The prices of raw material and packing material have further increased. The Company will take necessary steps to mitigate this increase.

The major subsidiaries in India are taking initiatives to improve the market shares in their respective businesses.

The Company’s major international subsidiaries are in USA, Brazil, Thailand, Egypt, Dubai and Bangladesh.

The business environment in some of these countries remain subdued. However, the management is taking various steps to improve the performance of these subsidiaries.

Outlook on opportunities, Threats, Risks and Concerns

The Indian economy provides a large opportunity to the Company to market its differentiated products. Higher growth in select global economies could provide a boost to exports.

Slower growth of the Indian economy could impact the performance of the Company.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Financial Control Systems and their adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan, periodically reviews the progress of audits as per approved audit plans, critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/Material orders passed by the Regulators

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

Human Resources

The focus for the year was on Capability Building, Employee Engagement and Key Talent Management. Capability building was taken forward by introducing Signature Programs across disciplines. These programs focus on building sales, marketing and excellence management.

This year the development Centre for frontline sales and field marketing employees covered over 500 employees across all divisions. This has facilitated frontline development, appropriate staffing for new opportunities and building frontline capability.

Employee Engagement activities have been now brought under the new theme of “HAH”- Happy And Healthy Pidilite. This enables building an engaging workplace for the employees. Coupled with Facebook’s Workplace which was launched last year, a young and vibrant workplace is now offered across all locations to all employees.

The total number of employees as on 31^st March 2018 was 5382.

General

The Company has not issued equity shares with differential rights as well as sweat equity shares.

The details of constitution of Nomination and Remuneration Committee and Stakeholders Relationship Committee are given in the Corporate Governance Report.

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

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 24^th May 2018 Executive Chairman

---

Mar 31, 2017

The Directors take pleasure in presenting the Forty Eighth Annual Report together with Audited Financial Statements for the year ended 31^st March 2017.

Financial Results (Standalone)

	(Rs. in crores )
	2016-17	2015-16 *
Gross Turnover	5270.30	5034.99
Turnover, Net of Excise	4837.02	4702.96
Operating profit	1338.94	1191.55
Exceptional items	94.34	27.00
Profit Before Tax	1144.72	1069.50
Current Year’s Tax	362.66	298.77
Profit After Current Year’s Tax	782.06	770.73
Deferred Tax	8.27	24.01
Profit After Tax	773.79	746.72
Profit Brought Forward	763.76	421.41
Other comprehensive income (net of tax)	(1.98)	(0.22)
Profit available for appropriation	1535.57	1167.91
Appropriations
Dividend paid	25.63	335.79
Tax on Dividend	5.22	68.36
Total	30.85	404.15
Closing balance of Retained Earnings	1504.72	763.76

* figures as per IND AS.

Financial Performance

The Operating Profit for the year at Rs. 1338.94 crores increased by 12.37% and Net Profit at Rs. 773.79 crores increased by 3.63%. Income tax for the current year at Rs. 362.66 crores is higher by 21.38%.

Gross margin for the year improved mainly on account of lower raw material prices.

The Indian Rupee was at Rs. 64.81 to a US $ as on 31^st March 2017 as compared to Rs. 66.31 to a US $ as on 31^st March 2016.

Dividend

Your Directors recommend a dividend of Rs. 4.75 per equity share of Rs. 1 each (previous year a total dividend of Rs. 4.15 per equity share of Rs. 1 each) , out of the current year’s profit, on 51.27 crores equity shares of Rs. 1/- each amounting to Rs. 243.52 crores (previous year Rs. 212.76 crores).

Dividend for the current year will be free of tax in the hands of shareholders, upto an amount aggregating to Rs. 10 lacs. The dividend payout amount has grown at a CAGR of 17.09% during the last 5 years. During the financial year 2016-17, the Board of Directors approved a Dividend Distribution Policy as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) which is available on the website of the Company.

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve out of the amount available for appropriation and an amount of Rs. 1504.72 crores is proposed to be retained in the profit and loss account.

Term Finance

The Company has no outstanding term loans.

Capital Expenditure

The total capital expenditure during the year was Rs. 120.88 crores, spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology.

Synthetic Elastomer Project at Dahej The Company has initiated manufacturing of adhesives for export market at Dahej site. The Company has made and is continuing to make attempts to find a strategic partner for Synthetic Elastomer project. In line with this strategy, the Company has fair valued items of plant and machinery alongwith the integrated patents, designs and drawings (currently included in Capital work in progress) and adjusted the difference between the carrying value and the fair value against the opening reserves of the Company as on 1^st April 2015 as permitted by IND AS 101. The Capital work in progress of the project as on 31^st March 2017 is Rs. 101 crores.

Manufacturing

The new manufacturing facility at Nalagarh (Himachal Pradesh) to produce adhesives, was commissioned during the year.

Fixed Deposits

The Company has not accepted any fixed deposits during the year 2016-17.

Subsidiaries

Investment in Subsidiaries

During the year, investment of Rs. 89.23 crores was made in subsidiaries. Of these Rs. 8.75 crores was invested in overseas subsidiaries and Rs. 80.48 crores was invested in domestic subsidiaries.

The investments in overseas subsidiaries were in Pidilite Middle East Ltd. (Rs. 8.00 crores) for onward investments in Pidilite MEA Chemicals LLC, Pidilite Industries Egypt SAE (Rs. 0.09 crores) and Pidilite Chemical PLC (Rs. 0.66 crores). The investments in domestic subsidiaries were in Fevicol Company Ltd (Rs. 1.63 crores) and ICA Pidilite Pvt Ltd ('' 78.85 crores).

During the year

a) The name of the subsidiary Wood Coat Pvt Ltd. was changed to ICA Pidilite Pvt Ltd.

b) Pidilite International Pte. Ltd and Pidilite Middle East Ltd, wholly owned subsidiaries of the Company, acquired shares of Nebula East Africa Pvt Ltd (NEAPL), a Company incorporated in Kenya. With this acquisition, the wholly owned subsidiaries of the Company jointly hold 100% of the paid up share capital of NEAPL.

c) Nina Waterproofing Systems Pvt Ltd., a subsidiary of the Company incorporated a subsidiary in Srilanka in the name of Nina Lanka Construction Technologies (Pvt) Ltd.

During the year the following companies became subsidiaries of the Company

a) Nebula East Africa Pvt Ltd

b) Nina Lanka Construction Technologies (Pvt) Ltd.

Performance of Major Domestic and Overseas Subsidiaries

(Rs. in crores)

Name of Subsidiary	Sales 16-17	Sales 15-16	% Growth	EBITDA 16-17	EBITDA 15-16	% Growth
Nina Waterproofing Systems Pvt Ltd	150.69	143.74	4.84%	11.07	16.99	(34.84)%
Percept Waterproofing Services Ltd	43.64	29.16	49.66%	4.76	2.02	135.64%
ICA Pidilite Pvt Ltd	101.08	NA	-	10.30	NA	-
Pidilite USA Inc.	235.96	248.36	(5.00)%	5.21	21.31	(75.50)%
Pulvitec do Brasil Industria e Comercio de Colas e Adesivos Ltda	94.50	101.03	(6.50)%	5.18	1.22	325.60%
Pidilite Speciality Chemicals Bangladesh Pvt Ltd	78.76	71.07	10.80%	14.04	15.48	(9.30)%
Pidilite Industries Egypt SAE includes PIL Trading (Egypt) Company	33.11	20.82	59.00%	(5.05)	(0.15)	(3371.80)%
Pidilite Bamco Ltd includes Bamco Supply and Services Ltd.	43.99	47.63	(7.60)%	4.60	7.91	(41.80)%
Pidilite MEA Chemicals LLC	75.32	70.51	6.80%	(18.19)	(12.89)	(41.10)%
Pidilite Lanka Pvt Ltd	27.64	10.80	155.90%	1.88	0.68	176.80%

Overseas subsidiaries figures are at constant currency.

Sales growth of Nina and Percept, domestic subsidiaries engaged in waterproofing services, was impacted by slowdown in real estate segment. ICA Pidilite, joint venture of the Company and ICA of Italy, commenced operations in 2016-17 and is in the process of setting up of a manufacturing facility for wood finishes at Jambusar, Gujarat.

Pidilite USA reported decline in sales & EBITDA due to slowdown in export of automotive care products to Middle East and Latin America and voluntary recall of tempra & finger paint products based on routine quality control inspections. Sales of Pulvitec do Brasil declined due to economic slowdown. However, EBITDA improved due to cost and margin improvement initiatives.

Pidilite Bangladesh reported decline in EBITDA due to increase in expenses to support future sales growth. Pidilite Lanka commenced operations in October 2015. Sales of Pidilite Bamco and Bamco Supply and Services, subsidiaries in Thailand, declined due to political and economic instability.

The subsidiaries in Egypt reported good sales growth but EBITDA declined due to sharp devaluation of Egyptian currency. Increase in selling, general and administrative expenses at Pidilite MEA, subsidiary in Middle East, did not result in commensurate increase in sales. Actions have been initiated to reduce these expenses.

Consolidated Financial Statements

In accordance with the requirements of Indian Accounting Standards AS 110 (read with IND AS 28), issued by, Central Government under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, the Consolidated Financial Statements of the Company and its subsidiaries, associate and joint venture company are annexed to this Annual Report.

A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed form is attached.

The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate company and joint venture, as approved by their respective Board of Directors except Plus Call Technical Services LLC for which the financial statements have been approved by the management of the Joint Venture.

The Consolidated Financial Statements of the Company for the financial year 2016-17 are prepared in compliance with applicable provisions of the Companies Act, 2013, Indian Accounting Standards and presented in compliance with Listing Regulations. The accounts of the subsidiaries are also uploaded on the website of the Company.

Directors and Key Managerial Personnel

In accordance with the Articles of Association of the Company, Shri N K Parekh and Shri A N Parekh, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Shri Pradeep Jain, resigned with effect from 24^th March 2017, as the Chief Financial Officer (Key Managerial Personnel) of the Company.

Adoption of new Articles of Association

The existing Articles of Association (AOA) of the Company are based on the provisions of the Companies Act, 1956 and several regulations in the existing AOA contain references to specific sections of the Companies Act, 1956. In order to make the Articles of Association of the Company in tandem with the relevant sections/ provisions under the Companies Act, 2013 and rules made thereunder, it is proposed to replace the existing Articles of Association of the Company by a new set of Articles. Accordingly, in lieu of amendments to various articles in the existing Articles of Association, it is considered prudent and desirable to adopt a new set of Articles of Association of the Company, in substitution for, and to the exclusion of the existing Articles of Association of the Company. Pursuant to Section 14 of the Companies Act, 2013, the consent of the members of the Company by way of a Special Resolution is required for adoption of a new set of Articles of Association of the Company. Accordingly, this matter has been placed before the Members for approval.

Directors’ Responsibility Statement

Your Directors confirm that:

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

- 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 ended 31^st March 2017 and of the profit of the company for that period;

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis; and

- the Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively;

- 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.

Annual Evaluation by the Board of its Own Performance, its Committees and Individual Directors

The Board of Directors of the Company has put in place a mechanism for evaluation of its own performance, its Committees and Individual Directors. The evaluation process inter alia considers attendance of Directors at Board and committee meetings, participation at meetings, domain knowledge, cohesion in the Board’s meeting, awareness and observance of governance, etc. The Board carried out annual performance evaluation of the Board, Board Committees and Individual Directors and Chairperson.

The result of the evaluation is satisfactory and adequate and meets the requirement of the Company.

Familiarisation Programme

The Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors.

The familiarisation programme for Independent Directors in terms of provisions of Regulation 46(2)(i) of Listing Regulations, is uploaded on the website of the Company.

Number of Meetings of Board of Directors

Six meetings of the Board of Directors of the Company were held during the year. For further details, please refer to Corporate Governance section of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

All the Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of Listing Regulations.

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Listing Regulations, along with a certificate from M/s M M Sheth & Co., Practicing Company Secretaries, are given separately in this Annual Report.

Statutory Auditors

In accordance with the provisions of Companies Act, 2013, at the Annual General Meeting held on 25^th September 2014, the shareholders had appointed M/s Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company, for a period of 4 years i.e. upto the conclusion of 49^th Annual General Meeting to be held for the adoption of accounts for the financial year ending 31^st March 2018. M/s Deloitte Haskins & Sells, Chartered Accountants, have consented to be the Auditors of the Company, if their appointment is ratified by the members at the Annual General Meeting and have also confirmed that their appointment is as per the provisions of Section 141 of the Companies Act, 2013 and Rule 4 of Companies (Audit and Auditors) Rules, 2014.

There is no qualification or adverse remark in Auditors’ report. There is no incident of fraud requiring reporting by the auditors under Section 143(12) of the Companies Act, 2013.

Corporate Social Responsibility Committee

The details of Corporate Social Responsibility Committee has been provided under Corporate Governance section of this Annual Report.

The report as per Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure 1.

Audit Committee

The Audit Committee comprises of Directors namely Shri B S Mehta (Chairman), Shri Ranjan Kapur, Shri M B Parekh and Shri Uday Khanna as other members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism / Whistle Blower Policy

The Company has established a Vigil mechanism for Directors and employees and the same has been communicated to the Directors and employees of the Company and the same is also posted on the website of the Company.

Policy relating to Prevention of Sexual Harassment

The Company has formulated a Prevention of Sexual Harassment Policy and has formed an Internal Complaints Committee. No complaints have been received during the year.

Cost Auditor and Cost Audit Report

M/s. V J Talati & Co., Cost Accountants, were appointed as the Cost Auditor for the financial year 2016-17 to conduct the audit of the cost records of the Company. M/s V J Talati & Co., Cost Accountants, have been reappointed as the Cost Auditor for the financial year 2017-18. In terms of the provisions of Section 148(3) of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, as amended, the remuneration payable to the Cost Auditors has to be ratified by the Members of the Company. Accordingly, the Board seeks ratification at the ensuing AGM of the remuneration payable to the Cost Auditors for the financial year 2017-18.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s M M Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is attached as Annexure 2. There is no qualification or adverse remark in their report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are attached to this Report as Annexure 3.

Risk Management

In compliance with Regulation 21 of Listing Regulations, a Risk Management Committee has been constituted by the Board. Risk Management Committee also known as Risk Management Oversight Committee has been entrusted with roles and powers which include a) Review and approval of risk management plan b) Review progress on the risk management plan c) Propose methodology on risk classification and measurement.

The Company has laid out a risk management plan for identification and mitigation of risks. The Company also has a Management Risk Committee which is chaired by an Executive Director and has functional heads as members of the Committee. Business heads are invited as and when required. Risks (Business / Reputation) and mitigation plans are considered by this committee. The Risk Management Committee provides reasonable oversight of the risks.

The other details are provided in the Corporate Governance Report.

Contracts and Arrangements with Related Parties

All contracts/arrangements entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm’s length basis. During the year, the Company did not enter into any contract/ arrangement/transaction with related parties which could be considered as material.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is available on the website : www.pidilite.com.

Your Directors draw attention of the members to Note No. 44 to the financial statement which sets out related party disclosures.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees or investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Employees Stock Option Scheme

The Employees Stock Option Scheme is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 [SBEB Regulations]. The certificate of auditors regarding implementation of the Scheme being in accordance with SBEB Regulations would be placed at the Annual General Meeting for inspection by Members.

The applicable disclosure, as stipulated under the SBEB Regulations, as on 31^st March 2017 with regard to Employee Stock Option Scheme is provided in Annexure 4 to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is attached as Annexure 5 to this Report.

Particulars of Employees and Related Disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 6 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available at the Registered Office of the Company during working hours and shall be made available to any shareholder on request.

Disclosure Relating to Remuneration of Directors and Key Managerial Personnel

The remuneration paid to the Directors is in accordance with the Remuneration Policy formulated in accordance with Section 178 of the Companies Act, 2013.

Business Responsibility Report

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by the Company on the environmental, social and governance front forms an integral part of this report.

Industry Structure and Development

There is no material change in the industry structure as was reported last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar products and Industrial products.

Products such as Adhesives, Sealants, Art & Craft Materials and Others, Construction and Paint Chemicals are covered under Branded Consumer & Bazaar Products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices etc. Industrial Products segment covers products such as industrial adhesives, synthetic resins, organic pigments, pigment preparations, surfactants etc and caters to various industries like packaging, textiles, paints, printing inks, paper, leather etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small companies which are active regionally. There is a growing presence of multinationals in many of the product categories in which the Company operates.

The VAM plant has been modified to make a range of Speciality Acetates as import of VAM continues to remain more viable as opposed to in-house manufacture. Plans are underway to manufacture Isopropyl Alcohol which is a widely used solvent having good domestic market.

Current Year Outlook

During the year 2017-18, it is expected that Goods and Service Tax (GST) will be implemented.

The prices of raw materials and packing materials have firmed up.

One manufacturing unit in Himachal Pradesh will be completing its income tax holiday period in the financial year 2017-18. One manufacturing unit in Assam enjoys exemption from excise duty and income tax. The newly set up unit at Himachal Pradesh will continue to enjoy excise benefit.

Domestic subsidiaries are largely represented by Nina Waterproofing Systems Pvt Ltd., Percept Waterproofing Services Limited and ICA Pidilite Pvt Ltd (ICA). During the financial year 2016-17, ICA commenced operations in the wood finish business. The major subsidiaries in India are in the nascent stages of operation. These companies are taking initiatives to increase their presence in the market.

The Company’s major international subsidiaries are in USA, Brazil, Thailand, Egypt, Dubai and Bangladesh. The business environment in some of these countries remain subdued. However, the management is taking various steps to improve the performance of these subsidiaries.

Outlook on Opportunities, Threats, Risks and Concerns

The Indian economy provides a large opportunity to the Company to market its differentiated products. Higher growth in select global economies could provide a boost to exports.

Slower growth of the Indian economy could impact the performance of the Company.

The domestic subsidiaries are dependent on the construction activity.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Control Systems and their Adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors approves the annual internal audit plan, periodically reviews the progress of audits as per approved audit plans, critical internal audit findings presented by internal auditors, status of implementation of audit recommendations, if any, and adequacy of internal controls.

Significant/Material orders passed by the Regulators

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

Human Resources

Several initiatives were undertaken to strengthen the Employee Connect and Talent Development Process.

‘My Pidilite’, an employee helpline, was launched across all locations to facilitate timely redressal of employee queries. An internal communication and collaboration tool - ‘Workplace by Facebook’ was also launched for internal communication, sharing of ideas and employee recognition.

This year the Founder’s Day was celebrated on 14^th March 2017 in a grand manner. The spirit of the event embodied the beliefs of our beloved founder late

Shri B K Parekh. Employees who personified the values of the organisation were recognised during the event and were awarded the “Late Shri B K Parekh Excellence Awards”. The event also provided a platform to showcase homegrown talent, with finalists performing and competing for the title of “Pidilite’s Got Talent.” The celebrations were streamed live on Workplace @ FB to enable employees across locations to witness the event and cheer their colleagues.

Opportunities for career growth to the in-house talent, was enhanced by strengthening the Internal Job Posting process and talent development interventions.

The Young Talent Programme was further enhanced through the internship programs and facilitation of career path movements for Young Managers, thus creating the talent pipeline.

The total number of employees as on 31^st March 2017 was 5247.

General

The Company has not issued equity shares with differential rights as well as sweat equity shares.

The details of constitution of Nomination and Remuneration Committee and Stakeholders Relationship Committee are given in the Corporate Governance Report.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 18^th May 2017 Executive Chairman

---

Mar 31, 2015

The Members

The Directors take pleasure in presenting the Forty Sixth Annual Report for the year ended 31st March, 2015.

Financial Results 2014-15 2013-14

Gross Turnover 46582 41037

Turnover, Net of Excise 43748 38561

Profit Before Tax 6685 6310

Current Year's Tax 1561 1599

Profit After Current Year's Tax 5124 4711

Deferred Tax 106 25

Profit After Tax 5018 4686

Profit Brought Forward 2184 1792

Profit available for appropriation 7202 6478

Appropriations

Proposed Dividend on Equity Shares 1487 1384

Tax on Dividend 303 235

Transfer to Debenture Redemption Reserve - 41

Transfer to General Reserve 750 2500

Total 2540 4160

Balance Carried to Balance Sheet 4662 2318

7202 6478

*Net of depreciation of Rs. 133.93 million on transition to schedule II of the Companies Act, 2013 on tangible fixed assets with nil remaining useful life (Net of deferred tax).

Financial Performance

The Operating Profit for the year at Rs. 8058 million increased by 11.8% and Net Profit at Rs. 5018 million increased by 7.1%. Income tax for the current year at Rs. 1561 million is lower by 2.4%.

Due to the slow down in the overall economic environment and in particular in the second half of the year, sales of the Company's products were affected.

Sales of Consumer and Bazaar Products grew by 15%, lower than the growth rates recorded in the last 5 years.

Sales of Industrial Products grew at a much slower rate of 6.6% due to weak domestic environment and slowdown in exports.

Margins were adversely impacted by steep increase in input costs particularly in the first half of the year. Selective price increases were taken in a phased manner. Input prices also came down in the second half of the year and this along with the pricing action helped improve margins in the second half.

The Indian Rupee was at Rs. 62.62 to a US $ as on 31st March, 2015 as compared to Rs. 60.05 to a US $ as on 31st March, 2014.

Dividend

The Directors recommend a dividend of Rs. 2.90 per equity share of Rs. 1 each, out of the current year's profit, on 512.66 million equity shares of Rs. 1 each (previous year @ Rs. 2.70 per equity share) amounting to Rs. 1487 million (previous year Rs. 1384 million). Dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 14.8% during the last 5 years.

Term Finance

The Company has no outstanding term loans.

Capital Expenditure

The total expenditure during the year was Rs. 3747 million, spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology. This also includes the acquisition cost for the adhesive business of Bluecoat Private Ltd.

Synthetic Elastomer Project

As mentioned in the last year's report, the Company was in discussion with several interested parties with a view to finding a strategic partner for the project. While discussions have continued in the last year, they have not reached a conclusive stage. The total investment in the project stands at Rs. 3657.03 million.

Manufacturing Plants

The manufacturing facility at Guwahati to produce Fevikwik and M-seal, was commissioned and commercial despatches commenced from April, 2014.

Equity Dividend Payout & % of Net Profit (excluding exceptional items)

Dividend Payout

including tax on dividend (Rs. in million)

— Dividend Payout (%)

Integration process of the business acquired from Bluecoat Private Ltd. was completed during the year. Capacity expansions were undertaken in Kalaamb Unit 2 for select Fevicol products.

Operations at two units located at Panvel and Taloja were discontinued during the year and capacity augmented in other existing units.

Fixed Deposits

The Company has not accepted any fixed deposits during the year 2014-15.

Subsidiaries

Investment in Subsidiaries

During the year, investment of Rs. 384.7 million was made in subsidiaries. Of these Rs. 382.4 million was invested in overseas subsidiaries and Rs. 2.3 million was invested in a domestic subsidiary.

The investments in overseas subsidiaries were mainly in Pulvitec do Brazil Industria e Comercio de colas e adesivos Ltda. (Rs. 179 million), Pidilite Middle East Ltd.

(Rs. 189.9 million) for onward investments in Jupiter Chemicals (LLC) and Pidilite Chemical PLC (Rs. 12.1 million).

During the financial year, the Company acquired 70% shareholding in Nina Waterproofing Systems Private Ltd. (Nina), making Nina a domestic subsidiary of the Company. Subsequently, in April, 2015, Nina acquired the water proofing business of Nina Concrete Systems Private Ltd. on a slump sale basis. Nina is engaged in the business of supply and installation of waterproofing systems.

Performance of Domestic Subsidiaries

Percept Waterproofing Services Ltd which commenced operations in February, 2014 reported sales ofRs. 200 million and Profit after Tax ofRs. 7.7 million.

Hybrid Coatings reported sales ofRs. 88.6 million and a Profit after Tax ofRs. 10.3 million. Sales have improved in the second half as the Company's products gained greater acceptance with customers.

Performance of Overseas Subsidiaries

Total revenue grew by 15.1% in constant currency terms. However, due to an unfavourable translation impact, the reported growth is 14.2%.

The subsidiary in US reported sales growth of 11.2% at constant currency. The growth in business was driven by strong growth of Sargent Art business in retail segment.

As a part of business strategy, the subsidiary invested in getting more products approved, improve visibility and

build up supply chain for supporting increased business in retail segment. The subsidiary in US reported 8% growth in profit before tax.

The subsidiary in Brazil reported sales growth of 3.1% at constant currency. This was partly due to slow growth in Brazilian economy. During the year, the company undertook various cost reduction and efficiency improvement initiatives. This resulted in 38% reduction in losses at EBITDA level over last year.

The subsidiary in Bangladesh reported net sales growth of 21.2% at constant currency. Higher sales coupled with pricing actions resulted in 21.3% growth in EBITDA.

The subsidiary in Egypt reported sales growth of 22.1% at constant currency. Margins were under stress due to sharp devaluation (~15%) of local currency against the USD.

The subsidiary reported marginal losses of Rs. 5 million at the EBITDA level.

Sales of the subsidiaries in Thailand grew by 10% at constant currency. Business was affected due to political disturbance / elections and slowdown in economy. Margins during the period improved by 200 bps driven by improved product mix. EBITDA grew by 8.5%.

The subsidiary in Dubai reported sales growth of 74.6% at constant currency on comparable basis. Effective November, 2014, the subsidiary expanded its business to include import and distribution of the parent company's products in the GCC and CIS countries. During the year, the subsidiary acquired a brand 'ROK' and hired a new management team. Losses at EBITDA level have reduced by 27% over last year.

The subsidiary in Singapore reported drop in sales by 20%. Losses were lower than last year by 10.3%.

Full year loss (PBT) incurred by overseas subsidiaries was Rs. 20.2 million as compared to loss of Rs. 180.1 million last year. Excluding extraordinary expenses, the overseas subsidiaries have made a profit of Rs. 4.4 million as compared to loss of Rs. 11.2 million last year.

During the year, Pidilite Chemical PLC was incorporated in Ethiopia, as a subsidiary of the Company. The Company has invested Rs. 12.1 million in Pidilite Chemical PLC (as on 31st March, 2015).

During the year the following companies became subsidiaries of the Company

1. Nina Waterproofing Systems Private Ltd.

2. Pidilite Chemical PLC

Consolidated Financial Statements

In accordance with the requirements of Accounting Standards AS 21 (read with AS 23), issued by the Institute of Chartered Accountants of India, the Consolidated Financial Statements of the Company and its subsidiaries and associate are annexed to this Annual Report.

A statement containing the salient features of the Company's subsidiaries and associate company in the prescribed form is attached.

The consolidated financial statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries and associate company, as approved by their respective Board of Directors except the newly incorporated subsidiary Pidilite Chemical PLC for which the financial statements have been approved by the management of the Company.

The consolidated financial statements of the Company for the financial year 2014-15 are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Listing Agreement as prescribed by the Securities and Exchange Board of India (SEBI).

Directors and Key Managerial Personnel

There has been a change in designation of Shri M B Parekh who ceased to be the Managing Director of the Company with effect from 10th April, 2015 and has been designated as a Whole Time Director and as the Executive Chairman of the Company.

The Board has appointed Shri Bharat Puri as the Managing Director of the Company for a period of 5 years with effect from 10th April, 2015.

Shri N K Parekh has ceased to be the Joint Managing Director of the Company and has been appointed as the Non Executive Vice Chairman of the Company with effect from 1st April, 2015.

The term of Shri A N Parekh as a Whole Time Director will expire on 1st July, 2015. The Board of Directors at their meeting held on 19th May, 2015 have re-appointed him for a further period of 5 years.

Shri R Sreeram, Director (Factories Operations) of the Company resigned with effect from 7th November, 2014 on account of taking up an entrepreneurship role.

Shri J L Shah was appointed as Director (Factories Operations) with effect from 4th November, 2014.

He resigned with effect from 19th May, 2015 as he was planning to re-start his consultancy activity.

Shri Yash Mahajan, Independent Director of the Company resigned with effect from 4th November, 2014 on account of personal reasons.

The Directors place on record their sincere appreciation of the valuable services rendered by Shri R Sreeram, Shri J L Shah and Shri Yash Mahajan during their tenure as Directors of the Company.

In terms of Section 203 of Companies Act, 2013, Shri Sandeep Batra is the Chief Financial Officer of the Company (who was already functioning as Chief Financial Officer designated as Director - Finance).

Shri Sabyaschi Patnaik has been appointed as an Additional Director by the Board of Directors with effect from 19th May, 2015. In terms of Section 161 of the Companies Act, 2013, he holds office upto the date of ensuing Annual General Meeting. Notice in writing with requisite deposit has been received from a member proposing his candidature for the office of Whole Time Director. The Board has also appointed him as Director - Operations, with effect from 19th May, 2015, subject to approval of members.

In accordance with the Articles of Association of the Company, Shri N K Parekh and Shri A N Parekh, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Shri Sanjeev Aga is Non-Executive Independent Director of the Company, liable to retire by rotation. In terms of Sections 149, 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013, he is proposed to be re-appointed as a Director who will be an Independent Director for a term of 5 years from the date of this Annual General Meeting upto the conclusion of the Fifty First Annual General Meeting of the Company to be held in respect of financial year ending 31st March, 2020.

The Company has received requisite notice in writing from a member, proposing Shri Sanjeev Aga for appointment as an Independent Director.

Shri Sanjeev Aga shall not be liable to retire by rotation.

He has given the declaration of independence as per Section 149 (6) of the Companies Act, 2013.

The members' approval is being sought at the ensuing Annual General Meeting for the above appointments.

Directors' Responsibility Statement

Your Directors confirm that:

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

- 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 ended 31st March, 2015 and of the profit of the company for that period;

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis; and

- the Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively;

- 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.

Annual Evaluation by the Board of its Own Performance, its Committees and individual Directors

The Board of Directors of the Company has initiated and put in place evaluation of its own performance, its committees and individual directors. The result of the evaluation is satisfactory and adequate and meets the requirement of the Company.

Familiarisation Programme

Your Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors.

The familiarisation programme for Independent Directors in terms of provisions of Clause 49 of the Listing Agreement is uploaded on the website of the Company and can be accessed through the following link: https://www.pidilite.com/

Number of Meetings of Board of Directors Nine meetings of the Board of Directors of the Company were held during the year. For further details, please refer to Corporate Governance section of this Annual Report.

Statement of Declaration on Independence given by Independent Directors

Shri B S Mehta, Shri Ranjan Kapur, Shri Uday Khanna and Smt. Meera Shankar, Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Shri Sanjeev Aga has also given a declaration that he meets the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreements with Stock Exchanges, along with a certificate from M/s M M Sheth & Co., Practising Company Secretaries, are given separately in this Annual Report.

Statutory Auditors

In accordance with the provisions of Companies Act, 2013, at the Annual General Meeting held on 25th September,

2014, the shareholders had appointed M/s Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors of the Company, for a period of 4 years i.e. upto the conclusion of 49th Annual General Meeting to be held for the adoption of accounts for the financial year ending 31st March, 2018. M/s Deloitte Haskins & Sells, Chartered Accountants, have consented to be the Auditors of the Company, if their appointment is ratified by the members at the Annual General Meeting and have also confirmed that their appointment is as per the provisions of Section 141 of the Companies Act, 2013 and Rule 4 of Companies (Audit and Auditors) Rules, 2014.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee (CSR Committee) comprises of directors namely Shri N K Parekh, Shri Sanjeev Aga and Shri A B Parekh as members.

The report as per Section 135 of the Companies Act, 2013 read with Companies (CSR Policy) Rules, 2014 is attached as Annexure 1.

Audit Committee

The Audit Committee comprises of Directors namely Shri B S Mehta (Chairman), Shri N J Jhaveri, Shri Ranjan Kapur and Shri M B Parekh as other members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism / Whistle Blower Policy

The Company has established a Vigil mechanism for Directors & employees and the same has been communicated to the Directors & employees of the Company and the same is also posted on the website of the Company.

Policy relating to Sexual Harassment

The Company has formulated a Sexual Harassment Policy and has formed an Internal Complaints Committee.

Cost Auditor and Cost Audit Report

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, cost audit records are maintained by the Company. As required under the Companies Act, 2013, a resolution seeking approval of the members in this regard is included in the Notice convening the Annual General Meeting.

Cost Audit Report for the year ended 31st March, 2015 will be submitted in due course.

The Company has filed the Cost Audit Report for the year ended March, 2014 with the Central Government.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s M M Sheth & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is attached as Annexure 2.

Conservation of Energy, Technology, Absorption and Foreign Exchange Earnings and Outgo

The particulars under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are attached to this Report as Annexure 3.

Risk Management

During the year your Directors constituted a Risk Management Committee which has been entrusted with roles and powers which include a) Review and approval of risk management plan b) Review progress on the risk management plan c) Propose methodology on risk classification and measurement.

A Risk Management Policy was reviewed and approved by the Committee.

Contracts and arrangements with Related Parties

All Contracts/arrangements entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company did not enter into any contract/ arrangement/transaction with related parties which could be considered material.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed through the following link:

http://www.pidilite.com/financials-policies.html

Your Directors draw attention of the members to Note no. 42 to the financial statement which sets out related party disclosures.

Particulars of Loans, Guarantees or Investments

Details of 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.

Employees Stock Option Scheme

During the financial year 2013-2014, 49,000 options were granted in one tranche to the eligible employees of the Company in terms of Employees Stock Option Scheme - 2012 (ESOS- 2012). During the current financial year, 20,500 options were exercised by the employees. Accordingly, the Company made an allotment of 20,500 equity shares on 15th November, 2014.

The applicable disclosure as stipulated under the SEBI Guidelines as on 31st March, 2015 with regard to Employee Stock Option Scheme is provided in Annexure 4 to this report.

Extract of Annual Return

Extract of Annual Return of the Company is attached as Annexure 5 to this Report.

Particulars of Employees and related disclosures

Disclosure pertaining to remuneration as per Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is attached as Annexure 6 to this Report.

Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available at the Registered Office of the Company during working hours and shall be made available to any shareholder on request.

Industry Structure and Development

There is no material change in the industry structure as was reported in the last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Industrial Products.

Products such as Adhesives, Sealants, Art Material, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment.

These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices etc.

Industrial Products segment covers products such as industrial adhesives, synthetic resins, organic pigments, pigment preparations, surfactants etc and caters to various industries like packaging, textiles, paints, printing inks, paper, leather etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small companies which are active regionally. There is a growing presence of multinationals in many of the product categories in which the Company operates. The share of imports is less than 10% of domestic volumes in most of the product categories.

The "Others" segment, largely comprises manufacture and sale of Speciality Acetates. As mentioned in last year's report, the VAM plant has been modified to make a range of Speciality Acetates as import of VAM continues to remain more viable as opposed to in-house manufacture.

The technology for these Speciality Acetates has been indigenously developed and these products are gaining acceptance with customers.

Current Year Outlook

Recent trends suggest a weak economic scenario in the current year. This will have an impact on the demand for the Company's products. It is expected that the economic scenario may improve only by the end of the year.

Prices of VAM, a key input for the Company's products, had sharply increased towards end of last year and peaked in July / August 2014. Prices in $ terms have since corrected and together with price increases, taken in last year, would have a positive impact on margins, in the short term.

The Company has 7 manufacturing units in Himachal Pradesh which enjoy exemption from excise duty and income tax. Three of these units will be completing their tax holiday period in 2015-16. While the excise benefit will cease on the 10th anniversary of the setting up of these units, no income tax exemption will be eligible on the profits from these three units for the financial year 2015-16.

The Company's major subsidiaries are in USA, Brazil, Thailand, Egypt, Dubai and Bangladesh.

The economic situation in Brazil is challenging with several key sectors like construction and real estate showing contraction. This is likely to have a negative effect on the performance of Brazilian subsidiary. Other overseas subsidiaries, in aggregate, are working towards an improved performance, subject to no significant adverse impact on current business environment.

Outlook on Opportunities, Threats, Risks and Concerns

The Indian economy provides a large opportunity to the Company to market its differentiated products. Higher growth in select global economies could provide a boost to exports. Slower growth of the Indian economy could impact the performance of the Company.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Control Systems and their Adequacy

The Company has adequate internal financial control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who periodically audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors periodically reviews the audit plans, internal audit reports, adequacy of internal controls and risks management plan.

Significant/Material orders passed by the Regulators

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

Human Resources

The company continues to place significant importance on its Human Resources and enjoys cordial relations at all levels.

The 'Talent Management Process', initiated in the previous year has now been strengthened.

The total number of employees as on 31st March, 2015 was 4,904.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh Date : 19th May, 2015 Executive Chairman

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Mar 31, 2014

The Members

The Directors take pleasure in presenting the Forty Fifth Annual Report together with Audited Statements of Accounts for the year ended 31st March, 2014.

Financial Results

(Rs. in million) 2013-14 2012-13

Gross Turnover 41037 35287

Turnover, Net of Excise 38561 33118

Profit Before Tax 6310 6196

Current Year''s Tax 1599 1559

Profit After Current Year''s Tax 4711 4637

Deferred Tax 25 29

Profit After Tax 4686 4608

Profit Brought Forward 1792 1303

Profit available for appropriation 6478 5911

Appropriations

Proposed Dividend on Equity Shares 1384 1333

Tax on Dividend 235 226

Transfer to Debenture Redemption Reserve 41 60

Transfer to General Reserve 2500 2500

Total 4160 4119

Balance Carried to Balance Sheet 2318 1792

6478 5911

Financial Performance

The Operating Profit for the year at Rs. 7209 million increased by 6.8% and Net Profit at Rs. 4686 million increased by 1.7%. Income tax for the current year at Rs. 1599 million is higher by 2.6% due to increase in the surcharge on income tax from 5% to 10%.

GDP growth and in particular industrial growth in India declined over last year and was the lowest in comparison to the growth in the last 5 years. This affected sales of Company''s products.

Sales of Consumer & Bazaar products grew by 16.3%, below the historical trends.

Sales of Industrial products grew by 15.2%, on account of higher exports, faster than the 10.6% growth recorded in the previous year.

The Indian Rupee was at Rs. 60.05 to a US $ as on 31st March, 2014 as compared to Rs. 54.28 to a US $ as on 31st March, 2013. However the exchange rate was very volatile with the Rs. toucing 68.75 to a dollar during the year. This impacted margins especially in the fourth quarter.

Dividend

The Directors recommend a dividend of Rs. 2.70 per equity share of Rs. 1 each, out of the current year''s profit, on 512.64 million equity shares of Rs. 1 each (previous year Rs. 2.60 per equity share) amounting to Rs. 1384 million (previous year Rs. 1333 million). Dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 16.3% during the last 5 years.

Term Finance

The Company has no outstanding term loans.

Capital Expenditure

The total expenditure during the year was Rs. 1686 million, of which approximately Rs. 1608.7 million was spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology. This also includes the amount spent for acquiring the business of Suparshva Adhesives Limited.

Synthetic Elastomer Project

As mentioned in last year''s report, the Company has decided to explore induction of a strategic partner in the project. While discussions were held with several interested parties, the Company is yet to finalize a partner for the project.

The total amount spent on the project during the year is Rs. 70.6 million and the total investment in the project stands at Rs. 3696.5 million.

Manufacturing Plants

Environment Management System( EMS ) / Occupational Health & Safety Assessment System (OHSAS) certification process is being extended to the manufacturing units at Secundrabad and Mahad. This is in continuation of the implementation done last year at 17 manufacturing units and the Research & Development facility at Kondivita, Mumbai.

Pidilite Safety, Health & Environment Excellence Model has been deployed at all the manufacturing locations of the Company. This model includes self audit by the units on defined parameters and is followed up by periodical peer audits. This has enabled benchmarking of performance amongst manufacturing units.

Installation of process waste heat recovery system and solar thermal system helped reduce fuel consumption. This together with utilization of power generated from wind farms reduced carbon footprint and manufacturing cost.

Implementation of water conservation initiatives across plants resulted in reduction of water consumption by 3500 kl/month

Non - Convertible Debentures

During the year, the Company redeemed the outstanding 600 Non-Convertible Debentures aggregating to Rs. 600 million.

Fixed Deposits

The Company has not accepted any fixed deposits during the year 2013-14.

Subsidiaries

Investment in Subsidiaries

During the year, investment of Rs. 623.8 million was made in subsidiaries, of which Rs. 549.8 million was in overseas subsidiaries.

Domestic

As on 31st March, 2014, the Company has invested Rs. 24 million in Building Envelope Systems India Limited (BESI), a company engaged in manufacturing of construction chemicals in which the Company holds 60% of the share capital.

During the year, Percept Waterproofing Services Limited (PWSL), was incorporated, as a 100% subsidiary of the Company, for the purpose of carrying on business of services relating to waterproofing including consultancy and project based services. The Company has invested Rs. 48 million in PWSL (as on 31st March, 2014). The present shareholding of the Company in PWSL is 80%.

Overseas Subsidiaries

Total revenue grew by 11.7% in constant currency terms. However, due to a favourable translation impact, the reported growth is 16.8%.

The subsidiary in US reported sales growth of 2.5%. EBITDA for the year improved by 195% mainly due to improvement in margins by 200 bps. It may be recalled that last year an exceptional provision of Rs. 25 million had been made on account of receivables from a customer who had filed for bankruptcy. Excluding this one time provision the growth in EBITDA is 58.7%.

The subsidiary in Brazil reported improvement in performance. Sales grew by 18.4% and margins improved by 790 bps over last year. Despite healthy growth in sales and improvement in margin, the decline in losses at EBITDA level was only 7.3% due to cost related to restructuring of manufacturing operations and higher legal and tax provisions.

The subsidiary in Bangladesh reported sales growth of 36.4% inspite of political unrest and market disturbance for 5 months (September, 2013-January, 2014). Business reported a 68.6% growth in EBITDA. During the year, the subsidiary declared an interim dividend of Rs. 35 million.

The subsidiary in Egypt reported sales growth of 19.6% despite political disturbances in the country. The business improved margins and controlled costs resulting in a positive EBITDA as compared to marginal loss last year.

Sales of the subsidiaries in Thailand grew by 14.2%. EBITDA grew by 38.2%.

The subsidiary in Dubai reported sales de-growth of 7.1%. Losses increased over last year due to lower sales and higher staff cost.

Sales of the subsidiary in Singapore more than doubled due to higher sales from traded products. Losses however, were marginally higher than last year due to provision for slow moving inventory.

Full year losses (PBT) incurred by overseas subsidiaries were Rs. 180.1 million as compared to losses of Rs. 441.7 million last year.

Consolidated Accounts

In accordance with the requirements of Accounting Standards AS 21 (read with AS 23), issued by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Annual Report. Additionally, a statement giving prescribed particulars of information, in aggregate for each subsidiary, is attached.

In terms of the General Circular No. 2/2011 dated 8th February, 2011, issued by the Government of India, Ministry of Corporate Affairs, the Annual Reports of the subsidiary companies are not annexed to this Report. Members desiring to have a copy of audited Annual Accounts and the related detailed information of the above subsidiaries may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon request. Annual Accounts of these subsidiary companies will also be kept for inspection of the members at the Registered Office of the Company as well as at the Registered Office of the subsidiary companies.

Directors

Shri S K Parekh had been associated with the Group for the last 5 decades and was the Vice Chairman and member of the Board of Directors of the Company. He resigned with effect from 3rd April, 2014 on health grounds.

The Directors place on record their sincere appreciation of the valuable services rendered by him to the Company during his long tenure as a Promoter / Director of the Company.

Shri D Bhattacharya, Director of the Company resigned with effect from 20th May 2014 on account of his inability to devote quality time to the Board owing to increased work load in his current engagements. The Directors place on record their sincere appreciation of the valuable services rendered by him during his tenure as a Director of the Company.

The tenure of Shri R Sreeram, Director (Factories Operations) will expire on 7th November, 2014. The Directors at their meeting held on 28th May 2014 have re-appointed him for a further period of 3 years.

Shri Uday Khanna and Smt. Meera Shankar have been appointed as Additional Directors by the Board of Directors with effect from 3rd April, 2014 and 30th July, 2014, respectively. In terms of Section 161 of the Companies Act, 2013, they hold office only upto the date of the ensuing Annual General Meeting. Notice in writing with requisite deposit has been received from members proposing their candidature for the office of Independent Director.

In accordance with the Articles of Association of the Company, Shri A B Parekh, a Director of the Company, retires by rotation and being eligible, offers himself for re-appointment.

Shri B S Mehta, Shri Ranjan Kapur and Shri Bharat Puri are Non-Executive Independent Directors of the Company, who are liable to retire by rotation. In terms of Sections 149, 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013, they are proposed to be appointed as Independent Directors for a term of 5 years from the date of this Annual General Meeting upto the conclusion of the Fiftieth Annual General Meeting of the Company to be held in respect of financial year ending 31st March, 2019.

The Company has received requisite notices in writing from members, proposing Shri B S Mehta, Shri Ranjan Kapur and Shri Bharat Puri for appointment as Independent Directors.

These Independent Directors shall not be liable to retire by rotation. All the Independent Directors have given the declaration of independence as per Section 149 (6) of the Companies Act, 2013.

The members'' approval is being sought at the ensuing Annual General Meeting for the above appointments.

Directors'' Responsibility Statement

Your Directors confirm that:

in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

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 ended 31st March, 2014 and of the profit of the Company for the year ended on that date;

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

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

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreement with Stock Exchanges, along with a certificate from M/s M M Sheth & Co., Practising Company Secretaries, are given separately in this Annual Report.

Auditors

In accordance with the provisions of Companies Act, 2013 it is proposed to appoint M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of the Company, for a period of 4 years i.e. upto the conclusion of Annual General Meeting to be held for the adoption of accounts for the year ending 31st March, 2018. M/s Deloitte Haskins & Sells, Chartered Accountants, have consented to be the Auditors of the Company, if appointed by the members at the Annual General Meeting and have also confirmed that their appointment is as per the provisions of Section 141 of the Companies Act, 2013 and Rule 4 of Companies (Audit and Auditors) Rule, 2014.

Corporate Social Resposibility Committee

During the year, Directors have constituted the Corporate Social Resposibility Committee (CSR Committee) comprising Shri N K Parekh, Shri Sanjeev Aga and Shri A B Parekh as members.

The said committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Resposibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, monitoring the implementation of the CSR policy and recommending the amount to be spent on CSR activities. The Board has approved the CSR Policy in its meeting held on 28th May, 2014.

Cost Auditor

As per the Companies (Cost Records and Audit) Rules, 2014, the Company is not required to conduct cost audit for the financial year 2014-15.

The Cost Audit Report for the year ended March 2014 will be submitted in due course.

The Company has filed the Cost Audit Report for the year ended March 2013 with the Central Government.

Conservation of Energy, Technology Absorption, etc.

The particulars under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are attached to this Report as Annexure I.

Employees Stock Option Scheme

Nomination and Remuneration Committee of the Board of Directors of the Company inter alia administers and monitors the Employees Stock Option Scheme of the Company, in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (SEBI Guidelines).

The applicable disclosures as stipulated under the SEBI Guidelines as on 31st March, 2014 with regard to Employee Stock Option Scheme are provided in Annexure II to this report.

The Company has received a certificate from the auditors of the Company as required under the SEBI guidelines and it would be placed at the Annual General Meeting of the Company for inspection by the members.

Particulars of Employees

A statement of particulars pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report as Annexure III. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report, together with Accounts, is being sent to the Shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Members desiring to have a copy of the same may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon request.

Industry Structure and Development

There is no material change in the industry structure as was reported in the last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Industrial Products.

Products such as Adhesives, Sealants, Art Materials, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.

Industrial Products segment covers products such as Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment Preparations, Surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small size companies that are active regionally. There is growing presence of multinationals in many of the product categories in which the Company operates. The share of imports is less than 10% of domestic volumes in most of the product categories.

The "Other" segment largely consists of the VA M manufacturing unit.

VAM

As mentioned earlier, due to the global demand supply situation it was viable to import VA M rather than manufacture in-house. Going forward, import of VA M is likely to remain more viable. Manufacture of speciality acetates in this plant is continuing and is likely to be scaled up based on the response from customers.

Current Year Outlook

The demand for the Company''s products is linked to the market demand both in India and worldwide. The current year''s outlook is uncertain. However, economic scenario is likely to improve towards the year end.

Prices of VAM, a key input for the Company''s products have sharply increased in the last few months owing to demand supply imbalance in the global market. The Company is taking suitable steps for price increases to offset the cost increase but due to a time lag between increase in costs and pricing action, margins could be impacted in the short term.

The Company''s major subsidiaries are in USA, Brazil, Thailand, Egypt and Bangladesh.

The overseas subsidiaries in aggregate, are expected to show improved performance. However, the economic environment in Brazil and Egypt is uncertain and may have an adverse impact on the performance of subsidiaries in these countries.

Outlook on Opportunities, Threats, Risks and Concerns

The Indian economy provides a large opportunity to the Company to market its differentiated products. Higher growth in select global economies could provide a boost to exports.

Slower growth of the Indian economy could impact the performance of the Company.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Control Systems and their Adequacy

The Company has adequate internal control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who audit the adequacy and effectiveness of the internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors periodically review the audit plans, internal audit reports and adequacy of internal controls and risk management.

Human Resources

The Company continues to place significant importance on its Human Resources and enjoys cordial relations at all levels.

The ''Young Talent Management (YTM)'' program instituted a few years back has been made more robust. A structured ''Talent Management process'' has been initiated across the Company to provide a talent pipeline to fulfill the future managerial needs.

The Company also enhanced the Capability Building process at all levels through various learning initiatives.

The total number of employees as on 31st March, 2014 was 4,651.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 30th July, 2014 Chairman & Managing Director

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Mar 31, 2013

To The Members

The Directors take pleasure in presenting the Forty Fourth Annual Report together with Audited Statements of Accounts for the year ended 31st March 2013.

Financial Results

(Rupees in million)

2012-13 2011-12

Gross Turnover 35287 29579

Turnover, Net of Excise 33118 27995

Profit Before Tax 6196 4441

Current Year''s Tax 1559 1051

Profit After Current Year''s Tax 4637 3390

Deferred Tax 29 45

Profit After Tax 4608 3345

Profit Brought forward 1303 1073

Profit available for appropriation 5911 4418

Appropriations

Proposed Dividend on Equity Shares 1333 965*

Tax on Dividend 226 157

Transfer to Debenture Redemption Reserve 60 243

Transfer to General Reserve 2500 1750

Total 4119 3115

Balance Carried to Balance Sheet 1792 1303

5911 4418

*Includes dividend for the prior year paid on 3,49,388 equity shares issued on conversion of FCCBs after the balance sheet date but prior to the book closure.

Financial Performance

The Operating Profit and Net Profit for the year at Rs. 6752 million and Rs. 4608 million increased by 26% and 38% respectively. Income Tax for the current year at Rs. 1559 million is higher by 48%, due to completion of the first five year tax holiday period for one manufacturing unit located in Himachal Pradesh. With this all units have completed their first five year tax holiday period.

Slow down in industrial growth in India combined with a weak global economy, impacted sales of industrial products. As a result, sales of industrial products grew by 10.6%, below the historical trends.

Sales of Consumer & Bazaar products grew by 20.7%. Volume growth, however, was lower than past trends.

The Indian Rupee was at Rs. 54.28 to a US $ as on 31st March 2013 as compared to Rs. 50.87 to a US as on 31st March 2012. Moreover the Rupee saw high volatility during the year and at times quoted above Rs. 57 to a US $. This made imports costlier and impacted margins. This movement adversely impacted the liability on account of outstanding Foreign Currency Convertible Bonds (FCCBs). However, this impact was partly offset by conversion of 128 FCCBs which resulted in write back of the earlier exchange fluctuations. Consequently, exchange loss for the year was only Rs. 5 million as compared to Rs. 85 million in the previous year.

Dividend

The Directors recommend a dividend of Rs. 2.60 per equity share of Rs. 1 each, out of the current year''s profit, on 512.64 million equity shares of Rs. 1 each (previous year @ Rs. 1.90 per equity share) amounting to Rs. 1333 million (previous year Rs. 965 million). Dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 32% during the last 5 years.

Term Finance

The Company has no outstanding term loans.

Capital Expenditure

The total expenditure during the year was Rs. 1284 million, of which approximately Rs. 1209.5 million was spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and on information technology. The expenditure on the Synthetic Elastomer Project was approximately Rs. 74.5 million.

Investment in Subsidiaries

During the year, investment of Rs. 265.3 million was made in subsidiaries, of which Rs. 265 million was in overseas subsidiaries.

Synthetic Elastomer Project

As mentioned in last year''s report, construction work on the Synthetic Elastomer Project remained suspended as the Company was evaluating various alternatives regarding the future of the project.

With due consideration to techno-commercial factors and completion of a strategic review, the Company has decided to explore induction of a strategic partner for the project.

The total amount spent on this project is Rs. 3625.9 million.

Manufacturing Plants

EMS (Environment Management System)/OHSAS (Occupational Health & Safety Assessment System) Certification has been obtained for 17 manufacturing locations and the Research & Development facility at Kondivita, Mumbai.

Implementation of these systems enables better control on safety management systems at the units and is one of the indicators of good manufacturing practices.

During the year, the Company commissioned a manufacturing unit at Mahad for producing PVC film.

The Company made an investment of Rs. 352.9 million and expanded capacity of various products to meet market demand.

Implementation of water conservation initiatives across plants resulted in reduction of water consumption by 275kL/month.

Foreign Currency Convertible Bonds Of the US $ 40 million raised through issue of 400 zero coupon Foreign Currency Convertible Bonds (Bonds) in 2007-2008, 333 Bonds aggregating US $ 33.3 million were outstanding as on 31st March 2012. 128 Bonds worth US $ 12.8 million were converted during the year and 4,993,704 Equity shares issued. The remaining 205 Bonds were redeemed on due date.

Fixed Deposits

The Company has not accepted any fixed deposit during the year 2012-13.

Subsidiaries

Domestic

During the year, a Joint Venture Company, Building Envelope Systems India Limited was incorporated for manufacture of a select range of construction chemicals for application in waterproofing and thermal insulation. All these products will be sold through the Company. These products will address demand for high end waterproofing solutions. The Company holds 60% of the capital in the Joint Venture Company.

Overseas Subsidiaries

Total revenue grew by 6.6% in constant currency terms.

The business in US reported sales growth of 10.2%. EBIDTA for the year declined by 21.6% due to higher material costs and item as detailed later.

The subsidiary in Brazil continued to perform below expectations. Sales declined by 0.9%. However due to actions taken to improve performance, sales growth in the second half was 6.7% as compared to a decline of 7.9% in the first half. Actions taken to improve performance include strengthening the management as well as to reduce cost and improve margin.

The subsidiary in Bangladesh reported sales growth of 34%. The business scope was extended to include trading operations which started in December 2012.

Sales growth after including the revenue from trading operations was 42%. The manufacturing facility was expanded to produce a wider range of adhesives.

Full benefit of these initiatives will be reflected in the current year.

The subsidiaries in Thailand reported sales growth of 22%. The manufacturing operations in Thailand were rationalised by shutting down one manufacturing facility to reduce operating costs.

The subsidiary in Egypt had a sales growth of 25%.

Losses were significantly reduced.

The subsidiary in Dubai reported sales decline of 42%. With measures taken to reduce costs, losses were lower than last year.

Due to the reasons mentioned above, the overseas operations continue to report losses.

Full year losses incurred by overseas subsidiaries were Rs. 440 million as compared to a loss of Rs. 254 million last year. This was mainly due to the following items:

i. Provision for receivables due from a Rs. 25 million customer who has filed for bankruptcy in US

ii. Provision for goodwill impairment Rs. 94 million in Brazil

iii. Provision for disputed tax liabilities of Rs. 46 million previous years & other disputed items in Brazil

iv. One off expenses for closure of factory Rs. 12 million in Thailand

Total Rs. 177 million

The total investment in overseas subsidiaries as on 31st March 2013 stands at Rs. 3032.34 million.

Consolidated Accounts

In accordance with the requirements of Accounting Standards AS 21 (read with AS 23), issued by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Annual Report. Additionally, a statement giving prescribed particulars of information, in aggregate for each subsidiary, is attached.

In terms of the General Circular No. 2/2011 dated 8th February 2011, issued by the Government of India, Ministry of Corporate Affairs, the Annual Reports of the subsidiary Companies are not annexed to this Report. Members desiring to have a copy of audited Annual Accounts and the related detailed information of the above subsidiaries may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request. Annual Accounts of these subsidiary Companies will also be kept for inspection of the Members at the Registered Office of the Company as well as at the Registered Office of the subsidiary Companies.

Directors

Shri B K Parekh, Founder Chairman of the Company passed away on 25th January 2013. Shri B K Parekh was a visionary of unassuming quality and was a warm, loving and caring leader with strong business acumen.

The tenure of Shri M B Parekh as Managing Director, Shri N K Parekh as Joint Managing Director and Shri A B Parekh as Whole-time Director will expire on 31st July 2013. The Directors at their meeting held on 10th June 2013 have re-appointed them for a period of 5 years.

The Members'' approval is being sought at the ensuing Annual General Meeting for above re-appointments.

In accordance with the Articles of Association of the Company, the tenure of Shri R M Gandhi as a Director expires at the ensuing Annual General Meeting.

Shri R M Gandhi has expressed his unwillingness to be re-appointed as a Director. The Directors place on record their sincere appreciaton of the valuable contribution made by him during his tenure on the Board.

In accordance with the Articles of Association of the Company, Shri Yash Mahajan, Shri N J Jhaveri,

Shri S K Parekh and Shri A N Parekh, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

At the Board meeting held on 28th May 2013,

Shri M B Parekh was appointed as the Chairman & Managing Director of the Company.

Directors'' Responsibility Statement

Your Directors confirm that:

- in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

- 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 ended 31st March 2013 and of the profit of the Company for the year ended on that date;

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

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

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreements with Stock Exchanges, along with a certificate from M/s M M Sheth & Co. Practising Company Secretaries, are given separately in this Annual Report.

Auditors

M/s Haribhakti & Co. the Company''s Auditors are not seeking re-appointment at the forthcoming Annual General Meeting. The Directors place on record their appreciation of the valuable services rendered by them during their tenure as the Auditors of the Company.

It is proposed to appoint M/s Deloitte Haskins & Sells, Chartered Accountants as the Statutory Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting. M/s Deloitte Haskins & Sells, Chartered Accountants, have consented to be the Auditors of the Company, if appointed by the members at the Annual General Meeting and have also confirmed that their appointment would be within the limits specified under Section 224(1B) of the Companies Act, 1956.

Cost Auditor

The Company has appointed M/s V J Talati & Co. as Cost Auditor to conduct cost audit for the financial year 2013-14, subject to the approval of the Central Government.

The Cost Audit Report for the year ended March 2013 will be submitted in due course.

The Company duly filed the Cost Audit Report for the year ended March 2012 with the Central Government on 30th January 2013.

Conservation of Energy, Technology Absorption, etc.

The particulars under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are attached to this Report as AnnexureI.

Particulars of Employees

A statement of particulars pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report as Annexure II. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report, together with Accounts, is being sent to the Shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Members desiring to have a copy of the same may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request.

Industry Structure and Development

There is no material change in the industry structure as was reported last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Industrial Products.

Products such as Adhesives, Sealants, Art Materials, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment.

These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.

Industrial Products segment covers products such as Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment Preparations, Surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small size companies that are active regionally. There is growing presence of multinationals in many of the segments in which the Company operates. The share of imports is less than 10% of domestic volumes in most of the product segments.

The "Other" segment largely covers manufacture and sale of VAM. As mentioned earlier, due to global demand supply situation it was viable to import VAM rather than manufacture in-house and accordingly the plant remained shut last year. Going forward, import of VAM is likely to remain more viable. As mentioned earlier, the Company has started manufacturing few speciality acetates at the plant. Market feedback, from the products manufactured and sold in the current year, has been positive.

Current Year Outlook

The demand for the Company''s products is linked to the market demand both in India and globally. The current year''s outlook is uncertain due to the present weakness in the underlying economic scenario.

With the Indian Rupee likely to remain weak versus the US $ due to the high fiscal deficit, margins are not likely to improve as higher cost of imports could offset gains from lower commodity prices.

The Company''s major subsidiaries are in USA, Brazil, Thailand, Egypt and Bangladesh.

All these units are making efforts to improve performance through demand generation and cost reduction initiatives.

Outlook on Opportunities, Threats, Risks and Concerns

The Indian economy provides a large opportunity to the Company to market its differentiated products. Recovery in select global economies could provide a boost to exports.

However, slower growth of the Indian economy could impact the performance of the Company. A weak Indian currency could make imports costlier thereby putting pressure on margins.

Overseas subsidiaries by virtue of their relatively smaller size remain vulnerable to the political and economic uncertainties of their respective countries.

Internal Control Systems and their Adequacy

The Company has adequate internal control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who audit the adequacy and effectiveness of internal controls laid down by the management and suggest improvements.

The Audit Committee of the Board of Directors periodically reviews the audit plans, internal audit reports and adequacy of internal controls and risk management.

The internal audit process of the Company detected a fraud whereby goods, described as samples were misappropriated. The total amount of misappropriation is Rs. 170.1 million. The Company had intimated the Stock Exchanges and initiated legal proceedings. This led to recovery of part of the amount. The nature of the misappropriation was such that its impact had already been reflected in the Company''s financial results for the earlier years. The Company has taken adequate steps to strengthen the internal control procedures to prevent such instances in future.

Human Resources

The Company continues to place significant importance on its Human Resources and enjoys cordial relations at all levels.

The Performance Management System has undergone considerable improvement and has enabled sharpening of the process of setting Goals & Major Initiatives.

During the year, the organisation structures of all key functions have been reviewed and strengthened so as to facilitate delivery of business goals.

The total number of employees as on 31st March 2013 was 4358.

SAP Implementation

The Company has implemented SAP across all its plants, depots and Head Office effective May 2013. This will improve productivity and provide accurate real time information for improved analysis and decision support.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all level to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation to the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai M B Parekh

Date : 10th June 2013 Chairman & Managing Director

---

Mar 31, 2012

To

The Members

The Directors take pleasure in presenting the Forty Third Annual Report together with Audited Statements of Accounts for the year ended 31st March 2012.

Financial Results

(Rupees in million) 2011-12 2010-11

Gross Turnover 29579 24883

Turnover, Net of Excise 27995 23538

Profit Before Tax 4441 3974

Current Year's Tax 1051 941

Profit After Current Year's Tax 3390 3033

Deferred Tax 45 (6)

Profit After Tax 3345 3039

Profit Brought forward 1073 1006

Profit available for appropriation 4418 4045

Appropriations

Proposed Dividend on Equity Shares

965* 886 (@ T 1.75 per share for the FY 2010-11)

Tax on Dividend 157 144

Transfer to Debenture Redemption Reserve 243 42

Transfer to General Reserve 1750 1900

Total 3115 2972

Balance Carried to Balance Sheet 1303 1073

4418 4045

*Includes dividend for the prior year paid on 3,49,388 equity shares issued on conversion of FCCBs after the balance sheet date but prior to the book closure.

Financial Performance

The Operating Profit and Net Profit, for the year at Rs. 5343 million and Rs. 3345 million increased by 8% and 10% respectively Income Tax for the current year at Rs. 1051 million is higher by 11.7%, due to completion of the first five year tax holiday period for one manufacturing unit located in Himachal Pradesh This is the fourth unit, out of six, which has completed the first 5 year tax holiday period

Business performance in the first half of the current year was better than in second half. The global economic situation affected exports, particularly of ndustrial products where the growth rates in the second half of the year were much below the past trends and significantly lower than what was recorded in the first half of the year. However, the Consumer & Bazaar segment maintained its growth in line with past trends. In addition, input prices increased steeply which, coupled with the weakening of the Rupee vis a vis US dollar, mpacted margins.

The Indian Rupee was at Rs. 50.87 to a USD as on 31st March 2012 as compared to Rs. 44.40 to a USD as on 31st March 2011. As a result, the exchange loss in the year was Rs. 85 million as compared to a loss of Rs. 8.4 million last year. The Company has opted to amortize the exchange rate difference on Foreign Currency Convertible Bonds over the remaining period of the Bonds and accordingly Rs. 55.5 million is carried forward in the balance sheet to be amortized between April 2012 and November 2012.

* After deferred tax of Rs. 140 million and prior year's tax provision written back of Rs. 4 million

** After deferred tax of Rs. 18 million and prior year's tax provision written back of Rs. nil.

*** After deferred tax reversal of Rs. 25 million and prior year's tax provision written back of Rs. 44 million.

# After deferred tax reversal of Rs. 6 million and before exceptional item of Rs. 250 million. ## Excludes exceptional item.

Dividend

The Directors recommend a dividend of Rs. 1.90 per equity share of Rs. 1 each out of the current year's profit, on Rs. 507.65 million equity shares of Rs. 1 each (previous year @ Rs. 1.75 per equity share) amounting to Rs. 965 million which includes dividend for the prior year paid on 3,49,388 equity shares issued on conversion of Foreign Currency Convertible Bonds (FCCBs) after the balance sheet date but prior to the book closure (previous year Rs. 886 million). In accordance with the terms of issue of FCCBs, shares allotted on conversion of FCCBs will also be entitled to Dividend for the year ended 2011-12, where request for conversion is received before the book closure. The dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 21.3% during the last 5 years.

Term Finance

The Company had borrowed USD 17 million through an ECB Term loan amounting to Rs. 796.2 million, repayable in 3 annual installments. During the year the Company repaid the final installment amounting to USD 5.67 million equivalent to Rs. 231.7 million.

Capital Expenditure

The total expenditure during the year was Rs. 1474 million, of which approximately Rs. 1005 million was spent on fixed assets for various manufacturing units, offices, laboratories, warehouses and information technology. The expenditure on the Synthetic Elastomer Project was approximately Rs. 469 million.

Investment in Subsidiaries

During the year, investment of Rs. 189.2 million was made in

overseas subsidiaries.

Synthetic Elastomer Project

Work on the construction of the Synthetic Elastomer Plant has been kept on hold, as a detailed techno commercial review of the project is underway.

During the year Rs. 469 million was spent on the project, which includes interest on loans of Rs. 65.7 million and foreign exchange fluctuation of Rs. 74.0 million.

The total amount spent on this project is Rs. 3551.4 million.

Manufacturing Plants

EMS (Environment Management System)/OHSAS (Occupational Health & Safety Assessment System) Certification has been obtained for 18 manufacturing locations.

Implementation of these systems enables better control on safety management systems at the units and is one of the indicators of good manufacturing practices.

During the year the Company commissioned a manufacturing unit at Secunderabad for manufacture of construction chemicals.

Manufacturing capacity of emulsion polymers, Fevikwik, Steelgrip, stainers, white glues and construction chemicals were enhanced.

Foreign Currency Convertible Bonds (FCCBs) Of the USD 40 million raised through issue of zero coupon Foreign Currency Convertible Bonds in 2007-2008, Bonds aggregating USD 33.3 million were outstanding as on March 2012. Bonds worth USD 3.9 million were converted during the year and 15,14,014 equity shares issued. The bond holders remain entitled to convert their holdings into Equity shares anytime upto 1st December, 2012. These Bonds are redeemable on 7th December, 2012.

Fixed Deposits

Your Company has not accepted any fixed deposits during the year 2011-12.

Subsidiaries - Overseas Subsidiaries

Total revenue grew by 1.8% in constant currency terms.

The business in USA reported a 2.5% decline in sales (in constant currency terms). However, due to actions taken to improve margin and control costs, EBIDTA for the year was higher by 10%.

The subsidiary in Brazil performed below expectations. Sales declined by 4.3% due to competitive pressures. Due to inability to fully pass on cost increases, the business reported significantly higher losses than last year.

The subsidiary in Bangladesh strengthened its market position with sales growing by 20.2%. Profitability was impacted by increase in commodity cost and sharp depreciation of the currency. The company is expanding its manufacturing facility to produce an additional range of adhesives which are currently being imported from India.

The subsidiaries in Thailand reported a 12.4% growth in sales despite weak economic situation and floods in the country. Profitability improved during the year due to actions taken to improve margins and reduce costs.

The subsidiary in Dubai reported a 24.7% growth in sales, although on a lower base. While losses were significantly reduced, the business still reported a cash loss in the year.

The operations in Egypt showed signs of recovery with sales growth of 63.3%. However, margins were impacted due to steep increase in input costs.

Due to the reasons mentioned above, the overseas subsidiaries, in aggregate, reported losses higher than last year by 20%.

The total investment in overseas subsidiaries as on 31st March 2012 stands at Rs. 2767.37 million

Consolidated Accounts In accordance with the requirements of Accounting Standards AS 21 (read with AS 23), issued by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Annual Report. Additionally, a statement giving prescribed particulars of information, in aggregate for each subsidiary, is attached.

In terms of the General Circular No. 2/2011 dated 08.02.2011, issued by the Government of India, Ministry of Corporate Affairs, the Annual Reports of the Subsidiary Companies are not annexed to this Report. Members desiring to have a copy of audited Annual Accounts and the related detailed information of the above subsidiaries may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request. Annual Accounts of these subsidiary companies will also be kept for inspection of the Members at the Registered Office of the Company as well as at the Registered Office of the subsidiary companies.

Directors

In accordance with the Articles of Association of the Company, Shri Bansi S. Mehta, Shri Ranjan Kapur Shri D. Bhattacharya and Shri A B Parekh, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Shri J L Shah was a Whole-time Director of the Company upto 20th October, 2011. He resigned from directorship with effect from 8th November, 2011. Directors place on record their sincere appreciation of the valuable contribution made by him during his tenure on the Board

Shri Sanjeev Aga and Shri R Sreeram have been appointed as Additional Directors by the Board of Directors and they hold office upto the date of the ensuing Annual Genera Meeting. Subject to approval of members, Shri R Sreeram has also been appointed by the Board of Directors as Whole-time Director, designated as Director (Factories Operations), with effect from 8th November, 2011. Notices in writing with requisite deposit have been received from members proposing Shri Sanjeev Aga and Shri R Sreeram as candidates for the office of Director.

Directors' Responsibility Statement

Your Directors confirm that:

In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

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 financia year ended 31st March 2012 and of the profit of the Company for the year ended on that date;

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

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

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreements with Stock Exchanges, along with a certificate from M/s M M Sheth & Co, Practising Company Secretaries, are given separately in this Annual Report.

Auditors

Members are requested to re-appoint M/s Haribhakti & Co., Chartered Accountants, as Auditors of the Company and also for its branches/C & F depots/depots, for the current financial year and to fix their remuneration

Cost Auditor

The Company has appointed M/s. V. J. Talati & Co., as Cost Auditor to conduct cost audit for the financial year 2012-13, subject to the approval of the Central Government.

The Cost Audit Report for the year ended March, 2012 will be submitted in due course.

The Company has filed the Cost Audit Report for the year ended March, 2011 with the Central Government on 23rd August, 2011. The due date for the same was 27th September, 2011

Conservation of Energy, Technology Absorption, etc.

The particulars under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are attached to this Report as Annexure I

Particulars of Employees

A statement of particulars pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report as Annexure II. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report, together with Accounts, is being sent to the Shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Members desiring to have a copy of the same may write to the

Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request.

Industry Structure and Development

There is no material change in the industry structure as was reported in the last year.

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Specialty Industrial Chemicals.

Products such as Adhesives, Sealants, Art Materials, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.

Specialty Industrial Chemicals segment covers products such as Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment Preparations, Surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small size companies that are active regionally. There is growing presence of multinationals in many of the segments in which the Company operates. The share of imports is less than 10% of domestic volumes in most of the product segments.

The "Other" segment largely covers manufacture and sale of VAM. As mentioned earlier, due to the global demand supply situation it was viable to import VAM rather than manufacture in-house and accordingly the plant remained shut last year. Going forward, import of VAM is likely to remain more viable. The Company is exploring alternate products which can be manufactured in the same plant.

Current Year Outlook

The current year's outlook is somewhat uncertain due to various factors like weakening demand, high interest rates and high inflation.

In addition, the volatility in currency rates impact input costs and due to a lag between the cost inflation and price increase, margins could get impacted in the short term.

The Company's major subsidiaries are in USA, Brazil, Thailand, Egypt and Bangladesh. Although initiatives are underway to improve performance of the subsidiaries, they are likely to face difficulties due to weak economic outlook in their respective markets. The business in Brazil remains susceptible to competitive pressures and high inflation.

Outlook on Opportunities, Threats, Risks and Concerns

The larger size of the Indian economy continues to provide an opportunity to the Company to bring in differentiated and value added products for addressing customer requirements. Recovery in the global economy could revive growth of exports.

Input cost increases, led by high crude oil prices and a weak rupee, could put pressure on margins in the short term.

The relative small size of overseas subsidiaries renders them vulnerable to local political/economic uncertainties, competitive and inflationary pressures.

Internal Control Systems and their Adequacy The Company has adequate internal control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who audit the adequacy and effectiveness of internal controls laid down by the management and suggest improvements.

For overseas subsidiaries, this is being done by their Statutory Auditors.

The Audit Committee of the Board of Directors periodically reviews the audit plans, internal audit reports and adequacy of internal controls and risks management.

Human Resources

The Company continues to place significant importance on its Human Resources and enjoys cordial relations at all levels.

During the year, the Talent Management process has further evolved and the Learning & Development cell has been strengthened, with the objective of providing adequate support and resources to develop a talent pipeline.

As part of capability building across the organization, certain key support functions have been restructured and strengthened.

The total number of employees as on 31st March 2012 was 4223.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all level to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation for the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai S K Parekh M B Parekh

Date : 24th May 2012 Vice Chairman Managing Director

---

Mar 31, 2011

The Directors take pleasure in presenting the Forty Second Annual Report together with Audited Statements of Accounts for the year ended 31st March 2011.

Financial Results

(Rupees in million)

2010-11 2009-10

Gross Turnover 24883 20240

Turnover, Net of Excise 23538 19322

Profit Before Tax 3975 3289

Current Years Tax 942 423

Profit After Current Years Tax 3033 2866

Deferred Tax (6) (25)

Profit After Current and Deferred Tax 3039 2891

Add: Prior Year Tax Provision written back - 44

Profit After Tax 3039 2935

Profit Brought Forward 1006 779

Profit available for appropriation 4045 3714

Appropriations

Proposed Dividend on Equity Shares 886 759

Tax on Dividend 143 126

Transfer to Debenture Redemption Reserve 42 323

Transfer to General Reserve 1900 1500

Total 2971 2708

Balance Carried to Balance Sheet 1074 1006

4045 3714

Financial Performance

The Operating Profit and Net Profit, for the year at Rs 4945 million and Rs 3039 million increased by 20% and 5% respectively. Income Tax for the current year at Rs 942 million is higher than Rs 423 million in the last year, due to completion of the first five year tax holiday period for 3 manufacturing units located in Himachal Pradesh.

Due to the improvement in the economic conditions in India, as evidenced by the strong GDP growth, sales growth was higher than last few years trend. The economic revival in the developed markets in the world also resulted in growth in exports, particularly in the second half of the year.

However, there has been an increase in the input costs, largely in the last quarter, due to firming up of commodity prices and that has put pressure on margins particularly of Industrial Products.

The stable Indian Rupee and cost control measures taken by the Company have helped to maintain the profitability at levels similar to that of the previous year.

The exchange rate of Indian Rupee was at Rs 44.40 to a USD in March 2011 as compared to Rs 44.97 to a USD in March 2010. Accordingly there was a nominal credit of Rs 1.99 million to carrying cost of depreciable assets and Rs 8.05 million was credited to the Foreign Exchange Monetary Item Translation Account. Out of the said Foreign Currency Monetary Item Translation Account, Rs 1.07 Million has been amortised in the current year.

After deferred tax of Rs 34 million and prior years tax provision written back of Rs 2 million

After deferred tax of Rs 140 million and prior years tax provision written back of Rs 4 million

After deferred tax of Rs 18 million and prior years tax provision written back of Rs nil.

After deferred tax reversal of Rs 25 million and prior years tax provision written back of Rs 44 million.

After deferred tax reversal of Rs 6 million and before exceptional item of Rs 250 million. $ Excludes exceptional item of Rs 250 million

Dividend

The Directors recommend a dividend of Rs 1.75 per equity share of Rs 1 each out of the current years profit, on 506.1 million equity shares of Rs 1 each (previous year @ Rs 1.50 per equity share including Rs 0.50 per equity share as "Golden Jubilee Special Dividend"), amounting to Rs 886 million (previous year Rs 759.2 million). In accordance with the terms of issue of Foreign Currency Convertible Bonds (FCCBs), shares alloted on conversion of FCCBs will also be entitled to Dividend, where request for conversion is received before the book closure for payment of dividend for the financial year 2010-11. The dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 23.68 % during the last 5 years.

Term Finance

The Company had borrowed USD 17 million through an ECB Term loan amounting to Rs 796.2 million, repayable in 3 annual installments. During the year the Company has repaid the 2nd of the 3 annual installments amounting to USD 5.67 million equivalent to Rs 241.18 million.

Capital Expenditure

The overall expenditure during the year was Rs 1235.68 million. Out of this approximately Rs 711.72 million was spent on fixed assets for various manufacturing units, offices, laboratories and warehouses and on information technology. The expenditure on the Synthetic Elastomer Project was approximately Rs 458.59 million.

Investment in Subsidiaries

During the year, Investment of Rs 131.73 million was made in overseas subsidiaries.

Synthetic Elastomer Project

The Company has started the construction of the Synthetic Elastomer Plant. Civil work at site has commenced and Company is targeting completion in the first half of the next financial year.

The total amount spent on this project is Rs 3106.61 million.

Manufacturing Plants

Health, Safety and Environment activities continued during the year bringing greater focus on safety and environment at all manufacturing units.

Continuous improvement plans in the manufacturing units resulted in 400 plus Kaizens leading to productivity and process improvement.

Manufacturing capacity of insulation tapes, Fevikwik and Fevicol were enhanced.

Technology and automation projects initiated and completed on various lines like Fevigum, Fevicol, M-seal, insulation tapes, Fevikwik and various industrial products.

Foreign Currency Convertible Bonds (FCCB)

Of the USD 40 million raised through issue of zero coupon Foreign Currency Convertible Bonds in 2007-2008, bonds aggregating USD 37.2 million were outstanding as on March 2011. The bond holders are entitled to convert their holdings into Equity shares anytime on or after 16th January 2008 upto 1st December 2012.

Fixed Deposits

Your Company has not accepted any fixed deposits during the year 2010-11.

Subsidiaries - Overseas Subsidiaries

During the year, Pidilite Industries Trading (Shanghai) Company Limited was incorporated in China as a wholly owned subsidiary of Pidilite International Pte. Ltd., Singapore (which is a wholly owned subsidiary of the Company).

The business in USA reported a 11.4% growth in sales. This growth together with improvement in operating margins helped the subsidiary to post cash profits as compared to cash losses last year.

While the subsidiary in Brazil, reported a 10.5% growth in sales, due to increase in input costs, the unit incurred losses from operations.

The operations in Bangladesh continued to gain strength with increased market penetration. The unit reported a profit after tax in its first full year of operations. Though the operations in Thailand reported higher cash profits than in the previous year, sales growth was lower than expected. Post tax losses were at levels similar to last year. Performance of the subsidiary in Dubai was impacted by adverse conditions in the markets serviced by the subsidiary.

Operations and performance of the subsidiaries in Egypt were disturbed due to political developments in the country and neighboring areas.

Due to the reasons mentioned above the overseas operations made a nominal cash loss. The net loss before tax was higher than the previous year. Total revenue from overseas subsidiaries for the year stood at Rs 3021 million, up by 11.4% over the previous year. The total investment in overseas subsidiaries as on 31st March 2011 stands at Rs 2578 million

A statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiaries in India and abroad, is attached hereto.

Consolidated Accounts

In accordance with the requirements of Accounting Standards AS 21 (read with AS 23) issued by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Annual Report. Additionally, a statement giving prescribed particulars of information, in aggregate for each subsidiary, is attached.

In terms of the General Circular No. 2/2011 dated 08.02.2011, issued by the Government of India, Ministry of Corporate Affairs, the Annual Reports of the Subsidiary Companies are not annexed to this Report. Members desiring to have a copy of audited Annual Accounts and the related detailed information of the above subsidiaries may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request. Annual Accounts of these subsidiary Companies will also be kept for inspection of the Members at the Registered Office of the Company as well as at the Registered Office of the subsidiary companies.

Directors

In accordance with the Articles of Association of the Company, Shri B K Parekh, Shri S K Parekh, Shri A N Parekh and Shri Bharat Puri, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Directors Responsibility Statement

Your Directors confirm that:

In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

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 ended 31st March 2011 and of the profit of the Company for the year ended on that date;

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

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

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreements with Stock Exchanges, along with a certificate from M/s. M M Sheth & Co, Practising Company Secretaries, are given separately in this Annual Report.

Auditors

Members are requested to re-appoint M/s. Haribhakti & Co, Chartered Accountants, as Auditors of the Company and also for its branches/C & F depots/depots, for the current financial year and to fix their remuneration.

Cost Auditor

The Company has received the approval of the Central Government for the appointment of M/s. V J Talati & Co. as Cost Auditor to conduct cost audit for the financial year 2011-12.



Conservation of Energy, Technology Absorption, etc.

The particulars under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are attached to this Report as Annexure I .

Industry Structure and Development

There is no material change in the industry structure as was reported last year

The Company operates under two major business segments i.e. Branded Consumer & Bazaar Products and Speciality Industrial Chemicals.

Products such as Adhesives, Sealants, Art Materials, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.

Speciality Industrial Chemicals segment covers products such as Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment Preparations, Surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence, and a large number of small size companies that are active regionally. There is growing presence of multinationals in many of the segments in which the Company operates. The share of imports is less than 10 % of domestic volumes in most of the product segments.

The "Other" segment largely covers manufacture and sale of VAM. As mentioned earlier, due to global demand supply situation it was viable to import VAM rather than manufacture in-house and accordingly the plant remained shut last year. Going forward, in the near future, import of VAM is likely to remain more viable. The Company is exploring alternate products which can be manufactured in the same plant.

Current Year Outlook

During the current year, due to the inflationary pressures, the Reserve Bank of India has been steadily increasing interest rates. This is expected to adversely impact overall economic growth and therefore could impact the demand for the Companys products, thereby impacting the sales growth.

Due to the steep increase in commodity prices, input costs have gone up sharply. Though the Company does pass on these increases by way of price increases, this could impact margins as there is a lag between the cost increase and the price increase.

The Companys major subsidiaries are in USA, Brazil, UAE, Thailand, Egypt and Bangladesh. While all the units are expected to show improved performance, the business in Brazil is vulnerable to high inflation and slow down in growth rate. The operations in Egypt and U.A.E. could be impacted by the local political situation.

Outlook on Opportunities, Threats, Risks and Concerns

Stable economic growth in India will provide an opportunity to the Company to grow its business and introduce differentiated products for meeting customer expectations. The improving global economy will facilitate growth of export oriented products.

Increasing interest rates could slow down economic demand thereby impacting Companys sales in the current year. In addition input costs increases are likely to put pressure on margins in the short term.

Though the Company has strengthened its management structure in the overseas subsidiaries, due to the political uncertainties in some countries and the small size of the overseas operations, the performance in these units could be impacted by local events.

Internal Control Systems and their adequacy

The Company has adequate internal control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who audit the adequacy and effectiveness of internal controls laid down by the management and suggest improvements.

For overseas subsidiaries, this is being done by their Statutory Auditors.

The Audit Committee of the Board of Directors periodically reviews the audit plans, internal audit reports, and adequacy of internal controls and risks management.

Human Resources

The Company continues to place significant importance on its Human Resources and enjoys cordial relations at all levels.

A New Performance & Potential Management System, branded as PILglobin has been launched. This process is likely to provide a steady stream of talent across the Company with clear career plans to occupy key jobs.

Further to improve the operational efficiency, the Company has also initiated automation of all its HR processes.

The total number of employees as on 31st March 2011 was 4130.

A statement of particulars pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report as Annexure II. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report, together with Accounts, is being sent to the Shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Members desiring to have a copy of the same may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request.

Appreciation

Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation for the shareholders, dealers, distributors, consumers, banks and other financial institutions for their continued support.

FOR AND ON BEHALF OF THE BOARD

Mumbai

Date: 19th May 2011 B K PAREKH

CHAIRMAN

---

Mar 31, 2010

The Directors take pleasure in presenting the Forty First Annual Report together with Audited Statements of Accounts for the year ended 31st March 2010.

Financial Results

(Rupees in million)

2009-10 2008-09

Gross Turnover 20215 19074

Turnover, Net of Excise 19297 17611

Profit Before Tax 3289 1632

Less: Current Year’s Tax 423 150

Profit After Current Year’s Tax 2866 1482

(Add)/Less: Deferred Tax (25) 18

Profit After Current and Deferred Tax 2891 1464

Add: Prior Year Tax Provision written back 44 -

Profit After Tax 2935 1464

Profit Brought Forward 779 720

Profit available for appropriation 3714 2184 Appropriations

Proposed Dividend on Equity Shares 759 443

Dividend on Preference Shares - 1

Tax on Dividend 126 75

Transfer to Capital Redemption Reserve - 29

Transfer to Debenture Redemption Reserve 323 257

Transfer to General Reserve 1500 600

Total 2708 1405

Balance Carried to Balance Sheet 1006 779

3714 2184

Financial Performance

The Operating Profit and Net Profit, for the year at Rs 4132 million and Rs 2891 million increased by 60% and 97% respectively. Income Tax for the current year at Rs 423 million is higher than Rs 150 million (including Rs 28 million for Fringe Benefit Tax) in the previous year.

In the last year’s report, the Company had highlighted the impact of the economic slowdown in India and abroad and its impact on the overall economic growth rate and on particular segments in which the Company operates.

The difficult economic conditions continued in the first six months of current year and improvement in growth rates was witnessed in the second half of the year.

However, there was substantial reduction in the input costs due to softening of prices of commodity chemicals and this together with the strengthening of the Indian Rupee, lower duties and cost control measures taken by the Company have helped in improving the year’s performance.

During the year, foreign exchange gain attributable to loans taken for depreciable assets was Rs 123.6 million and the same has been credited to the value of fixed assets. Out of total unamortized foreign exchange loss of Rs 164 million as on 31st March 2009, an amount of Rs 145 million has been reversed during the year due to foreign exchange gains. Further an amount of Rs 10 million has been amortized in the current year. The balance unamortized foreign exchange loss as on 31st March 2010 is Rs 9 million.

# After deferred tax of Rs 17 million and prior year’s tax provision written back of Rs 20 million

‡ After deferred tax of Rs 34 million and prior year’s tax provision written back of Rs 2 million

* After deferred tax of Rs 140 million and prior year’s tax provision written back of Rs 4 million

** After deferred tax of Rs 18 million and prior year’s tax provision written back of Rs nil.

*** After deferred tax of Rs 25 million and prior year’s tax provision written back of Rs 44 million.

Golden Jubilee Year

The year 2009-10 is the Golden Jubilee year of the Company and recognizing its significance, the Company has issued bonus equity shares in the ratio of 1:1 in March 2010. The Board has also recommended a Golden Jubilee Special Dividend of Re 0.50 per equity share on the enhanced share capital after bonus Issue.

The Company has reached its present position with the support of its valued customers and all stakeholders. The Company places on record its deep appreciation for their support.

Dividend

The Directors recommend a dividend of Rs 1.50 per equity share of Re 1 each including Golden Jubilee Special Dividend of Re 0.50 per share, out of the current year’s profit, on 506.1 million equity shares of Re 1 each (enhanced on account of bonus equity shares issued during the year) (previous year @ Rs 1.75 per equity share on 253.1 million equity shares of Re 1 each), amounting to Rs 759.2 million (previous year Rs 442.9 million). The dividend for the current year will be free of tax in the hands of shareholders. The dividend payout amount has grown at a CAGR of 24.7% during the last 5 years.

Term Finances

The Company had borrowed US $ 17 million through an ECB Term loan amounting to Rs 796.2 million, repayable in 3 annual installments. During the year the Company has repaid the 1st of the 3 annual installments amounting to US $ 5.67 million equivalent to Rs 262.9 million.

Capital Expenditure

The overall expenditure during the year was Rs 680 million. Out of this approximately Rs 187 million was spent on fixed assets for various manufacturing units, offices, laboratories and warehouses and on information technology. The expenditure on the Synthetic Elastomer Project was approximately Rs 472 million.

Investment in Subsidiaries

During the year, investment of Rs 251 million was made in

overseas subsidiaries.

Synthetic Elastomer Project

As mentioned last year, all equipments have arrived at the project site at Dahej (SEZ). Detailed engineering design of the Monomer and Polymer plant has been completed. Using this facility, small quantity of finished products have been manufactured.

Currently work is under way to set up a pilot plant which will enable the Company to streamline key process parameters and to make trial quantities of various grades of elastomers. The total amount spent till 31st March 2010 on this project is Rs 2648 million.

Manufacturing Plants

The adhesives manufacturing capacities at Kalamb in Himachal Pradesh and Daman were expanded during the year.

A drive for TPM, aimed at improving performance through greater involvement and participation of employees, was initiated during the year at the manufacturing units.

80% of the manufacturing units are now certified under ISO 14000/OHSAS 18000 and the balance units are likely to undergo the certification process during the next year.

Foreign Currency Convertible Bonds (FCCB) During the financial year 2007-2008, the Company had raised US $ 40 million through issue of zero coupon Foreign Currency Convertible Bonds.

As mentioned in last year’s report, the Company has repurchased bonds of face value of US $ 2.8 million which were cancelled and extinguished.

The FCCB holders are entitled to a right to convert their holdings into equity shares of the Company on or after 16th January 2008. Those FCCB holders who exercised this right till the Record Date i.e. 17th March 2010 were eligible to receive the bonus shares on par with the other shareholders. Furthermore, those FCCB holders who opt for conversion after the Record Date are, under the terms on which the FCCBs were offered, entitled to a proportionately higher number of equity shares as if the conversion had taken place prior to the Record Date.

Subsidiaries - Overseas Subsidiaries The Company has 13 overseas subsidiaries (4 direct and 9 step-down) including those having significant manufacturing and selling operations in USA, Brazil, Thailand, Singapore, Dubai, Egypt and Bangladesh.

Pulvitec, the Brazilian subsidiary reported impressive results with 28% growth in sales. This, together with lower material costs and control on costs helped the Company post cash profits for the year.

Operations in USA significantly reduced costs and improved margins. While overall sales remained flat, losses reduced by 38%.

The operations in Thailand posted cash profits on the back of 26% growth in sales.

Pidilite International Pte. Ltd. (PIPL), a wholly owned subsidiary of the Company acquired the remaining 25% equity shares of Pidilite Bamco Ltd. (PBL) from other shareholders at a cost of US $ 526,675. With this acquisition, all the shares (except 2 shares) of PBL are held by PIPL.

During the year, Pidilite Industries Egypt, SAE and Pidilite Specialty Chemicals Bangladesh Pvt Ltd commenced manufacturing operations in Egypt and Bangladesh, respectively.

PIL Trading Egypt (LLC), a subsidiary of the Company’s step down subsidiary (namely Pidilite Industries Egypt SAE), was incorporated during the year for the purpose of carrying on trading activities in Egypt, North Africa and COMESA countries.

The subsidiary in Bangladesh recorded profits in its first year of operations on the back of robust sales and good margins.

Performance of the subsidiary in Dubai was impacted by poor trading conditions, resulting in losses.

In February 2010, Chemson Asia Pte Ltd merged with Pidilite Innovation Centre Pte. Ltd. (both wholly owned subsidiaries of PIPL).

Overall there was significant improvement in the performance of the overseas subsidiaries with substantial reduction in losses due to measures taken to improve sales and reduce costs.

Total revenue from overseas subsidiaries for the year was Rs 2695 million, up by 16% over the previous year.

The total investment in overseas subsidiaries as on 31st March 2010 stands at Rs 2448 million.

A statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiaries in India and abroad, is attached hereto.

Consolidated Accounts In accordance with the requirements of Accounting Standards AS 21 (read with AS 23) issued by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Annual Report. Additionally, a statement giving prescribed particulars of information, in aggregate for each subsidiary, is attached.

By letter No. 47/244/2010-CL-III, of 2010, the Company has obtained from the Government of India, Ministry of Corporate Affairs, New Delhi, under Section 212 of the Companies Act, 1956, an exemption from annexing to this Report, the Annual Reports of subsidiary Companies for the year ended on 31st March 2010. Accordingly, the Annual Reports of the Subsidiary Companies are not annexed to this Report. Members desiring to have a copy of audited Annual Accounts of the above subsidiaries may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request. Annual Accounts of these subsidiary Companies will also be kept for inspection of the Members at the Registered Office of the Company as well as at the Registered Office of the subsidiary Companies. The Annual Reports of the subsidiary companies are available on the website of the Company.

Directors

The terms of appointment of Shri A N Parekh as a Whole- time Director will expire on 30th June 2010. Subject to the approval of members, your Directors at their Meeting held on 16th June 2010 have re-appointed him for a further period of 5 years.

Effective from 21st October 2009, Shri V S Vasan, a Whole- time Director resigned from the Board of Directors. Your Directors place on record their sincere appreciation of the valuable contribution made by him during his tenure on the Board.

In accordance with the Articles of Association of the Company, Shri A B Parekh, Shri R M Gandhi, Shri Yash Mahajan and Shri N J Jhaveri, Directors of the Company, retire by rotation and being eligible, offer themselves for re-appointment.

Subject to approval of members, Shri J L Shah has been appointed as an Additional Director and also Whole-time Director designated as Director (Factories Operations) of the Company with effect from 21st October 2009 and he holds office up to the conclusion of the ensuing Annual General Meeting. A notice in writing, with requisite deposit has been received from a member proposing Shri J L Shah as a candidate for the office of Director.

Directors’ Responsibility Statement

Your Directors confirm that: in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

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 as at 31st March 2010 and of the profit of the Company for the year ended on that date;

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

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

Corporate Governance

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with Clause 49 of the Listing Agreements with Stock Exchanges, along with a certificate from M/s M M Sheth & Co, Practising Company Secretaries, are given separately in this Annual Report.

Auditors

Members are requested to re-appoint M/s Haribhakti & Co, Chartered Accountants, as Auditors of the Company and also for its branches/C & F depots/depots, for the current year and to fix their remuneration.

Cost Auditor

The Company has received the approval of the Central Government for the appointment of M/s. V. J. Talati & Co. as Cost Auditor to conduct cost audit for the financial year 2010–11.

Conservation of Energy, Technology Absorption, etc.

The particulars under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are attached to this Report as Annexure I.

Industry Structure and Development

There is no material change in the industry structure as was reported last year.

The Company operates under two major business segments i.e. branded Consumer & Bazaar Products and Speciality Industrial Chemicals.

Products such as Adhesives, Sealants, Art Materials, Construction and Paint Chemicals are covered under branded Consumer & Bazaar Products segment. These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.

Speciality Industrial Chemicals segment covers products such as Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment Preparations, Surfactants, etc. and caters to various industries like packaging, textiles, paints, printing inks, paper, leather, etc.

In both the above business segments, there are a few medium to large companies with national presence and a large number of small sized companies that are active regionally. There is a growing presence of multinationals in many of the segments in which the Company operates. The share of imports is less than 10% of domestic volumes in most of the product segments.

The “Other” segment covers manufacture and sale of VAM. The Company is the only manufacturer of VAM in the country with an installed capacity of 30,000 MT per annum. As mentioned earlier, due to global demand supply situation it was viable to import VAM rather than manufacture in- house and accordingly the plant remained shut last year. Going forward, in the near future, import of VAM is likely to remain more viable. The Company is exploring alternative products which can be manufactured in the same plant.

Current Year Outlook

During the current year sales growth is expected to improve. However, margins will be under pressure due to significant increase in input costs.

The Company’s major subsidiaries are in USA, Brazil, UAE, Thailand, Egypt and Bangladesh. The units in Brazil, Thailand, Bangladesh and Egypt are expected to show improved performance. However, the economic scenario in USA & UAE remains uncertain.

Outlook on Opportunities, Threats, Risks and Concerns

Improvement in economic conditions, in India and abroad, is likely to have positive impact on Company’s sales for the current year. However, significant increase in input cost is likely to put pressure on margins in the near term.

The Company’s overseas business is improving but there is a need to strengthen the management structure to support these businesses.

Internal Control Systems and their adequacy The Company has adequate internal control procedures commensurate with its size and nature of business.

The Company has appointed Internal Auditors who audit the adequacy and effectiveness of internal controls laid down by the management and suggest improvements.

For overseas subsidiaries, this is being done by their statutory auditors.

The Audit Committee of the Board of Directors periodically reviews the audit plans, internal audit reports, adequacy of internal controls and risk management.

Human Resources

In order to foster collaborative working in addressing Company wide opportunities and issues, task forces titled Corporate Initiative Teams (CITs) were formed. These CITs have successfully completed several projects in the areas of customer service and employee engagement.

Competency and capability frameworks, aligned to the values of the Company have been developed.

The organizational capability of Business Divisions and Functions has been strengthened and non-family professionals now occupy many key senior positions in the Company.

The total number of employees as on 31st March 2010 was 4121.

A statement of particulars pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this report as Annexure II.

As per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report, together with Accounts, is being sent to the Members of the Company, excluding statement of particulars of employees under Section 217(2A) of the Act. Members desiring to have a copy of the same may write to the Company Secretary at the Registered Office of the Company and they will be provided with the same upon such a request.

Appreciation

Your Directors place on record their appreciation of the efficient services rendered by the employees of the Company at all levels.

FOR AND ON BEHALF OF THE BOARD

Mumbai B K PAREKH

Date: 16th June, 2010 CHAIRMAN