To the Members of
AARTI INDUSTRIES LIMITED
Your Directors are pleased to present this Thirty Third Annual Report and theAudited Statement of Accounts for the year ended 31st March 2016.
| || || || |
(Figures in Rs. Crores)
| ||STANDALONE ||CONSOLIDATED |
|PARTICULARS || || || || |
| ||2015-16 ||2014-15 ||2015-16 ||2014-15 |
|Total Income from Operations (Net) ||2717 ||2871 ||2780 ||2908 |
|EBIDTA ||540 ||458 ||578 ||471 |
|Depreciation & Amortization ||93 ||79 ||98 ||82 |
|Profit/(Loss) from Operations before Other Income ||437 ||378 ||474 ||384 |
|Finance Costs and Exceptional Items || || || || |
|Other Income/Exceptional Items ||10 ||5 ||6 ||9 |
|Profit/(Loss) before Finance Costs ||447 ||383 ||480 ||393 |
|Finance Costs ||116 ||137 ||117 ||138 |
|Profit/(Loss) before Tax ||331 ||246 ||363 ||255 |
|Tax Expenses || || || || |
|a) Provision for Taxation-Current (net of MAT ||43 ||40 ||55 ||43 |
|entitlement) || || || || |
|b) Provision for Deferred Tax ||17 ||18 ||19 ||18 |
|c) Short/(excess) Tax Provisions of earlier years ||19 || ||21 || |
|Total Tax Expenses ||79 ||58 ||95 ||61 |
|Share of Profit/(Loss) of Associates || || || ||14 |
|Minority Interest || || ||(11) ||(2) |
|Net Profit/(Loss) after consolidation ||252 ||188 ||257 ||206 |
|Earnings Per Share ( Rs. ) ||30.30 ||21.00 ||30.83 ||23.24 |
|Book Value Per Share ( Rs. ) ||128.43 ||102.47 ||133.75 ||114.73 |
Your Company had declared and paid three Interim Dividends aggregating Rs. 8.50 ps. (@170%) per share (of Rs. 5/- each) as compared to the Total Dividend of Rs. 5.50 ps. (@110%) per share (of Rs. 5/- each) for the FY 2014-15. The total amount of Dividend pay-outfor the year was Rs. 70.82 Crores (Previous Year: Rs. 48.73 Crores). In view of this theBoard had not proposed any further dividend for FY 2015-16. Your Company has transferredRs. 25.25 Crores to General Reserve (Previous Year: Rs. 19.00 Crores) and Rs. 30 Crores toDebenture Redemption Reserve (Previous Year: Rs. 30 Crores).
Your Company reported total Income at Rs. 2717 Crores for FY 2015-16 as against Rs.2871 Crores for FY 2014-15. Similarly the exports for the year were at Rs. 1352Crores for
FY 2015-16 v/s Rs. 1449 Crores for FY 2014-15. While the volumes had grown by over 10%y-o-y the total income and exports were lower on account of softer crude prices.
Your Companys Earnings Before Interest Depreciation and Taxes stood at Rs. 540Crores in FY 2015-16 as compared to Rs. 458 Crores in FY 2014-15 registering a growth of18%. Likewise Net Profit Before Tax rose by 35 % to Rs. 331 Crores in FY 2015-16 ascompared to Rs. 246 Crores in FY 2014-15. Likewise Net Profit after Tax & DeferredTax also grew by 34% to Rs. 252 Crores in FY 2015-16 as compared to Rs. 188 Crores inFinancial Year 2014-15.
Likewise the Consolidated Total income for FY 2015-16 was at Rs. 2780 Crores ascompared to Rs. 2908 Crores for FY 2014-15 and exports for the year 2015-16 was Rs. 1431Crores vs Rs. 1449 Crores for FY 2014-15.
On a Consolidated basis your Companys Earnings Before Interest Depreciation andTaxes stood at Rs. 578 Crores in FY 2015-16 as compared to Rs. 471 Crores in FY 2014-15registering a growth of 23%. Similarly Net Profit after consolidation grew by 25% to Rs.257 Crores in FY 2015-16 as compared to Rs. 206 Crores in FY 2014-15. LikewiseConsolidated EPS surged by about 33% at Rs. 30.83 for FY 2015-16 as compared toRs. 23.24 for FY 2014-15.
In terms of the Scheme of Amalgamation approved by the Honble High Courts atAhmedabad and Mumbai Anushakti Chemicals and Drugs Limited; Anushakti Holdings Limited;
Alchemie Leasing and Financing Private Limited and Gogri and Sons Investments PrivateLimited ("Transferor Companies") had been merged in the Company("Transferee Company") with effect from 1st April 2015; pursuant towhich the Authorised Share Capital of the Transferor Companies merged into the Company.Consequently the Authorised Share Capital of the Company has increased to Rs.1150751600.
Further Pursuant to the Scheme of Amalgamation 16726401 Equity Shares were issuedto the Shareholders of the Transferor Companies and 21997705 Equity Shares being heldby Transferor Companies in the Company were cancelled. As a result the paid-up sharecapital of the Company has been reduced by 5271304 Equity Share and stands cancelled atRs. 26356520.
Apart from the above no other shares were issued by the Company during the FinancialYear under review.
CORPORATE SOCIAL RESPONSIBILITY
Your Company through own trusts Aarti Foundation & Dhanvallabh Charitable trust andvarious other NGOs has been doing work in following Segments:
Cluster & Rural Development Education & Skill Development Childcare &Healthcare Facilities
Women Empowerment & Livelihood Opportunities Disaster Relief & RehabilitationEradication of Hunger & Poverty Water Conservation & Environment Research &Development work for upliftment of Society.
Rural Education Water Conservation Tribal Welfare Agriculture Animal HusbandryHealth and Hygiene Disaster
Relief and Rehabilitation are the main areas of focus in the social welfare plans ofour CSR Activities. Many of our Pilot projects had been appreciated by various NGOsand Other Corporate Houses who have also started adopting those models thereby multiplyingthe magnitude of the reach of these social activities for the benefit of the Society atlarge.
A brief note on various CSR initiatives undertaken during the year is presented earlierat page no. 26 of this Annual report.
CSR annual report is annexed as Annexure-A and forms an integral part of the Report.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT INCLUDING NUMBEROF PEOPLE EMPLOYED.
As on March 31 2016 the Company had 3254 permanent employees at its manufacturingplants and administrative office. The Company recognizes the importance of human value andensures that proper encouragement both moral and financial is extended to employees tomotivate them.
The Company enjoyed excellent relationship with workers and sta_ during the year underreview.
REMUNERATION AND NOMINATION POLICY
The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel and Senior Management of the Company.The policy also lays down criteria for selection and appointment of Board Members. Thedetails of this policy are given in the Corporate Governance Report.
The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is given in an Annexure and forms part of thisreport. In terms of Section 136(1) of the Companies Act 2013 the Report and the Accountsare being sent to the Members excluding the aforesaid Annexure. Any Member interested inobtaining a copy of the Annexure may write to the Company Secretary at the RegisteredOffice of the Company.
MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANYOCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATEAND THE DATE OF THE REPORT
No material changes and commitment affecting the financial position of the companyoccurred between the end of the Financial Year to which this financial statements relateand the date of the report.
However during the year under review there was a material change in the Share Capitalpursuant to the scheme of amalgamation. The details of which are mentioned under the headShare Capital of this report.
The details of the number of meetings of the Board held during the Financial Year2015-16 forms part of the Corporate Governance Report.
Risk Management Committee through its dynamic risk management framework continuouslyidentifies evaluates and takes appropriate measures to mitigate various elements ofrisks.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has clearly laid down policies guidelines and procedures that form partof internal control systems which provide for automatic checks and balances. Your Companyhas maintained a proper and adequate system of internal controls. This ensures that allAssets are safeguarded and protected against loss from unauthorized use or disposition andthat the transactions are authorised recorded and reported diligently. YourCompanys internal control systems commensurate with the nature and size of itsbusiness operations. Internal Financial Controls are evaluated and Internal AuditorsReports are regularly reviewed by the Audit Committee of the Board.
Statutory Auditors Report on Internal Financial Controls as required under Clause (i)of Sub-section 3 of Section 143 of the Companies Act 2013 ("the Act") isannexed with the Independent Auditors Report.
MANAGEMENTS DISCUSSION AND ANALYSIS REPORT
Managements Discussion and Analysis Report for the year under review asstipulated under Regulation 34 read with Schedule V to the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015("Listing Regulations") is presented in a separate section forming part of theAnnual Report.
DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013:
a. That in the preparation of the annual financial statements for the year ended March31 2016 the applicable accounting standards have been followed along with properexplanation relating to material departures if any; b. That the directors had selectedsuch accounting policies and applied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of a_airsof the company at the end of the Financial Year and of the profit and loss of the companyfor that period;
c. That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe Assets of the Company and for preventing and detecting fraud and other irregularities;
d. That Directors have prepared the annual accounts on a going concern basis;
e. The directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;
f. The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the Financial Year were onarms length basis and were in the ordinary course of the business. There are nomaterially significant related party transactions made by the Company with Promoters KeyManagerial Personnel or other designated persons which may have potential conflict withinterest of the Company at large.
All related party Transactions are presented to the Audit Committee. Omnibus approvalis obtained for the transactions which are foreseen and repetitive in nature. A statementof all related party transactions is presented before the Audit Committee on quarterlybasis specifying the nature value and terms and conditions of transactions.
The related party transactions policy is uploaded on the Companys website at theweb-link given below :
The details of Related party transactions are provided in the accompanyingfinancial statements.
Since all related party transactions entered into by the Company were in ordinarycourse of business and were on an arms lengths basis Form AOC2 is notapplicable to Company.
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (6) OFSECTION 149
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 of the SEBI (Listing Obligation and Disclosure Requirements).
Your Company has complied with the mandatory Corporate Governance requirementsstipulated under Regulation 34(3) of the Listing Agreement. Report on Corporate Governanceis annexed hereto forming part of this report.
CONSOLIDATED FINANCIAL STATEMENT
Your Directors have pleasure in presenting Consolidated Financial Statements which formpart of the Annual Report and Accounts.
The details forming part of the extract of Annual Return in the Form MGT-9 as requiredunder Section 92 of the Companies Act 2013 is included in the Report as AnnexureBand forms an integral part of the Report.
The Company did not have any deposits at the beginning of the year under review. TheCompany has neither accepted nor renewed any deposits during the year under review. TheCompany does not have any deposits which are not in compliance with the requirements ofChapter V of the Companies Act 2013.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and rulesmade thereunder the Company has appointed CS Sunil M. Dedhia (COP No. 2031)
Proprietor of Sunil M. Dedhia & Co. Company Secretary in Practice toundertake the Secretarial Audit of the Company. The Secretarial Audit Report isincluded as AnnexureC and forms an integral part of this Report.
The said report does not contain any observation or qualification requiring explanationor comments from the Board under Section 134(3) of the Companies Act 2013.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the Notes to the financial statements.
Pursuant to the provisions of Companies Act 2013 and the SEBI (Listing Obligation andDisclosure Requirements) Regulations 2015 a structured questionnaire was prepared aftertaking into consideration various aspects of the Boards functioning composition ofthe Board and its Committees culture execution and performance of specific dutiesobligations and governance.
The performance evaluation of the Independent Directors was completed. Theperformance evaluation of the Chairman and Non-Independent Directors was carriedout by the Independent Directors. The Board of Directors expressed their satisfaction withthe evaluation process.
The Company has 5 (five) direct subsidiaries namely Aarti Corporate Services LimitedAlchemie Europe Limited Innovative Envirocare Jhagadia Limited Ganesh Polychem LimitedAarti USA Inc and 2 (two) indirect subsidiaries namely Shanti Intermediates PrivateLimited Nascent Chemical Industries Limited both hold through Aarti Corporate ServicesLimited.
During the year under review Aarti USA Inc. and former associate Ganesh PolychemLimited has become Subsidiary of the Company and other Companies namely AnushaktiChemicals and Drugs Limited Anushakti Holdings Limited
Aarti Intermediates Private Limited Aarti Bio-Tech Limited and Perfect Enviro ControlSystem Limited have ceased to be Associate Companies.
During the year the Board of Directors reviewed the a_airs of the subsidiaries. Inaccordance with Section 129(3) of the Companies Act 2013 we have prepared consolidatedfinancial statements of the Company and all its subsidiaries which form part of theAnnual Report. Further a statement containing salient features of the financial statementof our Subsidiaries in the prescribed format AOC1 is included in the Report asAnnexure-D and forms an integral part of this Report. The statement also provides thedetails of performance financial position of each of the Subsidiaries.
Shri. Parimal H. Desai and Smt. Hetal Gogri Gala Whole-time Directors of the Companyshall retire by rotation at the ensuing Annual General Meeting and being eligible offersthemselves for re appointment.
Your Directors also recommend renewal of term of Smt. Hetal Gogri Gala Whole-timeDirector of the Company whose present term expires on 31st October 2016.
During the Year 2015-16 Whole-time Directors namely Shri. Kirit R. Mehta and Shri.Parimal H Desai were re-appointed for a period of 5 (five) years w.e.f. 18thSeptember 2015 and 10th February 2016 respectively.
Further Padmashri Prof. Ganapati D. Yadav and Smt. Priti P. Savla IndependentDirectors were appointed for a period of 3 Years w.e.f. 24th September 2015.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operations.
ENVIRONMENTAL SAFETY AND HEALTH
Your Company is committed to ensure a sound Safety
Health and Environment (SHE) performance related to its activities products andservices. Your Company had been continously taking various steps to develop and adoptSafer Process technologies and unit operations. Your Company has been investing heavily inareas such as Process Automation for increased safety and reduction of human errorelement Enhanced level of training on Process and Behaviour based safety adoption ofsafe & environmental friendly production process Installation of BioreactorsChemical ROs Multiple effect evaporator and Incinerator etc to reduce the discharge ofe_uents commissioning of Waste Heat recovery systems and so on to ensure the ReductionRecovery and Reuse of e_uents & other utilities. Monitoring and periodic reviewof the designed SHE Management System are done on a continuous basis.
Some of the initiatives in this regard as briefed below:
Introducing Aarti Management System: An in-house developed framework of 32 elementsdetailing procedures and processes catering to all Plant Related Activities - 3 elementsnamely MOC (to manage change) BBS (major root causes of incidents are due to behaviour)and Permit Systems catering to reduce SHE related risks had been launched and beingimplemented at various levels of operations. Other elements are being developed andreviewed and would be adopted in due course.
Review Existing Process Safety Parameters: Structured & regular HAZOP meetings arebeing carried out as per scheduled HAZOP calendar to further strengthen process safety ofexisting processes. Also HIRA (Hazard Identification and Risk Assessment) for proceduresand practices are being initiated for some of the units and would be gradually implementedacross various units.
Maintenance element with purpose to achieve rated performance of assets throughoutrated life is being launched. Standardisation of maintenance practices are under progress.Also the Plant Maintenance module (an IT enabled solution) are also being implemented withan objective to map and monitor all maintenance activities through the IT enabled system.This would help to have online reporting and tracking of various scheduled and unscheduledmaintenance breakdown activities.
Systematic and well documented scale up procedure including risk assessment and processsafety study at each stage of development from R&D to Pilot to Commercial Scale toensure inherently safe processes has been developed.
With these and various other initiatives your Company firmly places the SHE at the topof its goals and aims to provide a workplace which is safer and healthier for the societyat large.
WHISTLE BLOWER POLICY
The Company has a whistle blower policy to report genuine concerns or grievances. TheWhistle Blower policy has been posted on the website of the Company www.aartigroup.com
The Company does not have any material subsidiary whose net worth exceeds 20% of theconsolidated net worth of the Company in the immediately preceding accounting year or hasgenerated 20% of the consolidated income of the Company during the previous FinancialYear. A policy on material subsidiaries had been formulated and is available on thewebsite of the Company and the web link thereto is http://www.aartigroup.com/pdfs/Policy%20for%20determining%20 Material%20Subsidiary17.6.16.pdf
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS.
The Independent Directors of the Company were familarised and the details offamiliarisation programmes imparted to them are placed on the website of the Companywww.aartigroup.com
In the 31st Annual General Meeting (AGM) of the Company held on September24 2014 M/s. Gokhale & Sathe
Chartered Accountants (Firm Regn. No. 103264W) had been appointed as the StatutoryAuditors of the Company for a period up to 3(three) years to hold office from theconclusion of the 31st AGM (AGM) until the conclusion of the 34thAGM of the Company. In terms of the provisions of the Companies Act 2013 it is necessaryto get the appointment ratified by the shareholders in every Annual General Meeting untilthe expiry of the period of original appointment.
In view of the above the Board of Directors recommends your ratification of theappointment of M/s. Gokhale &
Sathe Chartered Accountants (Firm Regn. No. 103264W) as the Statutory Auditors asmentioned at Item No. 4 of the Notice.
There are no qualification reservation or adverse remark or disclaimer made by theAuditor in their report.
The Cost Auditor Ms. Ketki D. Visariya (Fellowship No. 16028) Cost Accountantre-appointed by the Company under provisions of Section 148(5) read with Section 141 ofthe Companies Act 2013 attend the Audit Committee Meeting where cost audit reports arediscussed.
The due date for filing the Cost Audit Reports in XBRL mode for the Financial Yearended 31st March 2015 was 30th September 2015 and the Cost AuditReports were filed by the Cost Auditor on 26th September 2015. The due datefor filing the Cost Audit Reports for the Financial Year ended 31st March 2016is 30th September 2016.
The Company is seeking the ratification from the Shareholders for the Remuneration ofMs. Ketki D. Visariya Cost Auditor of the Company for the Financial Year ending 31stMarch 2017 vide resolution no. 6 of the Notice of AGM.
NUMBER OF CASES FILED IF ANY AND THEIR DISPOSAL UNDER SECTION 22 OF THE SEXUAL HARASSMENTOF WOMEN AT WORK PLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT 2013
Your Company has Zero tolerance towards any action on the part of any one which mayfall under the ambit of Sexual Harassment at workplace and is fully committedto uphold and maintain the dignity of every women working with the Company. The Policyframed by the Company in this regard provides for protection against sexual harassment ofwomen at workplace and for prevention and redressal of such complaints.
|Particulars ||No. of Complaints |
|Number of Complaints pending as on || |
|beginning of the Financial Year ||NIL |
|Number of Complaints filed during the || |
|Financial Year ||NIL |
|Number of Complaints pending as on || |
|the end of the Financial Year ||NIL |
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 134(3)(m) of the Companies Act 2013 read with Rule8(3) of the Companies (Accounts) Rules 2014 as amended from time to time forms a partof this in AnnexureE.
The Board of Directors places on record its sincere appreciation for the dedicatedservices rendered by the employees of the Company at all levels and the constructiveco-operation extended by them. Your Directors would like to express their gratefulappreciation for the assistance and support by all Shareholders Government AuthoritiesAuditors financial institutions Customers employees suppliers other businessassociates and various other stakeholders.
| ||For and on behalf of the Board |
| ||Sd/- |
| ||RAJENDRA V. GOGRI |
| ||CHAIRMAN AND MANAGING DIRECTOR |
|Place : Mumbai || |
|Date: 6th May 2016 || |