Your Directors are indeed pleased to present the Thirty second Annual Report andAudited Accounts of the Company for the financial year ended March 31 2017.
FINANCIAL RESULTS : (Rupees in Lakhs)
| || |
Standalone for the Year ended on
| ||31-03-2017 ||31-03-2016 ||Consolidated for the year ended on 31-03-2017 |
|(1) Income (Net of Excise duty) ||18566.11 ||15254.08 ||60730.02 |
|(2) Profit before Interest Depreciation & Taxation ||2304.69 ||2346.88 ||8076.96 |
|Less : Interest ||480.22 ||392.09 ||2030.75 |
|(3) Profit before Depreciation and Taxation ||1824.47 ||1954.79 ||6045.21 |
|Less : Depreciation ||422.09 ||299.43 ||2670.77 |
|(4) Profit before Tax for the year ||1402.38 ||1655.36 ||3375.44 |
|Less : Provision for Taxation : || || || |
|(a) Current Tax ||353.12 ||436.60 ||1180.78 |
|(b) Deferred Tax ||196.19 ||164.66 ||51.43 |
|(c) Excess Provision of earlier years (Net) ||7.06 ||(5.83) ||7.06 |
|Sub-total ||556.37 ||595.43 ||1239.27 |
|(5) Net profit after Tax for the year ||846.01 ||1059.93 ||2136.17 |
|Add : Balance B/f from previous years a/c. ||4646.13 ||4101.25 ||4646.13 |
|Sub-total ||5492.14 ||5161.18 ||6782.30 |
|(6) Less : Appropriations : || || || |
|(a) Transferred to General Reserve ||- ||100.00 ||- |
|(b) Proposed Dividend ||- ||344.85 ||- |
|(c) Dividend Distribution Tax ||- ||70.20 ||- |
|Less : (a) Utilised for issue of Equity Shares in pursuance of Scheme of arrangement ||963.44 || ||963.44 |
|(b) Utilised for issue of Compulsorily convertible preference shares in pursuance of Scheme of Arrangement ||1263.44 || ||1263.44 |
|Sub-total ||2226.88 ||515.05 ||2226.88 |
|(7) Balance C/f to next years account ||3265.26 ||4646.13 ||4555.42 |
OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS :
During the year under review the consolidated revenue from operations and other incomewere Rs.60730.02 lakhs. This comprised of 12 months performance of Adis businessand 8 months performance of Privi Organics as the 'Appointed Date' under the Scheme ofArrangement was August 1 2016. The Company achieved consolidated profit before tax of Rs.3375.44 lakhs and profit after tax of Rs. 2136.17 lakhs. The EPS on ConsolidatedFinancial for the year ended March 31 2017 was Rs. 8.82 on diluted basis.
No material changes and commitments affecting the financial position of the Companyhave occurred between March 31 2017 and the date of this Report.
Your Directors are pleased to recommend a dividend of Re.1.00 (i.e.10%) per equityshare (Previous Year Rs.2.50 per equity share) on the expanded Equity Share Capital forthe financial year ended March 31 2017 subject to the approval of the shareholders atthe ensuing Annual General Meeting of the Company.
MEETINGS OF THE BOARD :
During the Financial Year 2016-17 9 (nine) meetings of the Board of Directors tookplace. For further details please refer Report on Corporate Governance.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS :
The Company has not given any loan made investment given any guarantee or providedany security - covered u/s. 186 of The Companies Act 2013 - to anyone.
CORPORATE GOVERNANCE/MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
A Report on the Corporate Governance Code alongwith a certificate from a practisingCompany Secretary regarding the compliance of conditions of Corporate Governance asstipulated in Regulation 34 of SEBI (LODR) Regulations 2015 as also the ManagementDiscussion and Analysis Report are annexed to this Report.
During the year Company has not accepted any Fixed Deposits.
CREDIT RATING :
CARE has maintained 'CARE A-' (Single A Minus) to Long Term Bank facilities (consideredto be good for our size of manufacturing companies) and 'CARE A1' (A One) to Short TermBank facilities.
The Company keeps on exploring the possibility of technical improvement and processoptimization for better yields / product mix / energy efficiency.
Shri Utkarsh Shah and Shri Nahoosh Jariwala shall retire at the forthcoming AnnualGeneral Meeting of the Company and being eligible offer themselves for reappointment.
Shri Bimal Parikh and Shri Hemant Shah Directors expressed their desire to step downas Directors of the Company in line with what was stated in their applications for theDe-promoterisation of their respective family groups.
Board accepted their request and acknowledged their contribution in the affairs of theCompany during a span of seven years most of which was in the category of PromoterDirectors.
Shri Mahesh Babani and Shri D. B. Rao have been appointed as Additional DirectorsPromoter Category u/s. 161 (1) of The Companies Act 2013. They will hold the Office ofDirector upto the date of forthcoming Annual General Meeting. Notices u/s. 160 of TheCompanies Act have been received for their appointment as Directors of the Company. ShriMahesh Babani was also designated as Managing Director of the Company subject to approvalof the shareholders of the company at the ensuing annual general meeting. No Managerialremuneration however is proposed to be paid to Mr. Babani from Fairchem SpecialityLimited.
With effect from the end of the proceedings of the Board Meeting held on May 11 2017following six Independent Directors expressed their desire to step down from theirDirectorships on personal grounds :
(1) Shri Jayesh K. Shah
(2) Shri Kalpesh A. Patel
(3) Shri Nitin R. Patel
(4) Shri Ganpatraj Chaudhary
(5) Shri Bhavin a. Shah
(6) Ms. Sonal V. Ambani
Board accepted their request and acknowledged their individual and collectivecontribution in the affairs of the Company during their tenure as Directors.
The Board of Directors have filled in four of the six casual vacancies of independentDirectors which arose due to above as follows :
| ||Name of outgoing Director ||Name of Incoming Director to fill in the casual vacancy |
|1 ||Shri Jayesh K. Shah ||Shri P R. Barpande |
|2 ||Shri Kalpesh A. Patel ||Shri Rajesh Budhrani |
|3 ||Shri Ganpatraj Chaudhary ||Shri Hemang Gandhi |
|4 ||Ms. Sonal V. Ambani ||Ms. Radhika Pereira |
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS :
The Company has received declarations from all the Independent Directors of theCompany inter alia confirming that they meet the criteria of Independence as prescribedunder Section 149 of the Companies Act 2013 and Regulation 16(1 )(b) of SEBI (LODR)Regulations 2015.
COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FORDETERMING QUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF A DIRECTOR ETC. :
Pursuant to the provisions of Section 178 and other applicable provisions if any ofthe Companies Act 2013 read with the Rules made thereunder and Clause 49 of the ListingAgreement now regulation 19 of SEBI (LODR) Regulation 2015 the Board of Directors attheir Meeting held on 11-08-2014 approved the Remuneration and Nomination Policy asrecommended by the Nomination and Remuneration Committee. The salient features of the saidpolicy covering the policy on appointment and remuneration and other matters have beenexplained in the Corporate Governance Report.
BOARD EVALUATION :
Based on the criteria for evaluation of Independent Directors and the Board asrecommended by the Nomination and Remuneration Committee and as adopted by the BoardBoard carried out evaluation of its own performance and that of the individual Directors.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement of Section 134 of the Companies Act 2013 with respect toDirectors' Responsibility Statement the Directors hereby confirm:
(i) that in the preparation of the annual accounts for the year ended March 31 2017the applicable accounting standards read with requirements set out under Schedule III ofthe Companies Act have been followed and there are no material departures from the same;
(ii) that the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year viz. March 31 2017 and of the profit of the Company for that period;
(iii) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) that the Directors have prepared the annual accounts on a 'Going Concern' basis;
(v) that the Directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively and
(vi) that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
All the employees have worked with zeal and enthusiasm and your Directors wish toexpress their sincere appreciation to all the employees for their support co-operationand dedicated services.
PARTICULARS OF EMPLOYEES:
There was no employee drawing an annual salary of Rs. 120.00 lakhs or more whereemployed for full year or monthly salary of Rs. 850000/- or more where employed for partof the year and therefore no information pursuant to the provisions of Rule 5 (2) and (3)of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isrequired to be given.
The Company's securities are listed with BSE Limited and National Stock Exchanges ofIndia Limited. The Company has paid the listing fees for F.Y 2017-18 on paid up sharecapital excluding issue of new equity shares in the month of March 2017 to both the StockExchanges. The listing applications for new equity shares aggregating to 23815757 areunder process at both the Stock Exchanges and additional listing fees if required will bepaid as per the intimation / advice of said stock exchanges.
BUSINESS ANALYSIS REPORT :
The Business Responsibility Reporting as required under clause 55 of the ListingAgreement is not applicable to the Company.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :
All contracts / arrangements / transactions with related parties entered into by theCompany during the financial year with related parties were in the ordinary course ofbusiness and on an arm's length basis. During the year the Company had not entered intoany contract / arrangement / transaction with related parties which could be consideredmaterial in accordance with related party transactions.
CORPORATE SOCIAL RESPONSIBILITY :
The Corporate Social Responsibility Committee had formulated and recommended to theBoard a Corporate Social Responsibility Policy which has been approved by the Board. Theother details of the CSR activities as required u/s. 135 of The Companies Act 2013 aregiven in the CSR Report as Annexure to Directors' Report.
RISK MANAGEMENT POLICY :
The Company has put in place Risk Management Plan. The Company has identified followingelements of risk which in the opinion of the Board may threaten the existence of theCompany :
(1) Severe simultaneous drought in those Soya producing countries of the world on whichIndian Crude Soya Oil refining is dependent.
(2) Development of new and substantially cheaper manufacturing technologies usingaltogether new inputs for making various kinds of resins which are required for makingpaints printing ink hardners
(3) New research on the benefits of Natural Vitamin E versus Synthetic one.
The Company has identified other hard vegetable oils such as Palm to which it canswitch over to in the extreme event of non-availability of soya based raw materialsthroughout the year.
The auditors M/s Price Waterhouse & Co. Chartered Accountants LLP were appointed atthe last Annual General Meeting held on September 9 2016 for a term of five yearssubject to ratification at each and every intervening annual general meeting. The AuditCommittee of the Board of Directors has recommended ratification of their appointment atthe ensuring annual general meeting.
SECRETARIAL AUDIT REPORT
As required by Section 204 of The Companies Act 2013 read with The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hasappointed M/s. Parikh Dave & Associates Company Secretaries Ahmedabad a firm ofCompany Secretaries in Practice to conduct Secretarial Audit for the Financial Year2016-17. The Report of the Secretarial Audit for the financial year ended on March 312017 is annexed as Annexure to this Report.
As per the Companies (Cost Records and Audit) Rules 2014 as amended by Companies (CostRecords and Audit) Amendment Rules 2014 issued by the Central Government the Company isrequired to get its cost records maintained by the company for the products covered underChapters 2917 and 3823 of Sr. No. 18 of table mentioned under Rule 3 (B) - Non-regulatedSectors audited by a Cost Auditor. Accordingly the Board of Directors as per therecommendation of the Audit Committee have appointed to M/s. Rajendra Patel &Associates Cost Accountants as Cost Auditors for the financial year 2017-18.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
A. Conservation of Energy
(a) Energy Conservation measures taken:
Energy Conservation is an ongoing feature at Fairchem Speciality Ltd.
(b) Additional investments and proposals if any being implemented for reduction ofconsumption of Energy:
Based on the suggestion of the Consultant referred in (a) above motors pumpschillers variable drives piping bulbs are being changed over a period of time.
(c) Impact of measures listed in (a) and (b) for reduction of energy consumption andconsequent impact on the cost of production of goods:
The above mentioned energy saving initiatives will help the company to contain itsPower and Fuel costs.
(d) Total energy consumption per unit of production as per prescribed Form 'A' :
As per annexure attached.
B. Technology Absorption
The Company has an ongoing program for up gradation of existing products improvementin manufacturing processes reduction in product costs and increase in yield of primeintermediate / finished products. The Company was able to achieve higher yield of itsprime intermediate / finished products on commissioning of its Fat Splitting / FractionalColumn equipments. This is done through constant interaction with employees customers andvendors.
Company continued its experiment with process routes.
C. Foreign Exchange Earnings and outgo
Foreign Exchange Earnings Rs.3544.28 lakhs Foreign Exchange Utilised Rs.1408.66 lakhs
Extract of Annual Return :
The details forming part of the extract of Annual Return in Form MGT-9 is annexedherewith as Annexure to this Report.
Your Board of Directors wishes to place on record its appreciation to the contributionmade by the employees of the company. The company has achieved impressive growth throughthe competence hard work solidarity cooperation and support of employees at all levels.The Directors also wish to thank the Government authorities financial institutions andshareholders for their cooperation and assistance extended to the company.
| ||For and on behalf of the Board of Directors |
|Place : Ahmedabad ||Utkarsh Shah |
|Date : May 11 2017 ||Chairman |
|A. POWER AND FUEL CONSUMPTION || ||2016-17 ||2015-16 |
| || || || |
|1. ELECTRICITY || || || |
|A. Purchased ||Units ||7073670 ||6961590 |
| ||Total Amount (Rs.) ||52403978 ||52606167 |
| ||Rate / Unit (Rs.) ||7.41 ||7.56 |
|B. Own Generation ||Units ||162400 ||190472 |
| ||Units per Litre of Diesel ||2.88 ||3.31 |
| ||Average Cost / Unit (Rs.) ||19.24 ||16.40 |
| || || || |
|2. FURNACE OIL || || || |
| ||Quantity (in KL) ||662.879 ||218.138 |
| ||Total Cost ||17281540 ||5193848 |
| ||Average rate per litre (Rs.) ||26.07 ||23.81 |
| || || || |
|3 LIGNITE / COAL || || || |
| ||Quantity (in M.Tons) ||8913.210 ||8814.57 |
| ||Total Cost ||47855572 ||50224900 |
| ||Average rate per Kg. (Rs.) ||5.37 ||5.68 |
| || || || |
|4. OTHERS (IF ANY) || ||- ||- |
|B. Consumption per unit of Production ||Production |
|Standards if any ||Per M.Ton |
|1 ELECTRICITY || || ||KWH |
|Deodorizer Distillate (Mixed Tocopherol Concentrate) ||1368.300 ||- ||489 |
| ||(1279.690) ||- ||(532) |
|Linoleic Acid ||1111.215 || |
| ||(2269.225) ||- ||(346) |
|Dimer Acid ||5818.605 || |
| ||(3777.055) ||- ||(296) |
|2 FURNACE OIL || || ||Litres |
|Deodorizer Distillate (Mixed Tocopherol Concentrate) ||1368.300 ||- ||20.00 |
| ||(1279.690) ||- ||(18.79) |
|Linoleic Acid ||1111.215 || |
| ||(2269.225) ||- ||(10.77) |
|Dimer Acid ||5818.605 || |
| ||(3777.055) ||- ||(15.89) |
|3 LIGNITE / COAL || || ||KGS. |
|Deodorizer Distillate (Mixed Tocopherol Concentrate) ||1368.300 ||- ||960 |
| ||(1279.690) ||- ||(977) |
|Linoleic Acid ||1111.215 || |
| ||(2269.225) ||- ||(421) |
|Dimer Acid ||5818.605 ||- ||769 |
| ||(3777.055) ||- ||(927) |
Note: Figures in brackets are in respect of previous year.
Bold Figures indicate Production and Consumption for the year 2016-17.
ANNEXURE TO DIRECTORS REPORT - DISCLOSURES ON MANAGERIAL REMUNERATION
Details of remuneration as required under Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is provided below:
(A) No of permanent employees on the rolls of the Company :175
(B) The percentage increase in the median remuneration of employees in FY 2017 stood at22%.
(C) Relationship between the average increase in remuneration and the Company'sperformance:
Given below are the key financial parameters reflecting Company's performance.
| ||March 31 2017 ||March 31 2016 ||Growth |
| ||Rs. in ||Crores ||( In% ) |
|1 Total Revenue ||185.66 ||152.54 ||21.71% |
|2 Profit before Depreciation Finance Costs and Tax expense ||23.04 ||23.34 ||(1.29%) |
|3 Profit before Tax ||14.02 ||16.56 ||(15.34%) |
|4 Profit after Tax ||8.46 ||10.60 ||(20.19%) |
|5 Earning per share Basic (As per annual reports for respective years) (Rs.) ||3.72 ||7.68 ||(51.56%) |
|6 Market Capitalisation ||2060.26 ||356.16 ||478.46% |
|7 Return on Capital Employed ||15.42 ||22.20% ||(30.54%) |
(D) Average percentile increase already made in salaries of employees other thanmanagerial personnel in last financial year and its comparison with the percentileincrease in managerial remuneration.
The average increase in the remuneration of all employees was 10% for the FY 2016-17.The increase in the remuneration of Managing Director was 68.87%. The increase in theremuneration of CFO and Company Secretary was 25.34%
The average increase in the remuneration of both the managerial and non-managerialpersonnel was determined based on the overall performance of the Company. Further thecriteria for remuneration of non-managerial personnel is based on an internal evaluationof key performance areas (KPAs) while the remuneration of the managerial personnel isbased on the remuneration policy as recommended by the Nomination & RemunerationCommittee and approved by the Board of Directors.
There were no exceptional circumstances which warranted an increase in managerialremuneration which was not justified by the overall performance of the Company
(E) Percentage increase in the remuneration of each director and key managerialpersonnel in FY 2017is given below. Further details are given in MGT-9.
|Name ||Designation / Category ||Increase / (Decrease) in Remuneration (%) |
|Shri Utkarsh B. Shah ||Chairman / Non-Executive ||No remuneration |
|Shri Nahoosh J. Jariwala ||Managing Director / Executive ||68.87% |
|Shri Harsha Raghavan ||Director / Non-Executive ||No remuneration |
|Shri Sumit Maheshwari ||Director / Non-Executive ||No remuneration |
|Shri Bimal D. Parikh* ||Director / Non-Executive ||No remuneration |
|Shri Hemant N. Shah ||Director / Non-Executive ||No remuneration |
|Shri Jayesh K. Shah ||Director / Non-Executive ||75.78% |
|Shri Kalpesh A. Patel ||Director / Non-Executive ||75.96% |
|Shri Nitin R. Patel ||Director / Non-Executive ||73.00% |
|Shri Ganpatraj Chowdhary ||Director / Non-Executive ||76.67% |
|Shri Bhavin A. Shah ||Director / Non-Executive ||65% |
|Ms. Sonal V. Ambani ||Director / Non-Executive ||78.13% |
|Mr. Rajen N. Jhaveri ||C.F.O. and Company Secretary ||25.34% |
* Except payment of commission on Net Profit payable for F.Y 2015-16 paid in F.Y2016-17 after the approval of audited financial statements by the Shareholders at 31stAGM held on September 9 2016.
(F) Remuneration of each director to the median employees' remuneration (times) for FY2017 :
|Names ||Designation / Category ||Remuneration of Directors to median Employee's remuneration (times) |
|Shri Utkarsh B. Shah ||Chairman / Non-Executive ||Not Applicable |
|Shri Nahoosh J. Jariwala ||Managing Director / Executive ||56.38 |
|Shri Harsha Raghavan ||Director / Non-Executive ||Not Applicable |
|Shri Sumit Maheshwari ||Director / Non-Executive ||Not Applicable |
|Shri Bimal D. Parikh ||Director / Non-Executive ||Not Applicable |
|Shri Hemant N. Shah ||Director / Non-Executive ||Not Applicable |
|Shri Jayesh K. Shah ||Director / Non-Executive ||0.44 |
|Shri Kalpesh A. Patel ||Director / Non-Executive ||0.36 |
|Shri Nitin R. Patel ||Director / Non-Executive ||0.39 |
|Shri Ganpatraj Chowdhary ||Director / Non-Executive ||0.23 |
|Shri Bhavin A. Shah ||Director / Non-Executive ||0.20 |
|Ms. Sonal V. Ambani ||Director / Non-Executive ||0.31 |
(G) Variations in the market capitalization of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year
The market capitalisation of the Company increased by 486% from Rs. 356.16 crores asat March 31 2016 to Rs. 2060.26 crores as at March 31 2017. The price to earnings ratioincreased by 338% from 33.61 times as at March 31 2016 to 147.25 times as at March 312017.
Year 1995 the Company (then known as H. K. Agrochem Limited) came out with an issue of2000000 fully paid equity shares of Rs. 10/- each at par for cash for an aggregateamount of Rs. 2.00 crores. The Company had three back to back bonus issue of equity sharesas follows :
(a) Year 2012 - Two bonus equity shares of Rs. 10/- each fully paid up for every 10/-equity shares of Rs. 10/- each fully paid up.
(b) Year 2013 - One bonus equity share of Rs. 10/- each fully paid up for every 10/-equity shares of Rs. 10/- each fully paid up.
(c) Year 2014 - One bonus equity share of Rs. 10/- each fully paid up for every 10/-equity shares of Rs. 10/- each fully paid up The equity shares of the Company closed atRs. 547.80 on Bombay Stock Exchange of India Limited on March 31 2017 representing anincrease of 7954% since the date of Public Issue (after adjustment for 3 bonus issues).
(d) Year 2017 - 12634353 equity shares of Rs.10/- each fully paid up issued to theeligible shareholders of Privi Organics Limited pursuant to Scheme of Arrangement approvedby Hon'ble NCLT.
(e) Year 2017 - 1181404 equity shares of Rs.10/- each fully paid up issued onconversion of equal number of compulsorily convertible preference shares of Rs.10/- eachon exercise of option by the holders of said CCPS.
(H) Key Parameters for Variable Component of remuneration availed by the Directors
There was no variable component in form of Commission payment to any Director-whetherExecutive or Non-Executive Directors during F.Y 2016-17.
(I) There were no employees (who are not directors) who received remuneration in excessof the highest paid Director of the Company during the year.