Your Directors take pleasure in presenting the 42nd Annual Report on thebusiness and operations of your Company together with the Audited Financial Statements forthe year ended 31st March 2017.
The financial performance of your Company is as summarized below for the year underreview:
| || || |
(Rs. in Lakhs)
|Particulars ||Standalone ||Consolidated |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
|Revenue from Operations ||21681.78 ||21563.77 ||28052.40 ||27104.71 |
|Profit for the year ||331.58 ||15122.59 ||775.53 ||15365.23 |
|Add: Balance as per last year ||17790.52 ||3359.89 ||18087.15 ||6586.04 |
|Less: Effect of divestment in JV & conversion of Associate into Subsidiaries ||- ||- ||- ||3041.65 |
|Add: Pre-acquisition profit & previous year transaction ||- ||- ||232.91 ||- |
|Total ||18122.10 ||18482.48 ||19095.59 ||18909.62 |
|Appropriation || || || || |
|General Reserves ||- ||- ||70 ||70.00 |
|Set off of Dividend Tax in respect of dividend from Subsidiary Company ||(45.17) ||(33.03) ||(45.17) ||(33.03) |
|Interim Dividend ||- ||601.49 ||- ||601.49 |
|Tax on Interim Dividend ||- ||122.45 ||- ||182.50 |
|Previous year Dividend ||- ||0.48 ||- ||0.48 |
|Tax on Previous year Dividend ||- ||0.58 ||- ||1.03 |
|Proposed Dividend ||221.90 ||- ||221.90 ||- |
|Tax on Proposed Dividend ||45.17 ||- ||92.03 ||- |
|Balance carried to Balance Sheet ||17900.20 ||17790.52 ||18756.84 ||18087.15 |
|Total ||18122.10 ||18482.48 ||19095.59 ||18909.62 |
During the year under review revenue from operations of your Company's products andservices was Rs. 21681.78 lakhs compared with Rs. 21563.76 lakhs in FY 2015-16. TheProfit after Taxes was Rs. 331.58 lakhs compared with Rs. 15122.59 lakhs in FY 2015-16.The sharp reduction is because of exceptional income on account of divestment of yourCompany's stake in Henkel Chembond Surface Technologies Limited in the previous year.
The Board of Directors has recommended final dividend of Rs. 1.65/- per share for thefinancial year ended 31st March 2017. The outflow on account of dividendpayment amounts to Rs. 221.90 Lakhs.
Transfer to Reserves
Your Company does not propose to transfer any amount from the current year's profits tothe General Reserve. (Previous year Rs. Nil)
The Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 and rules framed thereunder.
Directors and Key Managerial Personnel
The Board in its meeting held on 28th May 2016 on the recommendation ofNomination & Remuneration Committee of the Board approved the re-appointment of Mr.Sameer V. Shah (DIN: 00105721) and Mr. Nirmal V. Shah (DIN: 00083853) as Chairman andManaging Director and Vice Chairman and Managing Director of the Company respectively. There-appointment of Mr. Sameer V. Shah and Mr. Nirmal V. Shah was approved by shareholdersat the 41st Annual General Meeting held on 30th July 2016 for aterm of three years with effect from 1st August 2016. There was no change inany of Key Managerial Personnel during the year.
During the year Mr. O. P. Malhotra (DIN: 00009086) ceased to be Director (Independent)on the Board of the Company with effect from 1st August 2016 and the same wasapproved by the Board at its meeting held on 30th July 2016.
Inter-se relationship between Directors
Mr. Sameer V. Shah Chairman & Managing Director and Mr. Nirmal V. Shah ViceChairman & Managing Director are brothers.
Number of Board Meetings
Five (5) board meetings were convened and held during the year. Details of thesemeetings of the board are included in the Corporate Governance Report. The intervening gapbetween the meetings was within the period prescribed under the Companies Act 2013 andthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Performance evaluation and its criteria
The Directors on the Board carried out an annual evaluation of the Board itself itsCommittees and individual Directors. The entire Board carried out performance evaluationof each Independent Director excluding the Independent Director being evaluated.Nomination and Remuneration Committee also carried out evaluation of every Director'sperformance.
A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors setting out parameters of evaluation. Evaluation parameters of theBoard and Committees were mainly based on Disclosure of Information Key functions of theBoard and Committees responsibilities of the Board and Committees Corporate GovernanceNorms etc. Evaluation parameters of individual directors including the Chairman of theBoard and Independent Directors were based on knowledge to perform the role time andlevel of participation performance of duties and level of oversight and professionalconduct etc.
Independent Directors in their separate meeting held on 30th March 2017have also evaluated the performance of Non- Independent Directors Chairman of the Boardand the Board as a whole.
Disclosures by the Directors
The Directors on the Board have submitted notice of interest under Section 184(1)intimation under Section 164(2) and declaration as to compliance with the Code of Conductof the Company. All Independent Directors have also given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the Companies Act 2013 (the"Act") and Regulation 25 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
Directors' Responsibility Statement
Pursuant to Section 134 of the Companies Act 2013 the Board of Directors to the bestof their knowledge and ability confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;
(b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the Directors had 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; and
(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
The Statutory Auditors of your Company M/s. Kastury & Talati were appointed tohold office until the conclusion of the ensuing 42nd Annual General Meeting.
The term of M/s. Kastury & Talati Chartered Accountants Statutory Auditors of theCompany will expire at the end of the ensuing 42nd Annual General Meeting ofthe Company. M/s. Kastury and Talati had been the Statutory Auditors of the Company sinceinception of your Company. Being more than 10 years and as per the provisions of Section139 of the Companies Act 2013 and Rule 3 to 6 of the Companies (Audit and Auditors) Rulesmade thereunder the Statutory Auditor firm whose term expires shall be replaced by anew Statutory Auditor.
In terms of the requirements of Section 139 of the Act read with rules made thereunderthe Board of Directors of the Company on the recommendation of the Audit Committee hasappointed M/s. B. D. Jokhakar & Co. Chartered Accountants (Firm Registration No.104345W) as the Statutory Auditors of the Company in the Board Meeting held on 24thMay 2017 for a term of 5 (five) consecutive years commencing from the conclusion of theensuing 42nd Annual General Meeting till the conclusion of the 47thAnnual General Meeting to be held in the year 2022 subject to the approval of theshareholders' in the ensuing 42nd Annual General Meeting (AGM). M/s. B. D.Jokhakar & Co. Chartered Accountants have confirmed that their appointment if madewould be within the limits specified under Section 141(3)(g) of the Act and that they arenot disqualified to be appointed as statutory auditor in terms of the provisions of theproviso to Section 139(1) Section 141(2) and Section 141(3) of the Act and the provisionsof the Companies (Audit and Auditors) Rules 2014.
The appointment of M/s. B. D. Jokhakar & Co. Chartered Accountants as StatutoryAuditors shall be subject to ratification by the shareholders at every Annual GeneralMeeting during the remaining term of five years.
The Board places on record its appreciation for the services rendered by M/s. Kastury& Talati as Statutory Auditors of the Company.
On the recommendation of the Audit Committee the Board has appointed Mr. R. S.Raghavan Practising Cost Accountant as Cost Auditor of the Company for the financialyear 2017-18 in accordance of Section 148 of the Companies Act 2013 read with rules madethereunder.
Secretarial Auditor & Report
Mr. Virendra Bhatt Practising Company Secretary was appointed as Secretarial Auditorfor the financial year 2016-17 by the Board. Mr. Bhatt has also been appointed asSecretarial Auditor for the financial year 2017-18. The report of Secretarial Auditor forthe financial year 2016-17 is attached as Annexure-1.
Nomination & Remuneration Committee
The Company has a Nomination & Remuneration Committee of the Board the detailswhereof are given in the Corporate Governance Report.
Subsidiary Joint Venture or Associate Companies
Your Company has seven subsidiaries namely Chembond Solenis Water Technologies LimitedProtochem Industries Private Limited Chembond Industrial Coatings Limited Chembond CleanWater Technologies Limited Chembond Enzyme Company Limited Chembond Calvatis IndustrialHygiene Systems Limited and Chembond Chemicals (Malaysia) Sdn. Bhd. (formerly known asIChembond Water Sdn. Bhd.).
During the year your Company acquired 100% stake in Chembond Chemicals (Malaysia) Sdn.Bhd. (Formerly known as IChembond Water Sdn. Bhd.) the erstwhile Joint Venture of yourCompany in Malaysia thus making it your Company's wholly owned subsidiary (WOS). ChembondChemicals (Malaysia) Sdn. Bhd. is in the business of selling and servicing water treatmentchemicals for industries in Malaysia.
In the month of April 2017 your Company acquired additional 45% stake from itserstwhile jv partner Solenis in the material subsidiary Chembond Solenis WaterTechnologies Limited thus making it a wholly owned subsidiary of your Company.
The details of financial performance of the subsidiaries associates and joint ventureCompanies are given in AOC-I (Annexure 2 to the Directors Reports).
Remuneration to Directors
The details of remuneration paid to Directors of the Company including the ExecutiveDirectors are given in the Report on Corporate Governance.
Particulars of employees
The information required under Section 197 of the Companies Act 2013 & Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is givenbelow: a) Ratio of remuneration of each Director to the median employee's remuneration forthe financial year.
|Name ||Designation ||Ratio |
|Sameer V. Shah ||Chairman and Managing Director ||21.36:1 |
|Nirmal V. Shah ||Vice - Chairman and Managing Director ||10.37:1 |
For this purpose sitting fees paid to Non Executive Directors (NEDs) have not beenconsidered as remuneration.
b) Percentage increase in remuneration of each Director CFO and CS.
|Name ||Designation ||% increase |
|Sameer V. Shah ||Chairman and Managing Director ||14 |
|Nirmal V. Shah ||Vice Chairman and Managing Director ||0 |
|Rashmi S. Gavli ||Chief Financial Officer ||15 |
|Jay Mistry ||Company Secretary ||8.60 |
c) The percentage increase in the median remuneration of employees: 3%
d) The number of permanent employees: 361
e) Average percentile increase made in the salaries of employees other than keymanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:
Average increase made in the salaries of employees other than key managerial personnelduring the year is 11.87% versus 9.45% increase in managerial remuneration.
There are no other exceptional circumstances for increase in the remuneration of keymanagerial personnel and increase in remuneration has been in accordance with theCompany's policies. The increment given to each individual employee is based on theemployees' potential experience as also their performance and contribution to theCompany's progress over a period of time.
f) The Company affirms that the remuneration is as per the Remuneration Policy of theCompany.
Particulars of employees as per Rule 5(2) & Rule 5(3) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014
The information as per Rule 5(2) & Rule 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 will be provided upon request. In termsof Section 136 of the Companies Act 2013 the Report and Accounts are being sent to themembers and others entitled thereto excluding the aforesaid details which is availablefor inspection by the members at the Registered Office of the Company during businesshours on working days of the Company up to the date of the ensuing Annual General Meeting.If any member is interested in obtaining a copy thereof such members may write to theCompany Secretary in this regard.
Remuneration to Managing Director from wholly owned subsidiary
During the financial year 2016-17 Mr. Nirmal V. Shah Vice - Chairman & ManagingDirector received remuneration of Rs. 4466528/- (excluding contribution to LIC underGroup Gratuity Scheme & Superannuation Scheme) from Chembond Solenis WaterTechnologies Limited (CSWTL) wholly owned subsidiary Company. CSWTL previously asubsidiary became a wholly owned subsidiary of the Company in the month of April 2017pursuant to acquisition of additional 45% shares by your Company.
Pecuniary relationships with Non-Executive Directors
The Company paid sitting fees to Non-Executive Directors (NEDs) for attending themeetings. Criteria of making payments to NEDs is available on Company's website athttp://www.chembondindia.com/investors. The number of shares held by NEDs as on 31stMarch 2017 is as follows:
|Name of NED ||Shares held |
|Ashwin R. Nagarwadia ||1081264 |
|Perviz H. Dastur ||314120 |
|Mahendra K. Ghelani ||0 |
|Jawahar I. Mehta ||7400 |
|Sushil U. Lakhani ||0 |
|O. P. Malhotra# ||N.A. |
|Saraswati Sankar ||0 |
|Prakash D. Trivedi ||0 |
ceased to be Director (Independent) of the Company with effect from 1st
Employees Stock Option Scheme*
Pursuant to the approval accorded by the shareholders at the thirty sixth AnnualGeneral Meeting of the Company held on 10th September 2011 for issue of 636000*Options the Compensation Committee had formulated the Chembond Chemicals Employees StockOption Plan 2012 and approved a grant of 465562* options to the employees of the Companyand its subsidiaries under the said Scheme. As required under the Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014 (SEBI ESOP Regulations)Companies (Share Capital and Debentures) Rules 2014 and other applicable provisions ofthe Companies Act 2013 the following details of this scheme as on 31st March 2017 arebeing provided:
|Sr. No. ||Nature of Disclosure ||Particulars* |
|A ||The Pricing Formula ||At a price not less than lower of the average of weekly high and low of closing price of six months or two weeks on the Bombay Stock Exchange (BSE) prior to the date of grant of the options with a discount not more than 10% of the minimum applicable price i.e. Rs. 76.50/- per share. |
|B ||Options Outstanding at the beginning of the year ||206482 |
|C ||Options Granted during the year ||Nil |
|D ||Options Vested ||85020 |
|E ||Options Exercised & Exercise Price ||54500 Exercise Price Rs. 76.50/- |
|F ||The total no. of shares arising as a result of exercise of option* ||54500 |
|G ||Options Lapsed/ Surrendered/cancelled ||338098 |
|H ||Variation of Terms of Option ||Please refer note below* |
|I ||Money realized by exercise of Options* ||Rs. 4169250/- |
|J ||Total no of Options in force ||Nil |
|K ||Employee wise details of Options granted to- ||As follows |
| ||i) Details of Options granted to senior management personnel ||No new options were granted to senior management personnel during the year under review. For Options granted to them earlier please refer Annexure 3 |
| ||ii) Any other employee who received a grant in any one year of Option amounting to 5% or more of Options granted during the year ||Nil |
| ||iii) Employees who were granted Options during any one year equal to or exceeding 1% of the issued capital of the company at the time of grant ||Nil |
|L ||Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of Option calculated in accordance with Accounting standard AS-20 || |
|M ||(i) Difference between the compensation cost using the intrinsic value of the stock Options (which is the method of accounting used by the company) and the compensation cost that would have been recognized in the accounts if the fair value of Options had been used as the method of accounting. ||The employee compensation cost for the year would have been higher by Rs. 14.46 Lakhs had the Company used the fair value of options as the method of accounting instead of intrinsic value. |
| ||(ii) Impact of the difference mentioned in (i) above on the profits of the Company ||The stock-based compensation cost calculated as per the intrinsic value method upto 31st March 2017 is Rs. (16.11) Lacs. If the stock-based compensation cost was calculated as per the fair value method prescribed by SEBI the total cost to be recognized in the financial statements for the period ended 31st March 2017 would be Rs. (1.65 Lakhs). |
| ||(iii) Impact of the difference mentioned in (i) above on the EPS of the company ||Had the Company accounted the Options as per fair value the diluted EPS would have been 2.47 per share instead of 2.47 per share. |
|N ||(i) Weighted Average exercise price of Options ||Rs. 76.5/- |
| ||(ii) Weighted average fair value of Options ||Rs. 34/- |
|O ||(i) Method used to estimate the fair value of Options ||Black Scholes Options Pricing Model |
| ||(ii) Significant assumptions used (weighted average information relating) || |
| ||(a) Risk -free interest rate ||8.25 % |
| ||(b) Expected life of the Option ||3.34 years |
| ||(c) Expected volatility ||42 % |
| ||(d) Expected dividend yields ||1.38 % |
| ||(e) Price of the underlying share in the market at the time of Option grant ||Rs. 85/- |
The certificate from the statutory auditor as required under the SEBI ESOP Regulationsconfirming that the Company's Employees Stock Option Plan 2012 has been implemented inaccordance with the SEBI ESOP Regulations and shareholders resolution will be placedbefore the shareholders at the ensuing Annual General Meeting.
*During the year shares of Company were sub-divided from one share of Rs. 10/- eachinto two shares of Rs. 5/- each with effect from 7th September 2016. The Options andExercise price were adjusted to give effect to the sub-division of the equity shares ofthe Company. All the numbers mentioned have been arrived at after giving effect of thesubdivision of equity shares. The exercise period for the options vested/to be vestedunder the Scheme expired on 31st March 2017 hence all the shares granted and vestedunder the Scheme which remain un-exercised on 31st March 2017 lapsed.
Policies and Disclosure Requirements
In terms of provisions of the Act and provisions of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has adopted all the applicablepolicies. The policies are available on Company's website www.chembondindia. comand the web link is http://www.chembondindia.com/investors
It is confirmed that all Directors and Senior Management Personnel have affirmed theiradherence to the provisions of the Code of Conduct during the financial year 2016-17.
The Company's policy on Directors' appointment remuneration and other matters providedin Section 178(3) of the Act forms part of Nomination and Remuneration Policy and has beendisclosed in the Corporate Governance report.
The Board of Directors has formed a Risk Management Committee. The details of Committeeare set out in the Corporate Governance Report forming part of the Directors' Report. TheCompany has its Risk Management Plan & Policy in place which is also displayed on thewebsite of the Company. In the opinion of the Board during the financial year 2016-17the Board has not noticed any elements of risk which may threaten the existence of theCompany.
Internal Financial Controls
For the year ended 31st March 2017 the Board is of the opinion that theCompany has sound Internal Financial Controls commensurate with the nature and sizeof its business operations wherein controls are in place and operating effectively and nomaterial weaknesses have been noticed. The Company has a process in place to continuouslymonitor the existing controls and identify gaps if any and implement new and /orimproved controls wherever the effect of such gaps would have a material effect on theCompany's operation.
The Company has a vigil mechanism in place in accordance with the Companies Act 2013.The policy has also been uploaded on the website of the Company.
Corporate Social Responsibility (CSR)
The criteria prescribed under Section 135 of the Act with respect to constituting CSRcommittee adopting CSR policy and spending amount on CSR activities in accordance withthe Act do not apply to the Company. However Company has voluntarily framed CSR Policy andconstituted CSR Committee as good corporate governance practice. The CSR Committeecomposition is as follows:
The CSR Committee composition is as follows:
|Mahendra K. Ghelani ||Chairman & Independent Director |
|Sushil U. Lakhani ||Independent Director |
|Sameer V. Shah ||Managing Director |
|Ashwin R. Nagarwadia ||Director |
The Company's CSR Policy is available on the website of the Company athttp://www.chembondindia.com/investors
Related Party Transactions
All transactions entered into with Related Parties during the financial year were inthe ordinary course of business and on arm's length basis and do not attract theprovisions of Section 188(1) of the Companies Act 2013. For material transactions withrelated parties the Company has obtained members' approval by way of voting throughpostal ballot including e-voting results of which were declared on 19th March2015. Suitable disclosures as required by the Accounting Standards (AS-18) have been madein the notes to the Financial Statements. The Board has approved a policy for relatedparty transactions which has been uploaded on the Company's website. Necessary disclosuresin Form AOC-2 are attached as Annexure 4.
The Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The related information is provided in Annexure 5 which is attached to this report.
Particulars of Loans Guarantees and Investments
Details of Loans Guarantees and Investments have been disclosed in the FinancialStatements.
Extract of the Annual Return
An extract of the annual return in Form MGT-9 is provided herewith as Annexure 6.
Management Discussion and Analysis Report
Management Discussion and Analysis Report is separately provided in this Annual Report.
Corporate Governance Report
A separate report on Corporate Governance is attached as a part of this Annual Reportalong with the Auditor's Certificate on its compliance.
Prevention Prohibition and Redressal of Sexual Harassment of Women
The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy. No complaint has been received duringthe year under review.
Significant and Material Orders Passed
No significant and material order has been passed by the Regulators or Courts orTribunals impacting the going concern status and Company's operations in future.
Your Board takes this opportunity to express its deep thanks to the customers vendorsshareholders and bankers for the faith they have reposed in the Company. Your Directorsalso place on record their sincere appreciation of the contribution of its employees fortheir competence hard work and cooperation.
On behalf of the Board
|Sameer V. Shah ||Nirmal V. Shah |
|Chairman & Managing Director ||Vice - Chairman & Managing Director |
|Mumbai || |
|6th May 2017 || |