Your Directors take pleasure in presenting the 41st Annual Report on thebusiness and operations of your Company together with the Audited Financial Statements forthe year ended 31st March 2016.
The financial performance of your Company is as summarized below for the year underreview:
(Rs. in Lakhs)
|Particulars || |
| ||2015-16 ||2014-15 ||2015-16 ||2014-15 |
|Revenue from Operations ||21563.77 ||21674.90 ||27104.71 ||30022.85 |
|Profit for the year ||15122.59 ||558.33 ||15365.23 ||1237.86 |
|Add: Balance as per last year ||3359.89 ||3057.54 ||6586.04 ||5794.48 |
|Less: Effect of divestment in JV & conversion of Associate into Subsidiaries ||- ||- ||3041.65 ||- |
|Less: Transitional Depreciation Provision ||- ||34.11 ||- ||41.33 |
|Add: Transfer from Revaluation Reserve ||- ||54.04 ||- ||54.05 |
|Total ||18482.48 ||3635.80 ||18909.62 ||7045.06 |
|Appropriation || || || || |
|General Reserves ||- ||50.00 ||70.00 ||182.42 |
|Set off of Dividend Tax in respect of dividend from Subsidiary Company ||(33.03) ||(13.86) ||(33.03) ||(13.86) |
|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 ||- ||199.81 ||- ||199.81 |
|Tax on Proposed Dividend ||- ||39.95 ||- ||90.64 |
|Balance carried to Balance Sheet ||17790.52 ||3359.89 ||18087.15 ||6586.04 |
|Total ||18482.48 ||3635.80 ||18909.62 ||7045.06 |
During the year under review revenue from operations of your Company's products andservices was Rs.21563.77 lakhs compared with Rs.21674.90 lakhs in FY 2014-15. The Profitafter Taxes was Rs.15122.59 lakhs compared with Rs.558.33 lakhs in FY 2014-2015.
During the financial year 2015-16 the Board of Directors had declared first interimdividend of Rs.6/- per share and second interim dividend of Rs.3/- per share on the equityshares of the Company in November 2015 and March 2016 respectively. In view of twointerim dividends declared during the year the Board of Directors of the Company has notrecommended final dividend for the financial year ended 31st March 2016.
Transfer to Reserves
Your Company does not propose to transfer any amount from the current year's profits tothe General Reserve. (Previous year Rs.50 Lakhs).
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 21st May 2015 appointed Dr. Prakash D. Trivedi (DIN:00231288) as an Additional (Independent) Director of the Company. The shareholders of theCompany at the 40th Annual General Meeting appointed him as an IndependentDirector for a period of five years from 21st May 2015 upto 21stMay 2020.
Mr. Jay Mistry was appointed as Company Secretary & Compliance Officer of theCompany by the Board in its meeting held on 6th February 2016. Mr.Varadvinayak Khambete resigned as a Company Secretary with effect from 23rdDecember 2015.
The Board in its meeting held on 24th March 2015 has appointed Mrs.Saraswati Sankar as an Additional (Independent) Director of the Company. Mrs. Sankar wasappointed as an Independent Director of the Company by the shareholders at the 40th AnnualGeneral Meeting held on 8th August 2015 for a term of five years from 24thMarch 2015 upto 24th March 2020.
Inter-se relationship between Directors
Mr. Sameer V Shah Chairman and Managing Director and Mr. Nirmal V Shah Vice Chairmanand Managing Director are brothers.
Number of Board Meetings
Seven (7) 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 have also evaluated the performance ofNon- Independent Directors Chairman of the Board and 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 Annual General Meeting. The Company hasreceived the certificate from them to the effect that their re-appointment if made wouldbe in compliance of the Companies Act 2013.
The Company has appointed Mr. R. S. Raghavan Practising Cost Accountant as CostAuditor of the Company for the financial year 2016-17.
The Company has appointed Mr. Virendra Bhatt Practising Company Secretary asSecretarial Auditor for the financial year 201516. The report of Secretarial Auditor isattached as Annexure-1.
Please refer the details given in the Corporate Governance Report.
Subsidiary Joint Venture or Associate Companies
During the year two Companies have become your Company's subsidiaries i.e. ChembondEnzyme Company Limited & Chembond Calvatis Industrial Hygiene Systems Limited(formerly known as Chembond Bioengineering Company Limited) and one company has ceased tobe your Company's Joint Venture i.e. Henkel Chembond Surface Technologies Limited. Aseparate statement containing salient features of financial statements of your Company'ssubsidiaries in Form AOC-1 is attached as Annexure-2. The report on the performance andfinancial position of the subsidiaries associates and joint venture companies forms apart of the Management Discussion & Analysis.
During the year your Company has entered into an agreement with I-Chem Solution SdnBhd Malaysia for forming a joint venture Company in Malaysia to do the business ofselling and servicing water treatment chemicals for industries in Malaysia.
Particulars of employees
The information required under Section 197 & Rule 5 of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 is given below.
a) Ratio of remuneration of each Director to the median employee's remuneration for thefinancial year.
|Name ||Designation ||Ratio |
|Sameer V Shah ||Chairman and Managing Director ||19.41:1 |
|Nirmal V Shah ||Vice Chairman and Managing Director ||10.75:1 |
For this purpose sitting fees paid to neds have not been considered as remuneration.
b) Percentage increase in remuneration of each Director CFO and CS.
|Name ||Designation ||% increase |
|Sameer V Shah ||Chairman and Managing Director ||81.00 |
|Nirmal V Shah ||Vice Chairman and Managing Director ||0 |
|Rashmi S. Gavli ||Chief Financial Officer ||9 |
|Jay Mistry * ||Company Secretary ||N.A. |
* Mr. Jay Mistry was appointed as Company Secretary w.e.f. 6th February2016.
c) The percentage increase in the median remuneration of employees: 6.00%
d) The number of permanent employees: 336
e) The explanation on the relationship between average increase in remuneration andcompany performance: The average increase in remuneration during the year is 6% which isin line with market trends.
f) Comparison of remuneration of each key managerial personnel against the performanceof the Company.
|Name ||Designation ||CTC (as on 31st March 2016) (Rs. in Lakh) ||% increase in CTC ||PAT (Rs. in Lakh) ||% increase in PAT compared to previous year |
|Sameer V Shah ||MD ||65.01 ||81 || || |
|Nirmal V. Shah ||MD ||36.00 ||0 || || |
|Rashmi S. Gavli ||CFO ||32.39 ||9 ||151.23 ||2708.54 |
|Jay Mistry * ||CS ||5.90 ||N.A. || || |
* Mr. Jay Mistry was appointed as a Company Secretary w.e.f. 6th February2016.
g) Variations in the market capitalisation of the Company price-earnings ratio as atthe closing date of the current financial year and previous financial year and percentageincrease or decrease in the market quotations of the shares of the company.
|Date ||Issued Capital (shares) ||Closing Market Price per share in Rs. ||EPS ||P-E Ratio ||Market capitalization (In Lakhs Rs.) |
|31.03.2015 ||6660412 ||342.00 ||8.38 ||40.81 ||22778.61 |
|31.03.2016 ||6696894 ||417.30 ||226.45 ||1.84 ||27946.14 |
|Increase /(Decrease) ||36482 # ||75.30 ||218.07 ||- ||5167.53 |
|% of Increase /(Decrease) ||0.55 ||22.02 ||2602.27 ||- ||22.69 |
|Issue Price of the share at the last Pubic Offer (IPO) ||- ||15.00 ||- ||- ||- |
|Increase in market price as on 31.03.2016 as compared to issue price of IPO || ||402.30 || || || |
|Increase in % ||- ||2682.00 ||- ||- ||- |
# Out of 36482 options exercised15950 options were exercised upto 31stMarch 2015 and 15950 equity shares were allotted on 9th April 2015 andfurther 20532 Options were exercised and allotted during the year.
h) 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 3%. Pursuant to the provisions of Section 149 196 197 and 203 of theCompanies Act 2013 there was revision in the remuneration of Mr. Sameer V. Shah and Mr.Nirmal V. Shah Managing Directors of the Company w.e.f. 1st April 2015 tillthe remaining period of tenure i.e. upto 31st July 2016 which was approved bythe shareholders of the Company at the 40th Annual General Meeting. On thataccount average increase in the managerial remuneration in the year is 32.92%.
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.
i) Key parameters for any variable component of remuneration availed by the directors.- N.A.
j) The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year. : N.A.
k) The Company affirms that the remuneration is as per the Remuneration Policy of theCompany.
Disclosure under Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is not applicable to any of the employees of the Company.
Remuneration to Managing Director from subsidiary
During the financial year 2015-16 Mr. Nirmal V. Shah Vice Chairman and ManagingDirector received remuneration of Rs.4478263 (excluding contribution to LIC under GroupGratuity Scheme & Superannuation Scheme) from Chembond Solenis Water TechnologiesLimited subsidiary 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 2016 is as follows:
|Name of NED ||Shares held |
|Ashwin R. Nagarwadia ||540632 |
|Perviz H. Dastur ||157060 |
|Mahendra K. Ghelani ||9300 |
|Jawahar I. Mehta ||2800 |
|Sushil U. Lakhani ||4800 |
|O.P.Malhotra ||1600 |
|Saraswati Sankar ||0 |
|Prakash D. Trivedi ||0 |
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 of318000 Options the Compensation Committee had formulated the Chembond ChemicalsEmployees Stock Option Plan 2012 and approved a grant of 232781 options to the employeesof the Company and its subsidiaries under the said Scheme. As required under theSecurities and Exchange Board of India (Employees Stock Option and Employees StockPurchase Scheme) Guidelines 1999 (SEBI Guidelines) the following details of this schemeas on 31st March 2016 are being 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.153/- per share. |
|B Options Outstanding at the beginning of the year ||156999 |
|C Options Granted during the year ||Nil |
|D Options Vested ||28498 |
|E Options Exercised ||20532 |
|F The total no. of shares arising as a result of exercise of option* ||36482 |
|G Options Lapsed/ Surrendered ||33226 |
|H Variation of Terms of Option ||No |
|I Money realized by exercise of Options* ||Rs. 3171996 |
|J Total no of Options in force ||103241 |
|K Employee wise details of Options granted to- ||As follows |
|(i) Details of Options granted to senior management personnel ||As per 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.12.53 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 2016 is Rs.(2.01) 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 2016 would be Rs.10.52 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 223 per share instead of 226.45 per share. |
|N (i) Weighted Average exercise price of Options ||Rs. 153/- |
|(ii) Weighted average fair value of Options ||Rs. 68/- |
|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. 170/- |
The certificate from the statutory auditor as required under the SEBI Guidelinesconfirming that the Company's Employees Stock Option Plan 2012 has been implemented inaccordance with the SEBI Guidelines and shareholders resolution will be placed before theshareholders at the ensuing Annual General Meeting.
* During the year 15950 equity shares were allotted on 9th April 2015 and20532 equity shares were allotted on 1st February 2016. The 15950 optionsfor 15950 equity shares were exercised upto 31st March 2015. The disclosurein respect of 15950 equity shares was made in the previous year annual report.
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 . com andthe 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 2015-16.
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 2015-16the Board has not noticed any elements of risk which may threaten the existence of theCompany.
Internal Financial Controls
For the year ended 31st March 2016 the Board is of the opinion that theCompany has sound Internal Financial Controls commensurate with the nature and size of itsbusiness 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.
Corporate Social Responsibility
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:
|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 have been declared on 19thMarch 2015. Suitable disclosures as required by the Accounting Standards (AS18) have beenmade in 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 || |
|28th May 2016 || |
Annexure 5 to the Directors' Report
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
Particulars required under Section 134 of the Companies Act 2013 including rulesframed thereunder:-
(A) Conservation of Energy
(i) The steps taken or impact on conservation of energy:
The Company continues measures to reduce energy consumption at its plants and officesby improving energy intensive manufacturing process and installing solar power systems.
(ii) The steps taken by the Company for utilizing alternate sources of energy:
The Company has installed solar power systems at its head office.
(iii) The capital investment on energy conservation equipment: Nil
(B) Technology Absorption
(i) The efforts made towards Technology Absorption:
The Company has an on-going process of Research & Development and the Companycontinues its efforts to assimilate group technology for introducing new products andimproving product quality. The management is actively focused on imparting of high-endtechnology in India from within the country and across of the world.
(ii) The benefits derived like product improvement cost reduction product developmentor import substitution:- In view of the measures taken by the Company the consumption ofenergy is reduced by satisfactory levels.
(iii) In case of imported technology (imported during the last three years reckonedfrom beginning of the financial year): N.A.
(iv) The expenditure incurred on Research & Development
(Rs. in Lakhs)
|Particulars ||2015-16 ||2014-15 |
|Revenue Expenditure ||59.69 ||95.42 |
|Capital Expenditure ||8.08 ||7.73 |
|Total ||67.77 ||103.15 |
(C) Foreign Exchange Earnings and Outgo:
(Rs. in Lakhs)
|Particulars ||2015-16 ||2014-15 |
|Total Foreign Exchange Earned in terms of actual inflows ||239.11 ||369.65 |
|Total Foreign Exchange Outgo in terms of actual outflows ||3156.90 ||2922.20 |