Deepak Fertilizers & Petrochemicals Corp Ltd.
|BSE: 500645||Sector: Agri and agri inputs|
|NSE: DEEPAKFERT||ISIN Code: INE501A01019|
|BSE LIVE 15:40 | 21 Feb||256.25||
|NSE LIVE 15:57 | 21 Feb||256.25||
|Mkt Cap.(Rs cr)||2260.12|
|Mkt Cap.(Rs cr)||2260.12|
Deepak Fertilizers & Petrochemicals Corp Ltd. (DEEPAKFERT) - Director Report
Company director report
To the Members
Your Directors have pleasure in presenting the Thirty Sixth Annual Report together withAudited Accounts of the Company for the Financial Year ended 31st March 2016.
The summarised financial results for the year are as under:
(Rs. in Lacs)
STATE OF AFFAIRS OF THE COMPANY
Your Company has achieved the top line of Rs. 4258.72 Crore (including Rs. 1938.44Crore from trading operations) during the year under review which is higher by 15% overprevious year's level of Rs. 3711.77 Crore (including Rs. 1672.63 Crore from tradingoperations). Despite continuance of the unfair discriminatory gas cut Profit Before Tax(PBT) for the year under review was Rs. 169.40 Crores as against Rs. 108.22 Crore in theprevious year. Net Profit for the current year was recorded at Rs. 121.13 Crore as againstRs. 78.35 Crore in the previous year. A detailed analysis of the performance is availablein the Management Discussion and Analysis (MDA) which forms part of this Report andinter-alia deals adequately with the operations and also current and future outlook ofthe Company.
SCHEME OF AMALGAMATION WITH THE WHOLLY OWNED SUBSIDIARY
With a view to maintain a simple corporate structure and to enable effective managementand unified control of operations the Board of Directors of the Company approved the"Scheme of Amalgamation" providing for amalgamation of SCM Soilfert Limited aWholly Owned Subsidiary of the Company with the Company at its meeting held on 5thNovember 2015. The Appointed Date for the said Scheme is 1st April 2015. TheScheme is subject to sanction of Hon'ble High Court of Judicature at Bombay and otherrequisite approvals and will be given effect upon receipt of said sanction / approvals.The Company has filed the application before the Hon'ble High Court of Judicature atBombay upon receipt of necessary clearance from the Stock Exchanges and the Securities andExchange Board of India (SEBI). The detailed Scheme is available on the website of theCompany www.dfpcl.com.
SCHEME OF ARRANGEMENT WITH SCM FERTICHEM LIMITED AND SMARTCHEM TECHNOLOGIESLIMITED (BOTH WHOLLY OWNED SUBSIDIARIES OF THE COMPANY)
In order to enable better realisation of potential of the businesses of the Company andits Wholly Owned Subsidiary Companies viz. SCM Fertichem Limited (SCM Fertichem) andSmartchem Technologies Limited (Smartchem) and yield beneficial results and enhanced valuecreation for the Companies their respective shareholders lenders and employees on 29thMarch 2016 the Board of Directors of the Company approved the Scheme of Arrangementamongst the Company SCM Fertichem and Smartchem and their respective shareholders andcreditors involving:
The slump exchange of (a) the Technical Ammonium Nitrate ("TAN")undertaking of the Company together with its business and operations including itsmanufacturing and related facilities located at (i) Taloja & Pune Maharashtra (ii)Jawaharlal Nehru Port Maharashtra and (iii) Paradeep and its marketing & corporateoffice(s) ("TAN Undertaking") and (b) the Fertiliser undertaking of theCompany together with its business and operations including its manufacturing and relatedfacilities located at (i) Taloja and Pune Maharashtra (ii) Jawaharlal Nehru PortMaharashtra and (iii) Panipat Haryana and its marketing & corporate office(s) ("FertiliserUndertaking") (and collectively (a) and (b) are hereinafter referred to as the"Transferred Undertakings") of the Company to SCM Fertichem on a goingconcern basis ("Slump Exchange"); and
Thereafter the subsequent demerger of the Transferred Undertakings and vestingof the same from SCM Fertichem in Smartchem on a going concern basis in accordance withSection 2(19AA) of the Income Tax Act 1961 ("Demerger"); with effectfrom the Appointed Date 1st January 2015 in terms of the draft Scheme ofArrangement ("Scheme of Arrangement") under Sections 391 to 394 of theCompanies Act 1956 and other applicable provisions if any of the Companies Act 1956and Companies Act 2013. The Scheme is subject to sanction of Hon'ble High Court ofJudicature at Bombay and other requisite approvals and will be given effect upon receiptof said sanction / approvals. The Company has filed the draft Scheme of Arrangement withthe Stock Exchanges in terms of applicable Regulations for securing necessary approvalbefore approaching the High Court. The detailed Scheme is available on the website of theCompany www.dfpcl.com
Considering the performance of the Company the Board of Directors of the Company atits meeting held on 11th March 2016 had declared an Interim Dividend @ 50%i.e. Rs. 5 per Equity Share of Rs. 10 each of the Company for the year ended 31stMarch 2016. The said dividend which is already paid to the shareholders is recommendedas final dividend for the financial year 2015-16.
CHANGES IN BOARD OF DIRECTORS
During the year under review Shri. Partha Bhattacharyya resigned as an ExecutiveDirector with effect from 22nd January 2016 due to health reasons. Consideringthe wealth of knowledge and experience Shri. Partha Bhattacharyya was requested and heconsented to continue on the Board of the Company as a Non- Executive Non IndependentDirector with effect from 22nd January 2016.
Smt. Parul S. Mehta Non-Executive Director of the Company who has been spear-headingyour Company's CSR initiatives retires by rotation at the ensuing Annual General Meetingpursuant to the provisions of Section 152 of Companies Act 2013 and being eligibleoffers herself for re-appointment.
Six Board Meetings were held during the year. These meetings were held on 21stMay 2015 5th August 2015 5th November 2015 21stJanuary 2016 11th March 2016 and 29th March 2016.
Independent Directors have given declaration that they meet the criteria ofindependence as provided in subsection (6) of Section 149 of the Companies Act 2013.
CHANGES IN KEY MANAGERIAL PERSONNEL (KMP)
Shri Somnath Patil resigned as 'Chief Financial Officer' of the Company with effectfrom 22nd January 2016 and Shri Vipin Agarwal has been appointed as 'ChiefFinancial Officer' with effect from 22nd January 2016.
Shri Tushar Dey Executive Vice President & Company Secretary a Key ManagerialPersonnel (KMP) resigned from the services of the Company with effect from 16thSeptember 2015. Shri Mandar Velankar Assistant Company Secretary was appointed as'Company Secretary' and KMP in terms of provisions of the Companies Act 2013 without anychange in designation with effect from 14th March 2016.
SIGNIFICANT MATERIAL ORDERS PASSED BY THE REGULATORS / STATUTORY AUTHORITIES
I. Pursuant to the Order by Ministry of Petroleum & Natural Gas (MOPNG) the supplyof domestic gas to the Company's Plant situated at Plot No. K-1 Taloja MIDC Dist.Raigad Maharashtra had been stopped by Gas Authority of India Ltd. (GAIL) and RelianceIndustries Ltd. (RIL) on 15th May 2014. The Company challenged this decisionby filing the Writ Petition before the Hon'ble High Court of Delhi.
The Single Judge of Hon'ble High Court of Delhi vide his Order dated 7thJuly 2015 directed the Government of India to resume the supply of gas to the Company.However the supply of natural gas was not restored and therefore an appeal was filedbefore the Division Bench of the High Court of Delhi.
The Division Bench of Hon'ble High Court of Delhi vide its Order dated 19thOctober 2015 re-affirmed the direction of the Learned Single Judge in his Order dated 7thJuly 2015 to resume supply of natural gas to the Company. The Government of India filed areview petition before the Hon'ble High Court of Delhi seeking review of the Order dated19th October 2015. The Division Bench of the Hon'ble High Court of Delhi videits Order dated 2nd February 2016 rejected the said review petition of theGovernment.
Accordingly the Company was offered to resume gas supply from GAIL at revisedcommercial terms which were not in conformity with the Order of the High Court and hencethe Company has filed the petition seeking justice.
II. The Department of Fertilisers (DoF) Ministry of Chemicals and Fertilisers haswithheld a subsidy of '795 Crore (net of '35.16 Crore released against the Bank Guarantee)due to the Company in accordance with applicable Nutrient Based Subsidy Scheme of theGovernment of India (GOI). The Company has filed a writ petition before the Hon'ble BombayHigh Court challenging the withholding as being arbitrary and discriminatory. According tothe submission of DoF before the Hon'ble Bombay High Court formal framework of allegedundue gain is yet to be notified. The petition is pending before the Bombay High Court.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of sub-section (5) of Section 134 of the Companies Act2013 your Directors confirm that:
i) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
ii) the accounting policies had been selected and applied consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the Financial Year on 31stMarch 2016 and of the profit and loss of the Company for that period;
iii) proper and sufficient care had been taken 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;
iv) the annual accounts had been prepared on a going concern basis;
v) internal financial controls to be followed by the Company are duly laid down andthese controls are adequate and were operating effectively; and
vi) systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
STATUTORY AUDITORS AND THEIR REPORT
The Shareholders of the Company in their Thirty Fourth Annual General Meeting held on31st July 2014 had accorded their approval pursuant to the provisions ofSections 139 141 and other applicable provisions of Companies Act 2013 and Rules madethereunder to appoint M/s. B. K. Khare & Co. Chartered Accountants as the Auditorsof the Company for the period of three years commencing from the conclusion of ThirtyFourth Annual General Meeting until the conclusion of Thirty Seventh Annual GeneralMeeting.
The Board of Directors of the Company has pursuant to the provisions of Section 139recommended ratification of appointment of M/s. B. K. Khare & Co. CharteredAccountants for the approval of the Shareholders from the conclusion of Thirty SixthAnnual General Meeting till the conclusion of Thirty Seventh Annual General Meeting.
The Auditors' Report to the Shareholders for the year under review does not contain anyqualification reservation or adverse remark or disclaimer.
The Secretarial Auditors M/s. SVD & Associates Company Secretaries have issuedSecretarial Audit Report for the Financial Year 2015-16 pursuant to Section 204 of theCompanies Act 2013 which is annexed to Directors' Report. (Refer Annexure-1)
The Secretarial Audit Report for the year under review does not contain anyqualification reservation or adverse remark or disclaimer.
Your Directors have appointed M/s. Y. R. Doshi & Company Cost Accountants as theCost Auditors for the Financial Year 2016-17. M/s. Y. R. Doshi & Company CostAccountants will submit the cost audit report alongwith annexure to the Central Government(Ministry of Corporate Affairs) in the prescribed form within specified time and at thesame time forward a copy of such report to your Company.
The Cost Audit Report for the Financial Year ended 31st March 2015 was dulyfiled with the Central Government (Ministry of Corporate Affairs) on 30thSeptember 2015.
Pursuant to the provisions of Section 148 of Companies Act 2013 Board of Directors ofthe Company has appointed M/s. Y. R. Doshi & Company Cost Accountants for conductingCost Audit of the Company for the Financial Year ending 31st March 2017.
PARTICULARS OF LOANS INVESTMENTS AND GUARANTEES
Details of investments made and loans advanced by the Company have been given in notesto the Financial Statement.
The Company has not given any guarantee pursuant to the provisions of Section 186 ofCompanies Act 2013.
RELATED PARTY TRANSACTIONS
The Company has entered into contract / arrangements with the related parties in theordinary course of business and on arm's length basis and hence none of the transactionswith related parties fall under the scope of Section 188(1) of the Act.
Pursuant to provisions of SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 a separate section titled 'Corporate Governance' is attached to thisAnnual Report.
SUBSIDIARIES ASSOCIATES AND JOINT VENTURE COMPANIES
During the year under review Platinum Blasting Services Pty Ltd. (PBS) subsidiary ofSmartchem Technologies Limited has acquired ownership interest in Australian MiningExplosives Pty. Ltd. (AME) for a consideration of AUS $ 3.7 Million. Due to the aforesaidacquisition by PBS AME has become subsidiary of the Company pursuant to the provisions ofthe Companies Act 2013.
Report on the performance and financial position of subsidiaries associates and jointventure companies in specified format is annexed to this Report. (Refer Annexure-2).
NOMINATION AND REMUNERATION COMMITTEE
The Board of Directors of the Company has constituted Nomination and RemunerationCommittee (NRC) and also has approved the Nomination and Remuneration Policy which interalia contains appointment criteria qualifications positive attributes and independenceof Directors removal retirement and remuneration of Directors Key Managerial Personnel(KMP) and Senior Management Personnel of the Company.
Nomination and Remuneration Policy is annexed to this Report. (Refer Annexure-3) and isalso available on the website of the Company www.dfpcl.com
RISK MANAGEMENT COMMITTEE
Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may impact the working of the Company is given in the Corporate Governance Report.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Shri Pranay Vakil Smt. Parul S. Mehta and Shri S. R. Wadhwa constitute the CorporateSocial Responsibility (CSR) Committee. Please refer the Corporate Governance Report forfurther details.
The details of the initiatives taken by the Company on CSR during the year as per theCompanies (Corporate Social Responsibility Policy) Rules 2014 is annexed to this Report.(Refer Annexure-4)
The extract of Annual Return is annexed to this Report. (Refer Annexure-5).
PERFORMANCE EVALUATION OF CHAIRMAN DIRECTORS BOARD AND COMMITTEES
Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees and individual directors is given in theCorporate Governance Report.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Your Company's internal financial control systems are commensurate with the naturesize and complexity of the businesses and operations. These are routinely tested andcertified by Statutory as well as Internal Auditors. Significant audit observations andthe follow up actions are reported to the Audit Committee.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Pursuant to the provisions of Section 136(1) of the Act and as advised the statementcontaining particulars of employees as required under Section 197(12) of the Act read withRule 5(1) and 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 will be available for inspection at the Registered Office of the Companyduring working hours. Members interested in obtaining a copy of the same may write to theCompany Secretary and the same will be furnished on request. Hence the Annual Report andthe Accounts are being sent to all the Members of the Company excluding the aforesaidinformation.
Your Company has not accepted any deposits from public and as such no amount onaccount of principal or interest on deposits from public was outstanding as on date of thebalance sheet.
DISCLOSURE AS PER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013
Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 read with Rule 14 the internal committee constitutedunder the said act has confirmed that no complaint/case has been filed/ pending with theCompany during the year.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
As required by the Companies (Accounts) Rules 2014 the relevant data pertaining toconservation of energy technology absorption and foreign exchange earnings and outgo areannexed to this Report. (Refer Annexure-6).
Your Directors wish to place on record their sincere appreciation to the Company'sbankers customers vendors investors and all other stakeholders for their continuedsupport during the year. Your Directors are also pleased to record their appreciation forthe dedication and contribution made by employees at all levels who through theircompetence and hard work have enabled your Company achieve good performance during thesechallenging times and look forward to their support in the future as well.