Your Directors have pleasure in presenting the Annual Report for the year endedDecember 31 2016.
The global economic outlook continues to be in state of uncertainty. Major Asianeconomies are yet to pick up the growth momentum while the economy is trying to re-balancewith the changes in political front in Europe and US. The decision of the Oil economies tocut down on oil production and the consequent increase in global oil prices might have animpact in the global growth. In the global financial market the volatility continues withgrowing probability of the Federal Reserve of USA tightening monetary policy which againmay have impact on the emerging markets across the world. These risks led to adoption ofwait-and-watch attitude by the corporates and governments world over. Nevertheless theInternational Monetary Fund(IMF) has projected an upward trend in world GDP which presentsa picture of optimism for the coming years.
India's economy gained steam during the first half of the year but failed to sustainthe growth. Positive impulses to consumption owing to a near normal monsoon and public payhikes gave buoyancy to the economy. However a sharp fall in investment and a mutedperformance in the overseas economy prevented growth from meeting market expectations. Theeconomy's momentum witnessed turbulence in the second half with almost no growth inmanufacturing activities which was further hit by the government's bold demonetizationprogram. Cash shortage led to slower business cycles. However the effect is expected tobe transient and the economy should benefit in the long run by on boarding of paralleleconomy into the mainstream. Amidst all this India still managed to grow to become thesixth largest manufacturing country in the world up from previous ninth position. Themajor policy reforms eg GST Banking & Insolvency Code relaxed FDI Rules and increasein investments in infrastructure will augur well for the Indian economy going forward. TheGDP growth for the current 2016-17 which is pegged to be lower at 6.9% is expected to growback to 7.4% next fiscal.
Your Company recorded a turnover of Rs.7041.51 million as against Rs.7460.62 million inthe previous year registering a decrease of 6 % in terms of value and 2% in terms ofvolume. Adopting various strategies the Company registered a Profit before tax of Rs308.15 million against profit before tax of Rs 402.97 million in the previous year.Similarly profit after tax was lower to Rs 228.42 million as against a profit after taxof Rs.297.12 million in the previous year.
| || ||(Rs. In Million) |
| ||2016 ||2015 |
|Sales excluding excise duty ||7041.51 ||7460.62 |
|Other Income ||30.76 ||34.77 |
|Total Revenue ||7072.27 ||7495.39 |
|Profit before Taxation ||308.15 ||402.97 |
|Provision for Taxation including deferred taxation ||(79.73) ||(105.85) |
|Profit after Tax ||228.42 ||297.12 |
|Profit brought forward from the previous year ||1435.04 ||1203.81 |
|Amount available for Appropriation: ||1663.46 ||1480.23 |
|Appropriation- || || |
|Proposed Dividend ||36.72 ||36.72 |
|Tax on Dividend ||7.47 ||7.47 |
|General reserve ||0.50 ||1.00 |
|Balance Carried Forward ||1618.77 ||1435.04 |
The Company operates in two segments - printing inks and lamination adhesives. Whilethe Company registered a decrease of 5.21% in the turnover of printing inks at Rs 6538.65million (previous year Rs 6898.49 million) it registered a decrease of 10.55% in theturnover of lamination adhesives which stood at Rs 502.86 million against in the previousyear Rs 562.13 million. The profit from the printing ink segment and lamination adhesiveswere Rs 414.95 million (previous year Rs 536.86 million) and Rs 7.83 million (previousyear Rs 27.59 million) respectively. Pursuant to the judgement of the Hon'ble SupremeCourt passed on November 11 2016 on the validity of the States to levy Entry Tax anadditional provision of Rs 52 million (PY-Rs 18 million) was made which has impactedprofit.
To ensure that the Company is able to maintain its profitability your management hastaken several steps like cost effectiveness rationalization of expenditures improvingoperational efficiencies and induction of new technology. The Management is confident thatthe Company would be able to improve on its performances in the future years.
OPPORTUNITIES THREATS RISKS AND CONCERNS
Your company actively seeks out opportunities available in the market and works onconverting the opportunities into viable business. The primary threat comes from the factthat the opportunities are equally visible to your Company's competitors who are alsotrying to exploit the opportunity to their benefit. A combination of product innovationsconsistent quality delivery and continuous enhancement of capability and efficiency ofdistribution pipeline will help your Company address the threat.
The growth of the Company is linked to the overall economic growth. Primary risk to thebusiness will be on account of adverse changes to the economy. Volatility in raw materialprices changes in regulatory environment etc are sources of concern. The Managementmonitors all the risks and acts pro-actively to minimize them.
MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICHTHE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT
No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the Company.
CHANGES IN THE NATURE OF BUSINESS
There has been no change in the nature of business of the Company during the financialyear ended December 31 2016.
The global printing ink market can be categorized on the basis of process productsapplication and geography. On the basis of process broadly the segments are gravureprinting flexographic printing and digital printing. On the basis of product broadlythe classifications can be oil and water based and solvent based. On the basis ofapplication broadly the segments are packaging commercial printing & publication andmetal printing.
The packaging application segment which globally stands at $700 billion is theprimary growth driver in the printing ink industry. This is led by increased demand forflexible and other packaging materials and supported by growth in retail sales owing toincreased importance of printed materials in packaging labelling and advertisement. Asper various surveys India accounts for 18% of the world population whereas its packagingindustry forms just 4% of the global packaging industry. Various factors like increase inmiddle class population growth of young workforce rising affluence are expected tofurther drive the consumption led demand for Printing Inks and will augur well for thegrowth in the Industry and your Company. However the volatility in the Oil prices willhave some impact on the operating margins of the Industry.
TRANSFER TO RESERVES
The Company proposes to transfer a sum of Rs. 0.5 million to Reserve during thefinancial year ended December 31 2016.
Your Board recommends the rate of dividend declared to be Rs 4.00 per share (FY2015 -Rs 4.00 per share) subject to approval of shareholders at the ensuing Annual GeneralMeeting.
CHANGE IN SHARE CAPITAL
The paid up share capital of the Company as on December 31 2016 was Rs 91.98 millionand there has been no change in the capital structure of the Company.
The Company has not accepted any deposits during the year under review.
The Board evaluates all the decisions on a collective consensus basis amongst theDirectors. The intervening gap between the Meetings was within the period prescribed underthe Companies Act 2013.
During the financial year ended December 31 2016 6 (six) Meetings of the Board ofDirectors of the Company were held.
The details of the Board Meetings held during the Fy2016 have been furnished underClause I(2)(D) in the Corporate Governance Report forming a part of this Annual Report.
DECLARATION BY INDEPENDENT DIRECTORS
All the Independent Directors have given declaration to the Company stating theirindependence pursuant to Section 149(6) of the Companies Act 2013 and the same have beenplaced and noted by the Board in its meeting held on February 8 2017.
A Nomination and Remuneration Policy formulated and adopted on December 5 2014pursuant to the provisions of Section 178 and other applicable provisions of the CompaniesAct 2013 and Rules thereto inter alia define the Companies policy on Directors'appointment and remuneration by the Nomination and Remuneration Committee.
The said policy may be referred to at the Company's official website at the weblinkhttp://www.dicindialtd.co/ policies.html.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The Company has not given any loan guarantees or made any investments exceeding thelimits prescribed in Section 186 of the Companies Act 2013.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
A Related Party Policy has been adopted by the Board of Directors at its meeting heldon December 5 2014 for determining the materiality of transactions with related partiesand dealings with them. The said policy may be referred to at the Company's officialwebsite at the weblink http://www.dicindialtd.co/policies.html. The Audit Committeereviews all related party transactions quarterly.
Further the members may note that the Company has not entered into the following kindsof related party transactions:
Contracts/arrangement/transactions which are not at arm's length basis
Any Material contracts/arrangement/transactions
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 forms partof this report and is annexed herewith and marked as Annexure D.
ANNUAL EVALUATION OF BOARD'S PERFORMANCE
According to Regulation of 25(3) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a meeting of the IndependentDirectors was held on February 5 2016 to inter alia evaluate the performance of theNon-Independent Directors including the Chairman. The Board thereafter in its meetingheld on the same day evaluated the performance of the Independent Directors.
As a familiarization programme to enable the Board members to take informed decisionsthe Management presents a quarterly review of the Industry outlook company performanceoperations financial statements etc before the Board.
Capital Expenditure during the year towards tangible & intangible assets amountedto Rs. 137.75 million a major part of which was spent on plant & machinery andbuilding.
ENERGY TECHNOLOGY & FOREIGN EXCHANGE
As required under Section 134(3)(m) of the Companies Act 2013 read with the Companies(Accounts) Rules 2014 the information relating to Conservation of Energy TechnologyAbsorption and Foreign Exchange earnings & outgo is annexed and forms a part of thisReport marked as Annexure A.
SUBSIDIARY/ASSOCIATES/JOINT VENTURE COMPANIES
The Company does not have any subsidiary/associate/joint venture company for the yearended December 31 2016.
Your Company believes that the competence and commitment of the people are theprincipal driver of competitive advantage that enable the enterprise to create and delivervalue. The industrial relations climate of your Company continues to remain harmoniouswith focus on improving productivity quality and safety. Efforts are continuously made tostrengthen organizational culture in order to attract and retain the best talent in theindustry. Training needs are identified in a systematic manner and regular trainingprogrammes are organized. The Board appreciates the commitment and support of theemployees and looks forward to their continued support.
Information in accordance with the provisions of Section 197(12) of the Companies Act2013 and Rules made thereunder forms part of this Report marked as Annexure C. As per theprovisions of Section 136(1) of the Companies Act 2013 the Annual report excluding theinformation on employee's particulars is being sent to the members which is howeveravailable for inspection at the Registered office of the Company during working hours andany member interested in obtaining such information may write to the Company Secretary andthe same will be furnished without any fee.
DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION&REDRESSAL)ACT 2013
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 and Rules made thereunder your Company has inplace a Policy for Prevention of Sexual Harassment of Women at Work Place and constitutedan Internal Complaints Committees (ICC). No complaint has been raised during the yearended December 31 2016.
WEBSITE OF THE COMPANY
The Company maintains a website www.dicindialtd.co where detailed information ofthe Company and its products are provided.
WHISTLE BLOWER MECHANISM
The Company has an updated Whistle Blower Policy in place. The said policy may bereferred to at the Company's official website at the weblinkhttp://www.dicindialtd.co/policies.html .
INTERNAL CONTROL SYSTEMS
Your Company has an adequate system of internal control procedures which iscommensurate with the size and nature of business. Detailed procedural manuals are inplace to ensure that all the assets are safeguarded protected against loss and alltransactions are authorized recorded and reported correctly. The internal control systemsof the Company are monitored and evaluated by internal auditors and their audit reportsare periodically reviewed by the Audit Committee of the Board of Directors. Theobservations and comments of the Audit Committee are placed before the Board.
LISTING WITH STOCK EXCHANGES
Your Company is listed with The Calcutta Stock Exchange Limited BSE Limited andNational Stock Exchange of India Limited and the Company has paid the listing fees to eachof the Exchanges.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There were no significant material orders passed by the Regulators / Courts / Tribunalswhich would impact the going concern status of the Company and its future operations.
The composition and terms of reference of the Audit Committee has been furnished underClause I(3) in the Corporate Governance Report forming a part of this Annual Report. Therehad been no instances where the Board has not accepted the recommendations of the AuditCommittee.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Acknowledging its responsibility towards the society your Company has put in place aCSR Policy which may be referred to at the Company's official website at the weblinkhttp://www.dicindialtd.co/corporate-social-responsibility.html .The CSR Committeeguides and monitors the activity undertaken by the Company in this sphere.
Pursuant to the provisions of Sec 135 of the Companies Act 2013 and applicable Rulesfor the year ended December 31 2016 the Company was required to spent Rs 2.85 million inits CSR funds. Details of the project undertaken under CSR and expenses incurred duringthe year forms a part of the Report as Annexure B.
As informed your Company has focussed on child education as its core CSR activity andhas partnered with Child Relief and You (CRY) to fund its Vikramshila Project in Monteswarblock of Burdwan district in West Bengal which is expected to benefit students in thatarea who due to various reasons like lack of infrastructure have no access to propereducation.
Your Company attaches considerable significance to good Corporate Governance as animportant step towards building investor confidence improving investors' protection andmaximizing long-term shareholders value. The certificate of the Auditors M/s Lovelock& Lewes confirming compliance of conditions of Corporate Governance as stipulatedunder Schedule V(E) of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 of the Stock Exchanges is annexed.
Environment Safety and Health (ESH) is the topmost priority of our organization. YourDirectors through the Company's Safety Health and Environment Department oversee andreview the audit plans which ensure comprehensive coverage of all Company locations. Inaddition the operations of the Company are also reviewed on a global scale by DICCorporation Japan on a periodical basis. We believe in our Policy statement which alsohighlights that "No job is so important that Safety and Health of everyone concernedcan be compromised. All our manufacturing plants are certified for ISO 9001 14001 andOHSAS 18001.
Year 2016 was phenomenal for Safety performance when the number of recordable caseshave reduced from 15 in 2015 to 5 in 2016. With this performance our Total RecordableIncident Rate (TRIR) has come down all time record low to 2.44. The major factorcontributed towards this achievement was Safety talk initiative which highlightsproactively all unsafe conditions and acts before leading to any incident / accident.
A lot of work has been done on the Environment front as well. Total waste/Ton ofproduction has been reduced from 31.4 Kg/Ton to 24.2 Kg/Ton of production. To reduceCarbon footprints steps have been initiated by converting the fuels used in Themopacksfrom Diesel to Gas at Ahmedabad and Bangalore plant.
In a business where information is critical Information Technology plays a vital rolefacilitating informed decision-making to grow the business. Over the years the Companyhas invested extensively in infrastructure people and processes with the objective tocapture protect and transmit information with speed and accuracy.
To align with the DIC Group requirement the Company has installed SAP ERP suite for areliable high end comprehensive disciplined and integrated business solution.
In the Annual General Meeting held on June 27 2014 the members had approved theappointment of Mr Utpal Sengupta Independent Director for a term of 3 years. As per theprovision of Sec 149(6) of the Companies Act 2013 an independent Director may beappointed for two consecutive terms of 5 years each. Accordingly the Board in its meetingheld on February 8 2017 had approved and recommended the re-appointment of Mr UtpalSengupta for a further tenure of 3 years with effect from June 27 2017.
To broadbase the Board of Directors of the Company Mr. Partha Mitra was inducted intothe Board with effect from February 8 2017 as an Additional Director whose term shall betill the date of forthcoming Annual General Meeting. Mr Partha Mitra an IndependentDirector is not related to any Director in the Company and does not hold any shares inthe Company. The Company has received a notice from shareholders pursuant to Section 160of the Companies Act 2013 proposing the re-appointment of Mr Sengupta and Mr Mitraalongwith the requisite fees. Appropriate resolution seeking their appointment areappearing in the Notice convening the Annual General Meeting of the Company.
In terms of Articles of Association of the Company Mr. Naoyoshi Furuta retire from theBoard by rotation and being eligible offer himself for re-appointment. The appointmentsof Mr. Furuta Mr. Sengupta and Mr. Mitra form part of the Notice of Annual GeneralMeeting and the Resolutions are recommended for your approval.
The profiles of Mr Sengupta MrMitra and Mr. Furuta are given in the Notice of theAnnual General Meeting.
The following persons have been designated as Key Managerial Personnel of the Companypursuant to Section 2(51) and Section 203 of the Companies Act 2013 read with the Rulesframed thereunder.
1. Mr. Shailendra Hari Singh - Managing Director and Chief Executive Officer
2. Mr. Sandip Chatterjee - Chief Financial Officer
3. Mr. Banibrata DeSarkar- Company Secretary
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Act the Directors state that:
i. In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures if any;
ii. 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;
iii. 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;
iv. The Directors had prepared the annual accounts on a going concern basis; and
v. The Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
vi. The Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
In accordance with the provisions of Section 148 of the Companies Act 2013 and theCompanies (Audit & Auditors) Rules 2014 the Company is required to appoint a costauditor to audit the cost records of the applicable products of the Company relating tothe business of manufacturing printing inks. Accordingly M/s. Sinha Chaudhuri &Associates Cost Accountants (Firm regn No. 000057) were appointed as the Cost Auditorsfor auditing the Company's cost accounts for the year ended December 31 2016.
The Ministry of Corporate Affairs vide its Companies (Removal of Difficulties) ThirdOrder 2016 dated 30th June 2016 had directed that companies should comply withrequirements of the provisions of Section 139(2) of the Companies Act 2013 coveringappointment of auditors within a period which shall not be later than the date of thefirst annual general meeting of the company held after three years from the date ofcommencement of this Act.
Accordingly M/s. Lovelock & Lewes Chartered Accountants (FRN 301056E) retiringAuditors being eligible offer themselves for re-appointment.
The notes on financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report is anUn-modified report and does not contain any qualification reservation adverse remark ordisclaimer.
The provisions of Section 204 read with Section 134(3) of the Companies Act 2013mandates Secretarial Audit of the Company to be done from the financial year commencing onor after April 1 2014 by a Company Secretary in Practice. The Board in its meeting heldon February 8 2017 ratified the appointment of Mr. Tarun Chatterjee Practising CompanySecretary (Certificate of Practice No. 6935) as the Secretarial Auditor for the financialyear ending December 31 2016. The Secretarial Auditors' Report for the financial yearending December 31 2016 is annexed to the Boards' Report.
TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND
The Company has transferred a total sum of Rs.0.19 million during the financial year2016 to the Investor Education & Protection Fund established by the CentralGovernment in compliance with Section 125 of the Companies Act 2013.
RESEARCH & DEVELOPMENT
The Company has obtained approval for In-house R&D facilities u/s 35(2AB) of IncomeTax Act 1961 for its units at Kolkata Bengaluru and Noida from Government of IndiaMinistry of Science and Technology New Delhi. This approval is valid till March 31 2018.The Company will make suitable applications for renewal of approval for the abovefacilities in due course.
RISKS & MITIGATING STEPS
As a matter of prudent management the Board has adopted a risk management policy whereit has identified various risks faced by the Company alongwith proper framework for riskmitigation. A combination of policies and procedures attempts to counter risk as and whenthey evolve. Even though not mandatorily required the Company has formed a RiskManagement Committee which monitors various functions and reviews structures present sothat risks are inherently monitored and controlled. The risks and its mitigating factorsare discussed by the Committee and subsequently placed before the Board for their opinionand advice. The current risk management report was discussed by the Board in its meetingheld on December 14 2016.
Your Directors take this opportunity to thank the employees customers shareholderssuppliers bankers business partners/associates financial institutions Securities andExchange Board of India and Central and State Governments for their consistent support andencouragement to the Company.
| ||On behalf of the Board |
| ||Sd/- |
| ||Dr. Prabir Kumar Dutt |
| ||Chairman |
| ||Sd/- |
|Place: Kolkata ||Shailendra Hari Singh |
|Date: February 8 2017 ||Managing Director & CEO |