DIC India Ltd.
|BSE: 500089||Sector: Industrials|
|NSE: DICIND||ISIN Code: INE303A01010|
|BSE 00:00 | 26 Apr||470.00||
|NSE 00:00 | 26 Apr||470.00||
|Mkt Cap.(Rs cr)||431|
|Mkt Cap.(Rs cr)||431.46|
DIC India Ltd. (DICIND) - Director Report
Company director report
MANAGEMENT AND ANALYSIS REPORT
Your Directors have pleasure in presenting the Annual Report for the year endedDecember 312017.
The year started in the backdrop of the demonetization declared by the Government onNovember 82016. Although the long term objective was good it affected the economy in theshort-term with lower demand pushing the industrial production lower and impacting thecapital investment cycle. India's growth slumped to a 2 year low during the quarter endedMarch 312017. As the economy was recovering from the impact of demonetization theGovernment introduced the Goods & Service Tax Act 2017(GST) from July 1 2017. Againconceptually GST is good for the economy but it had teething troubles. It caused someuncertainty within the Industry in terms of the operation of GST specially on theTransition Rules. This affected the manufacturing activity and the manufacturing sectorcontracted to a 8 year low in July 2017. However India's GDP is expected to have bottomedout and with the impact of demonetization and uncertainty in GST rollout behind us theearly signs of revival is evident in the quarter ended December 312017. This indicatesthat the GDP growth can rebound to a healthy level in 2018.
The Global GDP for 2018 is projected to grow 4% which is higher than the growth of 3.7%of 2017. The strength in global growth is broad-based across advanced and emergingeconomies.
As per the Central Statistical Organization (CSO) as well as the International MonetaryFund (IMF) India turned out to be a fast growing economy. Various initiatives taken bythe Government under the 'Make in India' and 'Digital India' schemes saw India improve itsranking in the latest edition of the World Bank's Ease of Doing Business Report by 30spots over its 2017 ranking and is now at 100 among 190 countries. The recent push by theGovernment to recapitalise the Banks is expected to facilitate the credit demand from theIndustry as growth picks up.
The impact of Demonetization followed by introduction of GST resulted in lower offtakeparticularly in the first half of 2017. In addition the quarter ended March 31 2017witnessed the prices of some critical raw materials dramatically rising due to globalshortage followed by rising crude prices during quarter ended September 302017. All thesenegatively impacted the business in the first 9 months of operation resulting in loss.However the revival of sales and limited adjustment of selling price helped the Companyto get back to profitability in the quarter ended . December 312017.
Your Company recorded a turnover of Rs.7371.38 million as against Rs. 7041.51 millionin the previous year registering an increase of 5% in terms of value and 4% in terms ofvolume. The Company operates in two segments printing inks and lamination adhesives. TheCompany registered an increase of 4% in the turnover of printing inks at Rs. 6794.47million (previous year Rs 6538.65 million) and an increase of 15% in the turnover oflamination adhesives which stood at Rs 576.91 million as against turnover of Rs. 502.86million in the previous year. The operational profit from the Ink segment was Rs 116.44million (previous year profit of Rs 414.95 million) the lamination adhesives business hadan operational loss of Rs 160.45 million (previous year operational profit of Rs 7.83million) respectively. On overall basis for the year ended December 312017 the Companyregistered a Loss before tax (before exceptional item) of Rs. 46.20 million against Profitbefore Tax of Rs.308.15 million in the previous year. After considering the exceptionalitem of Rs. 120.59 million the Company registered a Loss after Tax of Rs. 123.69 millionas against a Profit after Tax of Rs. 228.42 million in the previous year.
In view of the negative results during the year and changed market situation inadhesive division the management did an impairment testing of fixed assets in accordancewith Accounting Standard 28 and decided to take an impairment of Rs. 116.16 Million (2016- Rs. Nil) and capital work-in-progress to the extent of Rs.4.43 Million (2016 - Rs. Nil)which has been disclosed as 'Exceptional Item' in the Statement of Profit and Loss.
Due to the market situation the Company found it difficult to pass on the increase inthe costs through sale price adjustments. The necessary corrective actions have beenimplemented during the quarter ended December 312017.
Your management is confident that various other steps taken to control cost introducenew products to improve operational efficiencies will ensure that the Company regain itsprofitability in the future years.
OPPORTUNITIES THREATS RISKS AND CONCERNS
Your company actively seeks out new opportunities in the market and works on convertingthe opportunities into viable business proposition. Direct customer interaction provisionof value added services are some of the ways exploited by the Company. The primary threatthe Company faces are common to all industries in the form of higher input costsmacro-economic factors and competition. A combination of capacity addition productinnovations - improved quality and continuous enhancement of efficiency of distributionpipeline will help the Company stay ahead of competition. The Management monitors therisks 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 OFBUSINESS
There has been no fundamental change in the nature of business of the Company duringthe financial year ended December312017.
The Indian printing ink market is estimated to be around INR 50 billion which is splitbetween flexo gravure and packaging sheet fed inks and digital inks. Amongst thesepackaging inks is the main driver and has a significant share of the Indian ink market.Flexible packaging continues to grow primarily in the food & beverage and personalcare segments. The growth in the economy fuels the growth of the printing ink industry.
Though a drop in demand has been noticed in Publication and Commercial printingsegment the New Education Policy of the HRD Ministry Government of India which isexpected to be submitted shortly may benefit the Company. The weakness in the publicationand commercial printing sector has been offset by the growth in the packaging segment. 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 workforce rising affluence are expected to lead toindustry growth which your company is in a position to exploit. Volatility of crudeprices and uncertainty over availability of certain raw materials remain a key concern.
TRANSFER TO RESERVES
The Company has not transferred any sum to Reserve for the financial year endedDecember312017.
In view of the loss your Directors regret their inability to recommend any dividendfor the year.
CHANGE IN SHARE CAPITAL
The paid up share capital of the Company as on December 31 2017 was Rs. 91.79 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 2 013.
During the financial year ended December 31 2017 9 (nine) Meetings of the Board ofDirectors of the Company were held.
The details of the Board Meetings held during the F.Y. 2017 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 82017.
REMUNERATION POLICY '
ANomination and Remuneration Policy formulated and adopted on December 52014 pursuantto the provisions of Section 178 and other applicable provisions of the Companies Act2013 and Rules thereto inter alia define the Companies policy on Directors' appointmentand remuneration by the Nomination and Remuneration Committee.
The said policy may be referred to at the Company's official website at the weblink
PARTICULARS OF LOANS GUARANTEES OR 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/corp-gov-rptp.html. The Audit Committee reviews all related party transactions quarterly.
Further the members may note that the Company has not entered into the following kindsof related part; 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 may bereferred to at the Company's official website atthe weblink
ANNUAL EVALUATION OF BOARD'S PERFORMANCE
According to Regulation 25(3) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a meeting of the IndependentDirectors was held on F ebruary 72017 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 in terms ofSchedule IV of the Companies Act 2013.
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.
The Nomination & Remuneration Committee evaluates and recommends to the Board thecompensation and benefits of the executive Board member and Leadership Team of theCompany. The MD&CEO in consultation with the Corporate General Manager - HR evaluatesand decides the annual compensation of all other officers.
Capital Expenditure during the year towards tangible & intangible assets amountedto Rs. 134.27 million a major part of which was spent on Plant & Machinery.
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 312017. HUMAN RESOURCES
DIC India believes that the Competence and Commitment of our employees are the keydifferentiating factors which enable our organization to create value by offering qualityproducts & services to our customers. We strive to create harmonious work environment& strengthen our work culture to drive high level of performance orientation. As apart of the culture we are committed towards scaling up competence level of employees& offering them long term career to attract & retain talent. As on December312017 the Company had 522 employees (previous year 498) on its direct pay roll.
Information in accordance with the provisions of Section 197( 12) of the Companies Act2013 read with Rule 5( 1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended forms part of this Report marked as Annexure C. As perthe provisions of Section 136(l)ofthe 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 312017.
WEBSITE OFTHE COMPANY
The Company maintains a website www.dicindialtd.co where detailed information of theCompany 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 weblink http://www. dicindialtd. co/investers-wbp. html.
INTERNAL CONTROL SYSTEMS
The Company has an adequate system of internal control procedures which is commensuratewith the size and nature of its business. Detailed procedural manuals are in place toensure that all the assets are protected against loss and all transactions are authorizedrecorded and reported correctly. The internal control systems of the Company are monitoredand evaluated by internal auditors and their audit reports are reviewed by the AuditCommittee of the Board of Directors. The observations and comments of the Audit Committeeare 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 BYTHE REGULATORS ORCOURTS
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 1(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 weblink
Pursuant to the provisions of Sec 13 5 of the Companies Act 2013 and applicable Rulesfor the year ended December 312017 the Company had a corpus of Rs. 3.60 million in itsCSR funds to be expended towards CSR activity.
As informed your Company has focussed on child education as its core CSR activity andhas partnered with two NGOs' as given below:
(i) Child Relief and You (CRY) to fund its Vikramshila Project in Monteswar block ofBurdwan district in West Bengal
(ii) SMILE Foundation to fund its Sanskar Kendra School based at Noida run by local NGOpartner Noida Lok Manch
These are expected to benefit students in those areas who due to various reasons likelack of infrastructure have no access to proper education. Details of the proj ectundertaken under CSR forms a part of the Report as Annexure B.
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 Statutory Auditors M/sLovelock & Lewes confirming compliance of conditions of Corporate Governance asstipulated under Schedule V(E) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 of the Stock Exchanges isannexed.
HEALTH SAFETY AND ENVIRONMENT
Your Directors attach high importance to Health Safety and Environment (HSE) which ismonitored through the Company's HSE function. The operations of the Company are alsoreviewed on a global scale by the ultimate holding company DIC Corporation Japan throughits Regional office in Singapore on periodic basis. All manufacturing sites ofDIC IndiaLimited are certified with ISO 9001 ISO 14001 and OHSAS18001.
Year 2017 was good in terms of HSE performance. In the Year 2017 total number ofrecordable cases have reduced from 5 in 2016 to 3 in 2017. With this performance theTotal Recordable Incident Rate (TRIR) has come down to all time low to 1.33. Variousrenewed initiatives like Behavioural Safety Contractual workers Safety Safety Talk DOJO Stations were introduced which has contributed towards this achievement.
The Company has fared well on the Environmental front also. In the year 2017 we havereduced our normalized water consumption by 7% and waste generation by 9%.
Information Technology (IT) plays a vital role facilitating informed decision-makingto grow the business. Over the years the Company has invested extensively in ITinfrastructure people and processes with the objective to capture protect and transmitinformation with speed and accuracy. To align with the DIC Group requirement the Companyhas installed SAP ERP suite for a reliable comprehensive and integrated businesssolution. The integrated IT & SAP ERP Suite enables the Management team to make timelyand informed business decisions based on MIS which is directly derived from real timetransactional data.
After being at the helm of affairs of the Company for 26 years Dr Prabir Kumar DuttNon-executive Chairman who had been on the Board of the Company since May 1984 steppeddown with effect from April 302017.
Mr Kazunari Sakai the erstwhile Regional Managing Director and Mr Naoyoshi Furuta theerstwhile Jt. Managing Director of the holding Company DIC Asia Pacific Pte Ltd had beenin the Board of the Company since February 5 2015. Subsequent to their taking up newassignment within the DIC Group Mr Sakai and Mr Furuta have tendered their resignationwith effect from February 6 2018 and December31 2017 respectively from the Board ofDirectors.
The Board recorded its appreciation for the dedication foresightedness leadership andcontribution made by Dr Prabir Kumar Dutt Mr. Kazunari Sakai and Mr. Naoyoshi Furuta tothe Company.
Pursuant to the resignation of Mr Kazunari Sakai and Mr Naoyoshi Furuta Mr. MasahiroKikuchi has been nominated to the Board ofDIC India Limited with effect from February62018 as Additional Director. He does not hold any other directorship. Mr. MasahiroKikuchi's appointment is valid till the date of forthcoming Annual General Meeting.
Mr. Ho Yeu Guan Regional Internal Audit Director ofDIC Asia Pacific Pte Ltd has alsobeen inducted in the Board of the Company with effect from February 62018 as anAdditional Director. He does not hold any other directorship. Mr. Ho Yeu Guan'sappointment is valid till the date of forthcoming Annual General Meeting.
In the Annual General Meeting held on March 232015 the members had approved theappointment of Mr Dipak Kumar Banerjee Mr Subir Bose and Dr Reena Sen IndependentDirectors for a term of 3 years. As per the provision of Sec 149(6) of the Companies Act2013 an independent Director may be appointed for two consecutive terms not exceeding 5years each. Accordingly the Board in its meeting held on February 6 2018 had approvedand recommended the re-appointment of Mr Dipak Kumar Baneijee Mr Subir Bose and Dr ReenaSen for a further tenure of 3 years with effect from March 222018.
In terms of Articles of Association of the Company Mr. Paul Koek retire from the Boardby rotation and being eligible offer himself for re-appointment.
Appropriate resolution seeking the appointments of Mr. Paul Koek Mr Dipak KumarBanerjee Mr Subir Bose Dr Reena Sen Mr Masahiro Kikuchi and Mr Ho Yeu Guan form part ofthe Notice of Annual General Meeting and the Resolutions are recommended for yourapproval. Their profiles are given in the Notice of the Annual General Meeting.
The following persons have been designated as Key Managerial Personnel of the Companypursuant to Section 2(51) and Section203 ofthe CompaniesAct 2013 read with the Rulesframed thereunder.
1. Mr. Shailendra Hari Singh - Managing Director and Chief Executive Officer
2. Mr. SandipChatterjee-Chief Financial Officer
3. Mr. Banibrata DeSarkar- Company Secretary
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) ofthe 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 andofthe 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 CostAuditors for auditing the Company's cost accounts for the year ended December 312017.
The Companies Act 2013 provides that for those of the companies that have firms audittheir accounts for more than ten years as of April 1 2014 such companies were allowed atransition period of three years to comply with the provisions of the Act. The currentstatutory auditors M/s Lovelock & Lewes had completed two consecutive terms as ofApril 1 2014. Accordingly the Company had appointed M/s. Lovelock & Lewes CharteredAccountants in its Annual General Meeting held on March 242017 and whose tenure came toan end on December 312017. As such M/s. Lovelock & Lewes who are the auditors ofthe Company will hold office until the conclusion of the ensuing AGM.
As per the provisions of the Act the Company has to appoint a new audit firm to auditits books of account for the financial year ending December 31 2018 and onwards. TheAudit Committee of the Board considered and recommended appointment of M/s. DeloitteHaskins & Sells Lip Chartered Accountants as the Statutory Auditors of the Companyfor a period of five years commencing from the conclusion of the ensuing 70th AnnualGeneral Meeting scheduled to be held on March 222018. The Board at its meeting held onFebruary 62018 accepted the decision of the Audit Committee and recommends for yourapproval the appointment of M/s. Deloitte Haskins & Sells Lip as the new StatutoryAuditor of the Company.
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 appointed M/s T Chatterjee & Associates Practising CompanySecretary (Firm Registration No. S2007WB097600) as the Secretarial Auditor for thefinancial year ending December 31 2017. The Secretarial Auditors' Report for thefinancial year ending December 31 2017 is annexed to the Boards' Report.
TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND
During the financial year ended December 31 2017 unpaid or unclaimed dividend for thefinancial year ended December 31 2009 amounting to Rs 0.23 million was transferred to theInvestor Education & Protection Fund established by the Central Government incompliance with Section 125 of the Companies Act 2013.
RESEARCH & DEVELOPMENT
The Company has obtained approval for In-house R&D facilities u/s 3 5 (2 AB) ofIncome Tax Act 1961 for its units at Kolkata Bengaluru and Noida from Government ofIndia Ministry of Science and Technology New Delhi. This approval is valid till March312018. The Company will make suitable applications for renewal of approval for the abovefacilities in due course.
RISKS & MITIGATING STEPS
The Board has adopted a risk management policy where various risks faced by the Companyhave been identified and framework for risk mitigation has been laid down. Even though notmandated the Company has constituted a Risk Management Committee to monitor review andcontrol risks.The risks and its mitigating factors are discussed in the Board.
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.