REPORT OF THE BOARD OF DIRECTORS
TO THE MEMBERS
Your Directors have pleasure in presenting the Fifty-Third Annual Report and theAudited Financial Statements of the Company for the year ended 31st March 2017.
|1. FINANCIAL RESULTS || || |
|The salient features of the Company's working are: || || |
| || ||( Rs. in Lacs) |
| ||2016-17 ||2015-16 |
|Gross Profit for the year was ||10015.91 ||9224.94 |
|Less: Depreciation and amortization expense ||1710.12 ||1751.77 |
|Net profit ||8305.79 ||7473.17 |
|Add: Exceptional Items ||1201.81 ||691.36 |
|Leaving a net profit subject to taxation of ||9507.60 ||8164.53 |
|Less: Taxation (Current and Deferred Tax) ||2436.03 ||2206.13 |
| ||7071.57 ||5958.40 |
|Add: Balance brought forward from the previous year ||6083.48 ||2780.84 |
|Leaving a balance available for disposal of ||13155.05 ||8739.24 |
|Appropriations: || || |
|Interim Dividend paid during the year ||1265.65 || |
|Proposed Dividend || ||1375.70 |
|Tax on Dividend ||252.37 ||280.06 |
|Transfer to General Reserve ||8500.00 ||1000.00 |
| ||10018.02 ||2655.76 |
|Carried forward to next year ||3137.03 ||6083.48 |
During the year under review the Company distributed an interim dividend of 230%amounting to Rs. 11.50 per equity share of Rs. 5.00 each to shareholders pursuant todeclaration of the interim dividend by the Board on 7th July 2016.
Your Directors have recommended that the interim dividend of Rs. 11.50 per equity sharedeclared on 7th July 2016 be considered as the final dividend for the year ended 31stMarch 2017.
3. CHANGE IN CONTROLLING STAKE AND PROMOTERS
In June 2016 a Share Purchase Agreement was entered into between the Shroff Familythe then Promoters Sumitomo Chemical Company Limited Japan Sumitomo Chemical IndiaPrivate Limited its Indian subsidiary certain Financial Shareholders and the Companywhereby Sumitomo Chemical Company Limited Japan agreed to purchase from the ShroffFamily its entire shareholding representing 24.72% of the paid-up equity capital of theCompany and from the Financial Shareholders 20.26% of the paid-up equity capital of theCompany.
In July 2016 Sumitomo Chemical India Private Limited made an Open Offer to the publicshareholders of the Company pursuant to the provisions of SEBI (Substantial Acquisitionand Takeovers) Regulations 2011. It acquired 19.98% shares of the Company offered to itunder the Offer at the price of Rs. 1259.36 per share the same price as agreed tobe paid to the Shroff Family and the Financial Shareholders under the Share PurchaseAgreement.
On 7th October 2016 Sumitomo Chemical Company Limited Japan acquired the sharesrepresenting 44.98% of the paid-up equity capital of the Company from the Shroff Familyand the Financial Shareholders pursuant to the Share Purchase Agreement. As a consequenceof acquisition of 64.97% shares by Sumitomo Chemical Company Limited Japan and itsIndian subsidiary and pursuant to the Ordinary Resolution passed by the members at the52nd Annual General Meeting held on 28th July 2016 the Shroff Family ceased to be thePromoters and Promoter Group' of the Company with effect from 7th October 2016.Sumitomo Chemical Company Limited Japan was named the Promoter' of the Company andSumitomo Chemical India Private Limited was named as a member of the PromoterGroup'. With the change in the shareholding pattern as above the Company has become asubsidiary of Sumitomo Chemical Company Limited Japan with effect from 7th October2016.
The Directors believe that the combining of the Company's strong manufacturingcapabilities robust off-patent product portfolio and extensive distribution network inIndia and abroad with the world class research capabilities of Sumitomo Chemical CompanyLimited Japan would be in the overall interest of the Company and would contribute tofurther growth of the Company's business. The Board places on record its deep appreciationof the Shroff Family for nurturing the Company and for their immensely valuablecontribution in the growth of the Company's business.
During the year under review the net sales increased from Rs. 862.77 crores in theprevious year to Rs. 943.55 crores. Domestic sales turnover increased to Rs. 677.86 croresfrom Rs. 628.23 crores in the previous year. Export turnover also increased from Rs.234.54 crores in the previous year to Rs. 265.69 crores in the year under review. TheCompany's profit before tax in 2016-17 is Rs. 95.08 crores as against Rs. 81.65 crores inthe previous year.
The overall performance of monsoon in 2016 was satisfactory especially in the backdropof two preceding years of subnormal rainfall. Good monsoon helped the Company in improvingits sale in the domestic market. However several parts of south India experienced draughtlike conditions owing to poor rainfall. In the export market the Company was able toincrease its sales turnover significantly in spite of draught in some of the importantmarkets adverse forex conditions and currency volatility in some importing countries andincreased pressure of competition.
5. NEW PRODUCTS/IMPROVEMENTS/EXPANSIONS
In the year under review your Company continued to pursue initiatives to optimiseutilization of its manufacturing facilities by undertaking in-house manufacturing of newproducts. Your Company launched production of three new products in herbicide andfungicide segments. It also expanded manufacturing capacities for its three major productsduring the year under review.
Your Company continues its initiative for increasing use of renewable energy. Duringthe year under review your Company expanded by 123 KW the capacity of its 500 KW solarpower plant in Gajod Kutch which was set up in 2014-15. This would help the Companyreduce dependence on outsourced power and also help in energy cost reduction.
Your Company continues its efforts in the area of product and process improvement forenhancing yields reducing manufacturing costs reducing effluent load and effluenttreatment cost and also for staying innovative and competitive in the market. Your Companyalso continues to focus on energy conservation and energy cost reduction.
The Company continues to maintain ISO:9001-2008 Quality Management System for all itsthree manufacturing sites at Bhavnagar Gajod and Silvassa. The quality of the products ismaintained and upgraded to the applicable national and international standards throughrigorous pursuit of Six Sigma initiative. The Company continues to enjoy the reputation ofa consistent and reliable quality supplier.
The Indian Metrology Department has predicted normal monsoon in 2017 in its advanceestimates. This augurs well for the farming community the agrochemicals industryand the Company since farming in India largely depends on monsoon. An internationalmetrology agency has however expressed fear of occurrence of El Nino phenomenamid way which may weaken the monsoon.
Government initiatives under the Make in India' theme are expected to benefitindigenous technical manufacturers in the long run.
Introduction of Goods and Service Tax (GST) in 2017-18 would impact the industry in abig way as it would affect other industries. The Company is getting ready to deal withchanges in the business systems and business processes which may come with GST. GST wouldlead to logistical advantages but is feared to impact the cost structure of the industryand the Company and in the worst case may lead to business disruption in theinitial stage. Clarity on several issues connected with GST is yet to emerge and at thispoint of time it is difficult to envisage short term and long term impact of GST on theindustry and the Company. In the export segment the Company expects to continue toperform well in view of prediction of good rains in East Africa which is a key market forthe Company. However in some countries in West Africa another major market for theCompany the Company's customers continue to experience currency volatility andunavailability of foreign exchange. This could pose difficulties in growth of business inthis region.
7. COURT ORDERS IN ENDOSULFAN AND COMPETITION ACT 2002
In April 2011 a petition by way of public interest litigation was filed before theHon'ble Supreme Court seeking a ban on Endosulfan a major product for the Company at thattime citing human health concerns. On 13th May 2011 the Hon'ble Supreme Court passed anad-interim Order banning production sale and use of Endosulfan. Accordingly the Companyimmediately stopped production and sale of Endosulfan.
In the year under review by its Order dated 10th January 2017 the Hon'ble SupremeCourt has disposed off the petition by directing the State Governments to release theundisbursed amount of compensation to the affected persons. The said Order also statesthat it shall be open to the State Governments to recover the aforesaid compensationeither from the concerned industry or from the Government of India in case it is open tothe State Governments to make such recovery in consonance with law. The Company carriesno stocks of Endosulfan. In the opinion of the Company the Order of the Hon'ble SupremeCourt is not likely to have any impact on the Company or its financials.
Case under Competition Act 2002:
By an Order passed in 2012 the Competition Commission of India had imposed on theCompany a penalty of Rs. 63.90 crores alleging violation of Section 3 of the CompetitionAct 2002 in relation to supply of a product to one buyer.
On appeal the Competition Appellate Tribunal reduced the amount of penalty to Rs. 2.92crores. The Company and the Competition Commission of India filed appeals before theHon'ble Supreme Court against the Order of the Competition Appellate Tribunal. The Hon'bleSupreme Court by its Order dated 8th May 2017 has disposed off the matter and has upheldthe Order of the Competition Appellate Tribunal. The penalty of Rs. 2.92 crores confirmedby the Hon'ble Supreme Court has already been provided for by the Company in FY 2013-14.
8. CREDIT RATING
In March 2017 CRISIL Limited the rating agency upgraded the Long Term Rating inrelation to the Company's bank facilities aggregating Rs. 200 crores from CRISILA+/Positive' to CRISIL AA-/Stable'. The Short Term Rating in relation to the bankfacilities remains unchanged at CRISIL A1+'.
9. SAFETY HEALTH AND ENVIRONMENT
The Company continues to play the role of a responsible corporate citizen in thefulfilment of its aims of protecting and enriching the environment and human health andsafety. The Company continues to hold and maintain ISO-9000 ISO-14000 and ISO-18001certifications which offer benefits in terms of consistent product quality and healthyworking environment at manufacturing sites. The Company also continues to sustain its SA8000 Certification for Social Accountability for all its sites. Safety audittraining programmes and other safety management processes and programmes are carriedout/conducted at regular intervals. All the manufacturing and warehousing sites of theCompany are covered by safety audit.
10. EDUCATION LEARNING AND HUMAN RESOURCES
Your Company continues to invest in the development and growth of the employees throughtraining and development programmes. Your Company endeavours to ensure that it hasrequisite competency to meet the new challenges in the changing business environment. Therelations between the employees and the management continue to be cordial. Your Directorswish to place on record their appreciation of the sincere and devoted efforts of theemployees and the management staff at all levels.
Your Company continues to educate farmers on various aspects of farming includinglatest technology and new products. 11. INSURANCE
The Company continues to carry adequate insurance cover for all its assets againstforeseeable perils like fire flood earthquake etc. and continues to maintainConsequential Loss (Fire) Policy and the Liability Policy as per the provisions of thePublic Liability Insurance Act.
12. SUBSIDIARIES ASSOCIATES AND JOINT VENTURE
During the year under review the Company sold its all investments in ECCL Investmentsand Finance Limited a wholly-owned subsidiary and Aimco Pesticides Limited Kutch CropServices Limited and Excel Genetics Limited associate companies and accordingly thesecompanies ceased to be subsidiary and associates respectively. M/s Multichem Industries ajoint venture partnership firm in which the Company was a partner has been dissolved.
Highlights of the financial performance of Excel Crop Care (Africa) Limited Tanzaniaand Excel Crop Care (Europe) NV Belgium subsidiary companies during FY 2016-17 are asfollows:
|Excel Crop Care (Africa) Limited Tanzania || || |
| ||(Tanzania Schillings in millions) |
| ||2016-17 ||2015-16 |
|Sales Turnover ||13865 ||13517 |
|Profit before Tax ||108 ||680 |
|Profit after Tax ||119 ||439 |
|Excel Crop Care (Europe) NV Belgium || || |
| ||(Euros in thousands) |
| ||2016-17 ||2015-16 |
|Sales Turnover ||3031 ||1710 |
|Loss ||33 ||133 |
During the year under review Excel Crop Care (Africa) Limited declared and paid adividend for FY 2015-16 at the rate of Tanzania Schillings 50000 per share i.e. 50%. TheCompany received Rs. 25.93 Lacs by way of dividend from the subsidiary. Excel Crop Care(Australia) Pty Limited Australia and Excel Brasil Agronegocious Ltda Brazilsubsidiaries did not have commercial activities during FY 2016-17.
Excel Brazil Agronegocious Ltda the Company's subsidiary in Brazil was incorporatedin 2011 but has not carried any commercial operation. The subsidiary has also not beenfunded for share capital. In view of the changed business plans the Board has decided towind up the subsidiary. An application for winding up has been made and the winding upprocess is under way .
The Financial Statements and the Reports of the Board of Directors and the Auditors ofthe Company's subsidiaries shall be made available to the members on requisition. Theseare also available for inspection at the Registered Office and Corporate Office of theCompany and are also being posted on the Company's website: www.excelcropcare.com
13. DISCLOSURE UNDER THE COMPANIES ACT 2013
Information is given below pursuant to various disclosure requirements prescribed underthe Companies Act 2013 and rules thereunder to the extent applicable to the Company.Some of the disclosures have been included in appropriate places in the CorporateGovernance Report which is part of the Board's Report. a) Energy Conservation TechnologyAbsorption and Foreign Exchange earnings and outgo: The information on conservation ofenergy technology absorption and foreign exchange earnings and outgo stipulated underSection 134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts)Rules 2014 is given in
Annexure I. b) Extract of Annual Return:
The details forming part of the extract of the annual return in Form MGT-9 are given inAnnexure II. c) Policy on Directors' appointment Remuneration Policy andinformation regarding remuneration:
Particulars of the Company's Policy on Directors' appointment Remuneration Policy andinformation pursuant to Rule 5(1) of the Companies (Appointment & Remuneration) Rules2014 are given in Annexure III. d) Particulars of Loans Guarantees andInvestments: The details of Loans Guarantees and Investments covered under the provisionsof Section 186 of the Companies Act 2013 are given in the notes to the FinancialStatements. e) Related Party Transactions: All contracts/arrangements/transactions enteredby the Company during the financial year with related parties were on an arm's lengthbasis. During the year the Company has not entered into anycontract/arrangement/transaction with related parties which could be considered materialin accordance with the Policy of the Company on materiality of related party transactions.
The Policy on related party transactions as approved by the Board may be accessed onthe Company's website www.excelcropcare.com All related party transactions are placedbefore the Audit Committee for their approval. Prior omnibus approval of the AuditCommittee is obtained for the transactions which are of a repetitive nature. Thetransactions entered into pursuant to the omnibus and specific approvals are reviewedperiodically by the Audit Committee.
Particulars of contracts entered during the financial year 2016-17 as per Form AOC-2are given in Annexure IV. f) Business Risk Management: Over the years the Companyhas evolved and implemented its Enterprise Risk Management Policy.
As a part of its risk management process the Company has identified and compiled alist of risks which need to be addressed managed and mitigated. The mitigation measuresfor such risks are also identified and implemented. The major risk areas relate to forexfluctuation credit risks relating to exports regulatory risks business competitionrisks and insurance adequacy risks. g) Evaluation of the performance of the BoardCommittees of Directors and Individual Directors: The Board has adopted a formal mechanismfor evaluating its performance as well as that of its Committees and individual Directorsincluding the Chairman of the Board. As a part of this mechanism a structuredquestionnaire which has been approved by the Company's Nomination and RemunerationCommittee is used to carry out evaluation of performance of the Board Committees ofDirectors and individual Directors. The questionnaires take into consideration variouscriteria and factors. h) Material orders passed by the regulatory authorities orcourts/material changes or commitments: There are no material orders passed by theregulators/courts which can impact the going concern status of the Company and its futureoperations. There are no material changes or commitments occurring after 31st March 2017which may affect the financial position of the Company. i) Internal Financial Controls andtheir adequacy: The Company has adequate system of internal controls to safeguard andprotect from loss unauthorised use or disposition of its assets. All the transactions areproperly authorised recorded and reported to the Management. The Company is following allthe applicable Accounting Standards for proper maintenance of books of accounts and forfinancial reporting. j) Performance of Subsidiaries: Details of performance and financialposition of each of the Subsidiaries are given in Form AOC-1 in Annexure V. As on31st March 2017 the Company has no associate company. k) Corporate Social Responsibility(CSR) initiatives: The Company has formulated its Corporate Social Responsibility Policywhich has been posted on its website www.excelcropcare.com A brief outline of the Policyand the Annual Report on CSR Activities is given in Annexure VI. l) Particulars ofEmployees: The information required under Section 197 of the Companies Act 2013 read withRule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is given in Annexure VII. m) Secretarial Auditor and Secretarial Audit Report:Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rules madethereunder Mr. Prashant Diwan Practicing Company Secretary (FCS:1403; CP NO.1979)Mumbai was appointed Secretarial Auditor to conduct secretarial audit for the year ended31st March 2017. The Secretarial Auditor has submitted his Report which is attached as AnnexureVIII.
14. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. S . Nallakuttalam resigned as Director with effect from 28th June 2016. Mr. DeepakBhimani and Mr. Mohit Bhuteria Independent Directors resigned from the Board with effectfrom 27th September 2016.
Following the change in the controlling stake and promoters of the Company on 7thOctober 2016 changes took place in the Company's Board and Committees of Directors.
The following Directors resigned from the Company's Board with effect from 7th October2016:
Mr. Ashwin C. Shroff Non-Executive Chairman
Mr. Hrishit A. Shroff Executive Director and a Key Managerial Personnel
Mr. J.R. Naik Non-Executive Director
Mr. Sandeep Junnarkar Independent Director
Mr. Sharad L. Patel Independent Director
Mr. Vinayak B. Buch Independent Director
Dr. Meena A. Galliara Independent Director
The Board places on record its sincere appreciation of the valuable and significantcontribution by the executive and other Directors who resigned from the Board to thegrowth of the Company and its business. Dr. Mukul G . Asher Independent Director wasappointed Chairman of the Board with effect from 7th October 2016.
Mr. Dipesh K . Shroff resigned as Managing Director and a Key Managerial Personnel witheffect from 7th October 2016. He was appointed as Additional Non-Executive Director witheffect from 7th October 2016.
On 7th October 2016 the Board appointed Mr. Tadashi Katayama and Mr.Seiji Ota asAdditional Non-Executive Directors and Mrs. Preeti Mehta as Independent Director.
Mr. Dipesh K . Shroff Mr. Tadashi Katayama Mr.Seiji Ota and Mrs . Preeti MehtaAdditional Directors hold office as Directors up to the date of the ensuing AnnualGeneral Meeting of the Company. The Company has received notices in writing from a memberunder Section 160 of the Companies Act 2013 signifying intention to propose thecandidature of Mr. Dipesh K . Shroff Mr. Tadashi Katayama Mr.Seiji Ota and Mrs . PreetiMehta for the office of Directors of the Company. The Board is of the opinion that itwould be in the interest of the Company to continue to avail of the expertise andexperience of Mr. Dipesh K . Shroff Mr. Tadashi Katayama Mr.Seiji Ota and Mrs . PreetiMehta and accordingly the Board commends their appointment.
The Board has appointed Mr. Chetan Shah as Managing Director for a period of 3 yearswith effect from 7th October 2016 and Mr. Ninad D . Gupte as Joint Managing Director fora period of 2 years with effect from 26th October 2016 subject to the approval of themembers of the Company in general meeting by ordinary resolutions. The Board commendstheir appointment. Mr. Chetan Shah and Mr. Ninad D . Gupte are Key Managerial Personnelunder the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
15. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act 2013 the Directors confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and that no material departures have been made from the same;
(b) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit of the Company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
(d) they have prepared the annual accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively; and
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and are operating effectively.
16. CORPORATE GOVERNANCE
Your Company is committed to the principles of good Corporate Governance and the Boardof Directors lays strong emphasis on transparency accountability and integrity. YourCompany has complied with all the requirements of the Code of Corporate Governancecontained in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 andpursuant thereto Management Discussion and Analysis Corporate Governance Report and theAuditors' Certificate regarding compliance of the same are annexed and form part of theAnnual Report.
At the 50th Annual General Meeting of the Company Messrs SRBC & CO LLP CharteredAccountants were appointed as Statutory Auditors of the Company to hold office from theconclusion of the 50th Annual General Meeting until the conclusion of the 53rd AnnualGeneral Meeting of the Company.
Pursuant to the provisions of the Companies Act 2013 for rotation of Auditors theCompany is required to appoint Auditors other than Messrs SRBC & CO LLP the retiringAuditors.
Based on the recommendation of the Audit Committee Messrs BSR & Associates LLP areproposed to be appointed as Auditors of the Company for a term from the conclusion of the53rd Annual General Meeting until the conclusion of the 58th Annual General Meeting of theCompany subject to ratification of such appointment at every subsequent Annual GeneralMeeting of the Company. Messrs BSR & Associates LLP have given consent for theirproposed appointment as Auditors. They have also given a Certificate stating that theirproposed appointment shall be in accordance with the provisions of Sections 139(1) and 141of the Companies Act 2013. The Board places on record its appreciation of the servicesrendered by Messrs SRBC & CO LLP as Auditors of the Company.
The Board of Directors has re-appointed Mr. Kishore Ajitshi Bhatia as the Cost Auditorfor the financial year 2017-18 to carry out audit of the Company's cost records asprescribed under Section 148 of the Companies Act 2013. The Cost Audit Report for thefinancial year 2015-16 which was required to be filed with the Ministry of CorporateAffairs on or before 27th August 2016 was filed on 25th August 2016 vide SRN:G09947250.
Your Directors wish to place on record their sincere appreciation of the wholeheartedco-operation received from the Company's Shareholders Bankers various authorities of theGovernments and business associates.
| ||For and on behalf of the Board of Directors |
| ||DR. MUKUL G. ASHER |
| ||Chairman |
| ||DIN: 00047673 |
|Mumbai 25th May 2017. || |