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GOCL Corporation Ltd.

BSE: 506480 Sector: Industrials
NSE: GOCLCORP ISIN Code: INE077F01035
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OPEN 526.95
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VOLUME 574
52-Week high 592.95
52-Week low 240.10
P/E 183.69
Mkt Cap.(Rs cr) 2,576
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

GOCL Corporation Ltd. (GOCLCORP) - Director Report

Company director report

To the Members of GOCL Corporation Limited

Your Directors have pleasure in presenting their Fifty Sixth Annual Report and AuditedAccounts for the year ended 31st March 2017.

1. FINANCIAL RESULTS

Consolidated

Standalone
2016-17 2015-16 2016-17 2015-16
` Lakhs ` Lakhs ` Lakhs ` Lakhs
Profit after providing for Depreciation and before extraordinary items and taxation 4025.35 3498.36 1801.57 2211.24
Exceptional Items 714.85 368.36 714.85 368.36
Profit Before Taxation 4740.20 3866.72 2516.42 2579.60
Tax Expenses:
Current Tax Current Year 1231.89 863.81 385.00 642.00
Deferred 212.79 378.15 200.00 177.00
MAT Credit 4.50 (68.86) - -
Profit After Taxation 3291.02 2693.62 1931.42 1760.60
Balance brought forward from previous year 12715.09 11056.65 20579.63 19846.50
Balance available for appropriation 16006.11 13750.27 22511.05 21607.10
Appropriations:
Proposed Dividend - 743.59 - 743.59
Tax on dividend 127.01 111.59 - 103.88
Transfer to General Reserve - 180.00 - 180.00
Balance carried to Balance Sheet 15879.10 12715.09 22511.05 20579.63
EPS (of ` 2/- each) 6.64 5.43 3.90 3.55

Consolidated Financial Statements

The Consolidated Financial Statements of the Company is prepared in accordance withrelevant Accounting Standards (AS) viz. AS 21 AS 23 and AS 27 issued by the Institute ofChartered Accountants of India form part of this Annual Report. These statements have beenprepared on the basis of audited financial statements received from the subsidiarycompanies as approved by their respective Board of Directors.

2. DIVIDEND

The Board at its meeting held on 29th May 2017 has recommended the payment of Dividendof ` 1.60 per share (` 1.50) equivalent to 80% (75%) on the Paid-up Capital of theCompany. The dividend of ` 8.28 crores (` 8.48 crores) including dividend distributiontax if approved by the Shareholders at the Fifty Sixth Annual General Meeting will bepaid out of the profits for the current year to all Shareholders of the Company whosenames appear on the Register of Members as on the date of the Book Closure.

3. OPERATIONS

The total turnover of the Company was ` 105.44 crores (previous year ` 108.21 crores).The profit before exceptional items and taxation was ` 18.02 crores (` 22.12 crores). Theprofit before tax was` 25.16 crores (` 25.80 crores). The profit after provision forcurrent tax of ` 3.85 crores and deferred tax of ` 2.00 crores was ` 19.31 crores (` 17.60crores) resulting in an EPS of ` 3.90 for the year (` 3.55 ).

On a consolidated basis the turnover of the Company was ` 554.20 crores (` 537.41crores). Profit after tax was ` 32.91 crores (` 26.94 crores) and EPS of ` 6.64 (` 5.43).

4. CREDIT RATING

ICRA has reaffirmedthe long term rating of [ICRA] BBB and short term rating of andshort term rating of [ICRA] A3+ for its wholly owned subsidiary IDL Explosives Ltd.

5.2 Energetics

The gross turnover of the Division increased by over 30% to

` 97 crores as against ` 74 crores in the previous year. This was achieved throughincrease in volumes of 14% in Detonators and 49% in Detonating Fuse in the Domestic Marketand increase in Detonator Volume by 37% and Detonating fuse by 46% in the Export Market.Production of Detonators went up by over 14% to 71 million as against 62 million in theprevious year. Detonating fuse production rose by 33% to 16 million meters as against 12million metres in the previous year driven by increase in Export volumes. Several projectsfor up gradation and modification of process and equipment for enhancing productivity andsafety was completed during the year. These actions helped to reduce production cost andimprove efficiencies. The R&D activities helped in completing the pilot plant formanufacture of HMX required for captive consumption. In the Special Products Group whichserves the Defense and Space sectors demand for Pryo Cartridges for Akash MissilesSquibs and Igniters besides Explosive Trains and Booster Pellets also for missiles weresuccessfully met. A major DRDO project for missile was also completed as per requirement.

5.3 Mining and Infrastructure

The operations of the Division were curtailed due to clients not receiving miningapproval from the State Government as their cases under the MMRDA Act were pendingdecision by the Supreme Court.

The Division did a limited turnover of ` 6.57 crores as against ` 20.16 crores ofprevious year. In view of the paucity of business all old equipment which were idleorhadbecomeinefficientwere disposed off during the year. The focus of the Divisioncontinued to be in Eastern India for ferrous metal mines in the Barbil region.Construction activities however continued.

5.4 Exports

Export sales increased by over 50% reaching ` 24.75 crores as against ` 16.43 crores ofprevious year. This was achieved with successful implementation of the strategy to expandinto new markets in South America and re-couping business in Europe. Better marginsresulted from improvement in product design increased volumes of value-added products andeffective logistics planning.

5.5 Realty Bengaluru:

The construction work in the "Ecopolis" project at Bengaluru has proceededwell during the year. Out of the proposed 77.31 lakh sq. ft. for development 14.54 sq.ft.in the SEZ designated area has been developed and ready for fitouts by client. Thecompleted area comprises of Block 3 and MLCP (for parking requirement of Block 3 2 &1). Block 3 and Multi Level Car Park (MLCP) are certified LEED Gold rated buildings.

During the year construction of Block 2 comprising of 10.06 lakh sq. ft. is nearingcompletion. Super structure is completed. The facade work is underway along with Low sideHVAC work electrical works and PHE works. Block 2 will be ready for fit-outs in Q1 2018.Block 2 is a pre-certified LEED Gold rated building. The Developer Company is closelyworking with consultants and local brokers. They have received clients' sale / lease and‘Build to Suit' requirements from reputed organizations and are working towards apositive conclusion.

Hyderabad:

Based on market assessment and owing to its proximity to the IT hub in Hyderabad theproject will be an Integrated Mixed-use Township comprising of residential apartments IT/ ITeS office space retail healthcare educational facilities leisure and hospitalityfacilities. Integrated new Master Plan for full 100-acre development has been reworked tosuit present market condition. Detailed design for Phase 1 of the development is currentlybeing finalised for obtaining statutory approvals.

6. OVERSEAS HOLDING

As reported earlier the Company through its UK based subsidiary HGHL Holdings LimitedUK (HGHL) holds 10% stake in Houghton International Inc. USA a subsidiary of the HindujaGroup's Gulf Oil International. The Company has been released of all its obligations tothe lenders by the new investor who had provided guarantee to the Company for servicingand repayment of balance of the then outstanding loan of USD180 million as per therepayment schedule of the Lender but continues to receive commission towards providing ofsecurity of its properties for the said loan. Houghton International has in the month ofApril 2017 entered into a definitive agreement to combine with Quaker Chemical (NYSE: KWR)to create a global leader in the space of process fluids chemical specialties andtechnical expertise to the global primary metals and metal working industries. The Hindujaconglomerate will be the largest shareholder in the combined public company. The Companywill be entitled to approx. 2% in the combined entity.

7. PROMOTER OF THE COMPANY

Hinduja Power Limited Mauritius (HPL) continued to reinforce their confidence in thelong term prospects of the Company by increasing their shareholding to 69.94%.

8. INTERNAL CONTROL SYSTEMS

The Company has laid down policies guidelines processes and structure which supportits robust Internal and Financial Control Systems that commensurate with the size scaleand complexity of its operations designed to ensure reliability of financial reportingtimely feedback on achievement of goals compliance with policies procedures applicablelaws and regulations safeguarding of assets and economical and efficient use ofresources. Internal assists the Board and Management to fulfill all business objectives.The Company's SAP-ERP system Risk Management processes along with its certification inISO 9001(QMS) ISO 14001(EMS) & ISO 18001 (OHSAS) ensures that quality and controlprocesses in place are operating effectively.

The Company has an Internal Audit Department which provides the Audit Committee and theBoard of Directors an independent objective and reasonable assurance of the adequacyefficiency and internal financial and operational controls and corporate governanceprocesses. Internal Audit reviews are on-going basis based on a comprehensive risk-basedaudit plan approved by the Audit Committee at the beginning of the year. The InternalAudit Department reviews and evaluates the efficacy and adequacy of internal and financialcontrol systems in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiaries. The functionalso assesses opportunities for improvement in business processes systems and controlsand provides recommendations designed to add value to the organization in consultationwith the Senior Management. corrective actions and good practices suggested by Statutoryand Internal Auditors are reviewed Significant by the Management and the Audit Committeefor appropriate implementation for monitoring and strengthening controls on variousbusiness processes. During the year the Audit Committee met six times to review keyfindings and recommendations of the internal auditors including status of implementationthrough Action Taken Reports.

9. PUBLIC DEPOSITS

The Company has during the earlier financialyear repaid / prepaid all the publicdeposits and there were no outstanding public deposits at the beginning of the year underreview. The Company has not accepted any public deposits during the year. The Board ofDirectors of the Company may consider accepting fresh public deposits at the appropriatetime as per the regulatory changes under the Companies Act 2013.

10. TAXATION Odisha Sales Tax

The Sales Tax cases pertain to branch transfer of finished goods from Rourkela factory(since transferred to IDL Explosives Limited as part of the Demerger) situated in theState of Odisha to other States.

Writ Petitions for assessment years 1976-77 to 1983-84 were filed in March 2013 in theOrissa High Court against the order of the Commissioner of Commercial Taxes dismissing theRevision Petitions. The High Court has granted stay on the tax recomputation order and theorder of Commissioner of Commercial Taxes. The Writ Petitions are pending.

In respect of other assessment years 1998-99 2002-03 2004-05 & 2005-06 thepetitions are pending before the Odisha Sales Tax Tribunal and Orissa High Court.

11. SUBSIDIARIES

The Company has four subsidiaries of which only one is a material one namely IDLExplosives Limited. The UK subsidiary is a SPV incorporated for the purpose of overseasacquisition of Houghton. The remaining two subsidiaries do not at present undertake anysignificant business activity. The annual performance of the subsidiaries are as under:

- HGHL Holdings Limited UK reported a profit of` 248.72 lakhs (` 288.10 lakhs).

- IDL Explosives Limited reported a profit of ` 1561.26 lakhs (` 661.79 lakhs).

- IDL Buildware Limited reported a profit of` 22.48 lakhs (` 2.15 lakhs).

- Gulf Carosserie India Limited incurred a loss of ` -0.58 lakhs (` 5.16 lakhs).

In accordance with section 136 of the Companies Act 2013 The Audited FinancialStatements including Consolidated Financial Statements and related information of theCompany and Audited accounts of the each of its subsidiaries are available on our websitewww.goclcorp.com. These documents are also available for inspection till the date of AGMduring working hours at our Registered Office. A statement containing salient features ofthe financial statement of above subsidiaries are disclosed in Form-AOC 1 as ‘Annexure-A'to the Board's Report.

12. HUMAN RESOURCES / INDUSTRIAL RELATIONS

Human Resources and Industrial Relations Departments ensured high morale amongst theemployees in the Company and its subsidiary IDL Explosives Limited ( IDLEL ) whichresulted in increased production volumes and revenues. A healthy and positive workingrelationship was maintained through continuing programs on behavioral competencies for theManagement staff. As a continuing trend strong emphasis was laid on reducing productrejections and process wastages through training programs in statistical quality controland material flow cost accounting system in the Company and its major subsidiary IDLEL.Training programs in Safety Internal Audit on Integrated Management Systems for ISO 900114001 and 18001 have been successfully conducted for employees in the Company.

Strategic HR initiatives to ensure seamless understanding of Company goals have beenput in place through implementation of Balanced Score Card objectives across all levels ofManagement / Supervisory cadre.

Staff Welfare

Employee motivation by felicitation of employees on monthly basis for outstandingperformance is being continued in GOCL as well as in IDLEL to inculcate a culture ofinnovation and achievement beyond annual goals.

Safety

Safety awareness has been enhanced by way of training on hazard identification riskassessment and continuous training to the newly inducted employees and regular training tothe employees on SOPs mock drills on emergency preparedness and mitigation exercises; inaddition to internal and external safety audits central safety committee with equalnumber of worker staff and management staff to bring out the safety issues from the shopfloor and to review and discuss on the safety related issues monthly safety reviews bytop management CCTV surveillance monitoring in vulnerable process areas Safety walkthrough audits by the cross functional teams have helped to strengthen the overall safetyprocesses in the Hyderabad Works. All new projects and developmental activities are beingassessed and appropriate management of change of approvals Hazard Identification and RiskAssessments as well as Hazop studies are undertaken by the Safety Department and its majorsubsidiary IDLEL. National Safety Day on 4th March was celebrated and month long programsconducted for various kinds of safety awareness to the employees like Safety SlogansQuiz Essay writings drawings and Paper presentations etc. Safety Bulletin HousekeepingHandbook in English and Telugu languages and Company standing orders Handbook in Telugulanguage were released. ISO system in the organization was upgraded to a new level byimplementing the new standards of ISO i.e. ISO 9001:2015 ISO 14001:2015 and BS OHSAS18001:2007 thereby integrating management systems covering quality occupational healthsafety and environmental standards as per the latest updates.

Preventive Health Check-ups

In order to ensure healthy atmosphere in the Company and to create necessary awarenessamong the employees on the health aspects the Hyderabad Factory organized number of freemedical camps and preventive medical check ups with the association of reputed multi-specialty and super specialty hospitals. Specialized medical check-ups on health andhygiene has been conducted for all the canteen workers and Specialized medical check-upson occupational health were conducted for all the employees who are involved in theoperations to identify any occupational health effects on the workers. The camps have beenfocused on the areas of diabetic pulmonology pathology orthopedics cardiology andgynecology and free medical checkups conducted on dental eye RBS ECG etc. during thefinancial year at our occupational health center and given necessary preventive guidance.Occupational Health Centre has been equipped further with specialized emergency medicinesand specialized equipments like Defibrillators Burnaid - Sterile gel impregnated dressing(First aid Emergency burn dressing kit) etc.

Security

Security measures have been increased to safeguard the Company's personnel propertiesequipment. Speed breakers were constructed on both sides of all access gates to checkspeedy movement of vehicles. Improvised CC cameras have been installed at the gates forclear view of the incoming/outgoing vehicles and their occupants. Additional securitymeasures include mandatory frisking bio-metric attendance system for all employees andphoto records of people entering the premises. Additional vehicles have been provided forbetter patrolling in the Factory area by the security personnel. Better illumination hasbeen provided at all magazines tower posts and periphery of the factory area.

Employment Practices

The Company believes in fair employment practices and is committed to provide anenvironment that ensures that every employee is treated with dignity and respect and isprovided equitable treatment. The Company has a large proportion of women in the workforceand has adopted a Policy in line with the provisions of the Sexual Harassment of Women atWorkplace ( Prevention Prohibition and Redressal ) Act 2013 and the Rules there under.No complaint was received in this regard during the year.

13. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Particulars of loans guarantees securities and investments made by the Company mostof which are to its wholly owned subsidiaries are in the notes to the financialstatements forming part of this report.

14. OUTLOOK FOR THE CURRENT YEAR OPPORTUNITIES AND THREATS

India has emerged as the fastest growing major economy in the world. India's grossdomestic product (GDP) growth is expected to be around7.4percentforfiscal2017-18inflationlevel continue to be at a moderate level. Energypricesand The proposed GSTwhich will come into force shortly is expected to bring rationalization of taxes andsupply chains and will benefit all stakeholders. Economic growth will drive energy demandespecially coal. The Union Government has increased focus on the infrastructure sectorwhich will enhance the consumption of cement steel aluminum copper and other metals.The "Make in India" policy of the Government of India in the Defence sectorwould be a game changer and is expected to bring several activities of the Company intohigher revenue levels.

14.1 Energetics

The growth of GDP will drive the demand for Power Steel Cement and major Mineralslike Coal Iron Ore Manganese Ore Dolomite Limestone Bauxite and Copper which in turnsustains the demand for Explosives & Accessories.

In addition to the increase in demand from the Mining and Minerals sectortherewillbesignificantincrease in demand from infrastructure transport housing andirrigation segments. The Central and State Governments have affirmed their strongcommitment towards these sectors of economy. The growth in demand in these areas over themedium and long term augurs well for the Company to deliver enhanced value tostakeholders.

The Energetics Division and its 100% subsidiary IDLEL have undertaken more projects forthe upgradation and modification of processes and equipment for enhancing qualityproductivity along with safety and efficiency to deliver superior value through improvedand new products and services.

For the Special Products Group the outlook is exciting with the Government of Indiarolling its strategic "Make in India" initiative. The group has received keytechnology transfers (TOTs) from DRDO and other strategic partners to exploit theemerging opportunities.

The Company will continue its expansion plans for exports into new territories inAfrica and South East Asia.

14.2 Mining and Infrastructure

Mining business in the metal sector especially in Eastern India where we have beenfocusing is awaiting Supreme Court orders under the MMRDA Act. As such very limitedactivity is currently being continued in mines meant for captive consumption. Thecommercial mining activities will be taking more time as several clarifications are stillawaited by the Supreme Court based on which State Governments would be required to issueorders for restart of the leases. As a result we do not expect an immediate restart ofthe Division's mining activities. However the infrastructure work is being continued on alimited scale and is expected to yield revenues as in the past.

14.3 Realty Bangalore

The Real Estate (Regulation and Development) Act 2016 which has recently come intoforce is expected to create a uniform regulatory environment and bring transparency tothe sector thereby giving a boost to investments into the sector which had turnedsluggish.

The first quarter of calendar year 2017 saw India's gross office take-up of spaceamounting to 9.3 million sft. Bengaluru maintained its top position in comparison to 9cities with 37% share of total absorption area. Bengaluru also retained its top positionby attracting occupier interest of 3.5 million sft which is 33% of total office leasingvolume. Majority of the office take-up was concentrated on Outer Ring road whichaccounted for 59% followed by SBD CBD Whitefield Bannerghatta road and othermicro-markets accounting for 13% 8% 7% 5% and 8% respectively.

The "Ecopolis" project located in North Bengaluru near the Airport isexpected to show growth in demand with the improving infrastructure in the Hebbal area.Already the "Ecopolis" project is drawing the attention of large internationalclients. We expect 2017 18 to be a watershed year for the project.

Hyderabad

Hyderabad market offers the lowest office rentals across major markets in South Indiathereby attracting many large corporates who are planning expansion in the region. Thecity's real estate development has seen a major uptick due to strong political stability;coupled with its status as a prominent IT hub availability of large talent poolsupportive government policies and improved infrastructure.

Hyderabad commercial market clocked in 0.51 million sft of total office leasing volumein Q1 2017. Out of this IT/ITeS segment contributed to 61% of the total share followed byhealthcare (20%) business centers (15%) and others (4%).

Multi-national technology companies have signed large office spaces in the last fewmonths. The city saw the second-largest office space absorption last year after Bengaluru.Considering these emerging demand for office space the revised plan for Hyderabaddevelopment have been made for approval.

15. RISKS & CONCERNS AND RISK MANAGEMENT

Pursuant to the Companies Act 2013 and the SEBI Regulations the Board has authorizedthe Audit Committee to review the risk management systems of the Company from time totime. There is a Risk Management Committee functioning at the senior executive level thatfacilitates identification and evaluation of business risks related to the Company and itsmajor subsidiary IDLEL from time to time. The Audit Committee / Board reviews the riskmanagement framework/ systems of the Company and renders advice for minimizing adverseimpact if any.

Apart from the usual risks and concerns that affect any commercial manufacturingorganization the key business risks and concern areas identified by the Company and itsmitigation plans are as under:

15.1 Environmental Risks

Regular safety audits are carried out by internal safety audit teams and at regularintervals by external teams. General Safety Directions (GSDs) are strictly enforced in allplants within the factories to ensure minimization of risk. In addition strict complianceof the requirements of the Explosives Act and Rules are ensured to protect the exposure ofadjacent neighbourhoods to the explosives and accessories factories from undue risk.Operations are carried out to comply with emission waste water and waste disposal normsof the local authorities of the respective factories. In addition the Hyderabad Factoryhas implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001.

15.2 Operational Issues Licensing

The Energetics Division operates a licensed factory in a highly regulated environment.Amendments / revisions in licenses are required for change in production capacities andprocesses for launch of new productsetc.Anysignificantdelay in such approvals beyondnormal time taken by the regulatory authorities may impact the growth prospects of theCompany. The Division therefore ensures that approvals are applied for well in advanceto avoid delay in launch dates / export of products and active follow up is maintained toget approvals in time.

Imported Raw Materials

Many of the inputs of the Company and its major subsidiary are imported availabilityof which is affected by global market situations. Also prices of such items are volatile.Timely availability of raw materials is critical for continuous plant operations. TheCompany addresses this by entering into long-term relationship with global raw materialsuppliers with suitable price adjustment clauses to ensure regular flow of supplies.

15.3 Market Dynamics:

The Company and its major subsidiary operate in highly competitive markets wherecompetition from all India players as well as regional players is high. The EnergeticsDivision which manufactures explosive accessories and Mining & Infrastructure Divisionoperate in tender-driven markets sometimes with onerous and unreasonable performanceclauses. Therefore there is a risk of cost increases not being possible to be passed onto ultimate consumers. Any reversal in growth trend in the demand and consequenteconomyingeneralandweakmonsoons deceleration in manufacturing particular couldaffect industry.

Concentration of Customers

The Mining & Infrastructure Division which undertakes mining services in coal ironore and limestone sectors is exposed to business risks on account of non-availability ofenvironmental clearances in time and lack of adequate infrastructure for dispatch of oresfrom the mine. In view of this detailed review of approvals and quality of infrastructureis carried out before undertaking mining service contracts. Both the Energetics and Mining& Infrastructure Divisions are operating in the mining and infrastructure sectorsdominated by the PSUs where the tendering system is in vogue with the attendant risks.Missing L1 to L3 status in these tenders might result in loss of business opportunitiesfor extended periods for the relevant tender(s).

15.4 Financial Risks:

Currency Value and Interest Rate Fluctuations

Financial risk management is done by the Finance Department at the various businessDivisions and at Corporate Office under policies approved by the Board of Directors. TheCompany has designed a debt mix policy that also considers natural hedge available to itfrom its export earnings to mitigatecurrencyfluctuationrisks. Policies for overall foreignexchange loss risks and liquidity are regularly reviewed based on emerging trends.Interest risks arising out of financial debt are normally done at fixed rates or linkedto LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levelsmay further impact landed cost of imported materials.

Credit Risk

The Company and its major subsidiary sometimes sell their products by extending creditto customers with the attendant risk of payment delays and defaults. To mitigate therisk a credit risk policy is also in place to ensure that sale of products are made tocustomers after evaluation of their ability to meet financial commitments throughallotment of specific credit limits to respective customers. Credit availability andexposure is another area of risk.

Liquidity Risk

The Company and its major subsidiary operate in working capital intensive industries.The Company realizes that its ability to meet its obligations to its suppliers and othersis linked to timely and regular collection of receivables and maintaining a healthy creditrating. Review of working capital constituents like inventory of raw materials finishedgoods and receivables are done regularly by the respective Divisions and closely monitoredby Corporate Finance.

With the introduction of GST during 2017 18 the liquidity risks may increase till theGST implementation stabilizes across the Country.

15.5 Legal and Statutory Issues: Contractual Liability

All major contracts are reviewed / vetted by the in-house Legal Department before thesame are executed. In addition the Company engages the services of reputed independentlegal counsels on need basis. In matters of tax law and other statutory obligations theoutcome of litigation cannot always be predicted. Hence appropriate financial provisionsinsurance policies and credit lines are taken to limit the risk for the Company.

Litigation Issues:

The Company is exposed to the risk of litigation of prolonged nature. Apart from theTax Matters referred to in the Financial Statements Litigations having a major impact onthe Company include those with Udasin Mutt pertaining to leased lands of

Hyderabad Works Competition Commission of India which are being pursued by theCompany with the appropriate Court/ Tribunal.

15.6 IT Risks

The Company is dependent on intra-office and inter-office networks as well as severalbusiness software operated from the Corporate Office and the business Divisions. Viralattacks failure of system networks and consequential loss of business is attempted to beminimized by critical systems being operated on secured servers with regular maintenanceregular back up and off-site storage of data selection of suitable firewall and virusprotection also addresses IT risk mitigation measures.

15.7 Risks in the Realty Business

Market demand and price is a factor of macroeconomic conditions in the Country andvaries from city to city as well. The Company's strategy is to entrust development tospecialist developer companies who take responsibility for insulating your Company againstrise in construction cost. On the other hand timely completion of projects is a riskwhich is not fully mitigated and is therefore becomes a matter of close follow up by yourCompany. The construction industry attracts many local body state and centralregulations. Responsibility for compliance with regulations is owned jointly by yourCompany and the developer.

16. DIRECTORS AND KMPs

During the year there was no change in composition of Board of Directors and KMPs ofthe Company.

In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Ramkrishan P. Hinduja retires by rotation at the 56thAnnual General Meeting of the Company and is eligible for reappointment. The Boardrecommended his re-appointment.

The number and details of the meetings of the Board and other Committees are furnishedin the Corporate Governance Report.

The Independent Directors have furnished declaration of independence under Section 149of the Companies Act 2013 and Regulation 25 of SEBI (LODR) Regulations 2015.

Familiarization Programme for Independent Directors

No new Independent Directors have joined during the year. However the IndependentDirectors are familiarized with the Company their roles rights responsibilities in theCompany nature of the industry in which the Company operates business model of theCompany etc. through various programmes on a continuing basis. The familiarisationprogramme along with terms and conditions of appointment of Independent Directors isdisclosed on the Company's website.

Separate Meeting of Independent Directors

A separate meeting of Independent Directors of the Company without the attendance ofNon-Independent Directors and members of management was held on 9th February 2017 asrequired under Schedule IV to the Companies Act 2013 (Code for Independent Directors) andRegulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.At the Meeting the Independent Directors:

- Reviewed the performance of Non-Independent Directors and the Board as a whole;

- Reviewed the performance of the Chairman of the Company taking into account theviews of Executive Director and Non-Executive Directors; and

- Assessed the quality quantity and timeliness of flow of information between theCompany management and the Board that is necessary for the Board to effectively andreasonably perform their duties.

The Independent Directors had appreciated the overall performance of the Non-executivedirectors including the Chairman and the Managing Director. They also concluded that theBoard as a collective body is performing satisfactorily and is an active andparticipating Board. The Independent Directors also concluded that the flow of informationbetween the Company's Management and the Board in terms of quality quantity andtimeliness is satisfactory. The Independent Directors commended the depth and quality ofdiscussions at the Board and the Committee Meetings.

All the Independent Directors attended/participated in the Meeting of IndependentDirectors and Mr. K.N.Venkatasubramanian was the Lead Independent Director of thatMeeting.

Board & Directors' Evaluation

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 (Listing Regulations) the Board itsCommittees and the Directors have carried out annual evaluation based on the evaluationparameters formulated by the Nomination and Remuneration Committee and the Board based onSEBI Guidance Note on Board Evaluation. The performance evaluation of the IndependentDirectors was carried out by the entire Board excluding the Director being evaluated. Theperformance evaluation of the Chairman and the Non-Independent Directors was carried outby the Independent Directors who also reviewed the flow of information between theCompany's Management and the Board in terms of quality quantity and timeliness. TheDirectors expressed their satisfaction with the evaluation process.

Directors' Appointment and Remuneration Policy

The Nomination and Remuneration Committee is responsible for developing competencyrequirements for the Board based on the industry and strategy of the Company andformulates the criteria for determining qualifications positive attributes andindependence of Directors in terms of provisions of Section 178 (3) of the Act and theListing Regulations. The Board has in an earlier year on the recommendations of theNomination & Remuneration Committee framed a policy for remuneration of the Directorsand Key Managerial Personnel. The objective of the Company's remuneration policy is toattract motivate and retain qualified and expert individuals that the Company needs inorder to achieve its strategic and operational objectives whilst acknowledging thesocietal context around remuneration and recognizing the interests of Company'sstakeholders. The Non-Executive Directors (NED) are remunerated by way of Sitting Fee foreach meeting attended by them and an annual commission on the profits of the Company.Commission to respective non-executive directors is determined on the basis of anobjective criteria discussed and agreed upon by the Committee Members unanimously. NEDsare reimbursed any out of pocket expenses incurred by them in connection with theattendance of the Company's Meetings.

Particulars of Employees and Remuneration

The information required under Section 197 (12) of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedas ‘Annexure B'. The information required under Rule 5 (2) and (3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin the Annexure forming part of the Report.

None of the employees listed in the said Annexure is related to any Director of theCompany.

17. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as ‘AnnexureC'.

18. INFORMATION ON STOCK EXCHANGES

The equity shares of the Company are listed on BSE Limited and the National StockExchange of India Limited and the listing fees have been paid to them uptodate.

19. CORPORATE GOVERNANCE

A detailed report on the subject forms part of this Report. The Statutory Auditors ofthe Company have examined the Company's compliance and have certified the same as requiredunder the SEBI Guidelines/ Regulations.Such certificateis reproduced in this AnnualReport.

20. DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134 of the Companies Act 2013: (a) that in the preparation of the annualaccounts/financial statements for the financial year ended 31st March 2017 theapplicable accounting standards had been followed along with proper explanation relatingto material departures if any; (b) that the accounting policies as mentioned in thefinancial statements were selected and applied consistently and reasonable and prudentjudgments and estimates were made so as to give a true and fair view of the state ofaffairs of the company at the end of the financial year and of the profit and loss of thecompany for that period;

(c) that proper and sufficient care had been taken for the maintenance of theprovisions of the Companies Act 2013 for safeguarding the assets of the company and forpreventing and detecting fraud and other irregularities; (d) that the annual accounts wereprepared on a going concern basis; (e) that proper internal financial controls were inplace and that such internal financial controls are adequate and were operatingeffectively; and (f) that proper systems to ensure compliance with the provisions of allapplicable laws were in place and that such systems were adequate and operatingeffectively.

21. AUDITORS

Statutory / Financial Audit

M/s Deloitte Haskins and Sells Chartered Accountants retire at the ensuing AnnualGeneral Meeting and are not eligible for re-appointment in view of the provisions formandatory rotation of auditors. The Audit Committee and the Board of Directors at theirrespective meetings held on 28th and 29th May 2017 have recommended the appointment ofM/s. B S R & Associates LLP Chartered Accountants (ICAI Firm Registration Number:116231W/ W-100024) as Auditors of the Company for a period of five years from conclusionof the ensuing Annual General Meeting subject to ratification by the members at every AGMin compliance with section 139 of the Companies Act 2013 on receipt of confirmation thattheir appointment will be within the limits prescribed under Section 141 of the CompaniesAct 2013.

Cost Audit

The Ministry of Corporate Affairs had vide its Order dated 31st December 2014directed audit of cost records of the companies covered under the Companies (Cost Records& Audit) Amendment Rules 2014. The said Order is applicable to the Company beingmanufacturer of Detonators Detonating Fuse Explosives etc. Accordingly the Board ofDirectors has appointed M/s Narasimha Murthy & Co. Cost Accountants Hyderabad as theCost Auditors of the Company for the financial year 2016-17.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hasappointed M/s BS & Company Company Secretaries LLP Company Secretaries Hyderabad toundertake the Secretarial Audit of the Company for the financial year 2017-18. TheSecretarial Audit Report is annexed herewith as ‘Annexure D'.

There was no qualification reservation or adverse remark or disclaimer in the AuditorsReport or the Secretarial Audit Report.

22. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

In compliance with Section 135 of the Companies Act 2015 and other applicableprovisions the Company has constituted Corporate Social Responsibility Committeeconsisting of Mr. Ashok Kini Chairman of the Committee (Independent Director) Mr. AjayP. Hinduja (Non-Executive Director and Chairman of the Company) and Mr.K.N.Venkatasubramanian (Independent Director) as the other Members of the Committee. TheCommittee met once during the year and reviewed the policy on Corporate SocialResponsibility stating therein the objectives implementation and other issues pertainingto the achievement of the CSR objectives of the Company.

Theerst while Lubricants Division whichwasdemergedfromtheCompanywasthemajorprofitgenerating Division. The remaining businessesof the Company did not have eligible profit on aggregate basis during the last one out ofthe three financial years. Gulf Oil Lubricants India Limited (GOLIL) to whom theLubricants Division was transferred had undertaken to incur the CSR expenditure treatingthe profits of the erstwhile Lubricants Division as that of GOLIL for CSR purposes.Accordingly the CSR Committee recommended CSR expenditure of ` 23 lakhs and the same wasspent for CSR purposes. The CSR Policy of the Company is displayed on the website of theCompany. The Annual Report on CSR activities is annexed herewith as ‘Annexure-E'.

23. VIGIL MECHANISM / WHISTLE BLOWER POLICY

In terms of the requirements of the Companies Act 2013 and Regulation 22 of ListingRegulations the Company has a vigil mechanism to deal with instance of fraud andmismanagement if any. The details of the vigil mechanism are displayed on the website ofthe Company. The Audit Committee reviews the functioning of the vigil / whistle blowermechanism from time to time. There were no allegations / disclosures / concerns receivedduring the year under review in terms of the vigil mechanism established by the Company.

24. RELATED PARTY TRANSACTIONS

All related party transactions / arrangements that were entered into during thefinancial year were at an arm's length basis and were in the ordinary course of business.During the year under review there were nomateriallysignificantrelated party transactionsmade by the Company with Promoters Directors Key Managerial Personnel which may have apotential conflict with the interest of the Company at large.

All related party transactions / arrangements are placed before the Audit Committee forapproval supported by a statement/ declaration from the management as to the adherence ofarm's length basis and being in the ordinary course of business. The policy on RelatedParty Transactions as approved by the Board is displayed on the Company's website.

None of the Directors has any pecuniary relationships or transactions vis-a-vis theCompany. Details of the transactions with Related Parties are provided in the accompanyingfinancial statements.

25. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

During the year under review therewerenosignificantmaterial orders passed by theRegulators / Courts which would impact the going concern status of the Company and itsfuture operations.

Pursuant to a complaint filed before the Competition Commission of India (CCI) by CoalIndia Limited CCI had vide their Order dated 16th April 2012 held that the Company hadalong with a few other explosive manufacturers contravened the provisions of Section 3 ofthe Competition Act 2002. The CCI had on that basis imposed a penalty on the Company of `29.84 crores. The Company had filed an appeal before the Competition Appellate Tribunal(COMPAT) and the COMPAT had vide its Order dated 18th April 2013 reduced to ` 2.89crores; and a further Civil Appeal in the Supreme Court of India and the matter issubjudice. Based on expert legal advice the Company believes that it has a good case andexpects a favourable decision in the matter.

26. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as ‘Annexure F'.

ACKNOWLEDGEMENTS

Your Directors place on record their sincere appreciation for the continuedco-operation and support received from the financial institutions banks Government ofIndia and various State Government authorities and agencies customers vendors andmembers during the year under review. The directors take this opportunity to thank theinvestors for their support and cooperation. Your Directors also place on record theirdeep appreciation for the dedicated hard work and contribution of all employees of theCompany which has enabled the business growth of the Company in the extremely competitiveand challenging market conditions which prevailed in the year under review.

For and on behalf of the Board of Directors
Place : Mumbai Ajay P. Hinduja
Date : May 29 2017 Chairman