You are here » Home » Companies » Company Overview » Linde India Ltd

Linde India Ltd.

BSE: 523457 Sector: Industrials
NSE: LINDEINDIA ISIN Code: INE473A01011
BSE LIVE 15:55 | 19 Sep 405.65 0.60
(0.15%)
OPEN

404.10

HIGH

409.00

LOW

404.10

NSE 15:43 | 19 Sep 405.00 -0.45
(-0.11%)
OPEN

406.30

HIGH

409.00

LOW

403.65

OPEN 404.10
PREVIOUS CLOSE 405.05
VOLUME 1553
52-Week high 499.00
52-Week low 322.20
P/E 316.91
Mkt Cap.(Rs cr) 3,459
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 404.10
CLOSE 405.05
VOLUME 1553
52-Week high 499.00
52-Week low 322.20
P/E 316.91
Mkt Cap.(Rs cr) 3,459
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Linde India Ltd. (LINDEINDIA) - Director Report

Company director report

Directors

The Directors have pleasure in submitting their Report together with the AuditedAccounts of your Company for the year ended 31 December 2014:

The results for the year and for the previous year are summarized below:

in Rupees million Year ended 31 Dec. 2014 Year ended 31 Dec. 2013
Revenue from operations 16148.67 15294.96
Operating profit before depreciation and amortisation 2877.90 2698.31
Profit after depreciation impairment and interest but before exceptional items 35.78 663.38
Exceptional items - 502.70
Profit before tax 35.78 1166.08
Provision for current and deferred tax release/(charge) 18.22 (392.80)
Profit after tax 54.00 773.28
Profit brought forward 5149.73 4564.78
Profit available for appropriation 5203.73 5338.06
Appropriations :
Proposed dividend @ 15% (Previous year @ 15%) on 85284223 equity shares of Rs. 10 each absorbing 127.93 127.93
Tax on proposed dividend 25.58 21.74
Transfer to general reserve 2.70 38.66
Balance carried forward 5047.52 5149.73

Financial performance

Your Company recorded a subdued performance during the year under review amidst weakeconomic conditions and contraction of demand in most of the end user industry segments.While inflation showed some signs of abatement during the year the slowdown inmanufacturing and industrial activity across the country and deferment of new capitalexpenditure in most segments made market conditions very challenging. Besides higherdepreciation related to recently commissioned plants and higher finance cost on borrowingsseverely impacted the financial performance for the year under review.

The sluggish demand faced by most of the end user industry segments and many of ourcustomers through the year and over supply position in the markets resulted in significantunder utilisation of installed capacities further impacting the financial performance.Revenue from operations during the year stood at Rs.161 48.67 million reflecting a growthof 6% compared to last year. This growth was primarily achieved by revenues realized fromthe newly commissioned plants while the base gases and engineering business remainedsubdued.

Gases business grew by 22% during the year mainly driven by commissioning of 2X 853tonnes per day (tpd) - air separation units (ASU) at Steel Authority of India Ltd's worksat Rourkela. The incremental revenues from ramping up of the newly commissioned plants inthe previous year viz. 2550 tpd ASU at Tata Steel in Jamshedpur and 330 tpd merchant ASUat Taloja also contributed to higher revenues in the Gases business. The ProjectEngineering Division (PED) achieved a turnover of Rs. 2001.58 million during the yearcompared to Rs. 3676.66 million last year due to significantly lower number of newprojects. The PED's business is primarily driven by capacity expansion in steel andrefinery segments. These sectors witnessed restrained capex spend by major customers dueto adverse market conditions high interest rates and policy bottlenecks in mining andother core sectors. However the Division managed to improve overall profit margin throughcost savings and efficient project management in ongoing projects.

The operating profit for the year amounted to Rs. 2877.90 million which grew byaround 7% as compared to Rs. 2698.31 million in the previous year. This includes a profitof Rs. 66.40 million shown as other income arising from disposal of right to use anapartment at Kolkata. This growth in operating profit has been achieved through focus onapplication development and promoting value added products like shielding gases andhelium. Your Company also initiated cost control measures on various administrative frontsand focused on delivering operational efficiency including by using Six Sigma.

The Profit before exceptional items and taxes for the year under review amounted to Rs.35.78 million as against Rs. 663.38 million in previous year. The decrease is on accountof significantly higher depreciation charge of Rs. 1813.46 million as compared to Rs.1290.43 million in the previous year mainly due to capitalization of new ASUs at SAILRourkela and impairment in value of certain assets under capital work in progress. Thesteep increase in finance cost from Rs. 744.50 million to Rs. 1028.66 million furtherimpacted the profits for the year. The significant increase in the finance cost during theyear under review is mainly on account of interest on ECB availed for SAIL Rourkela ASUswhich has been fully charged to revenue during the year under review following thecapitalisation of the ASUs.

Net profit for the year stood at Rs. 54.00 million as against Rs. 773.28 million in theprevious year which included exceptional income of Rs. 502.70 million from sale of landat Ahmedabad.

Dividend

After a careful review of the Company's performance your Board has decided torecommend a dividend of 15% (Rs. 1.50 per equity share of Rs. 10 each) for the year 2014in respect of 85284223 equity shares of Rs. 10 each in the Company which will be paidout of the undistributed profits of previous financial years pursuant to the provisions ofSection 205(1) of the Companies Act 1956 and the relevant corresponding provisions of theCompanies Act 2013. The dividend together with dividend tax will result in a cash outlayof Rs. 153.51 million. The Board has also recommended a transfer to general reserve of Rs.2.70 million (Previous Year Rs. 38.66 million) in compliance with the Companies (Transferof Profits to Reserves) Rules 1975.

Industry developments

The gases business is capital intensive by nature as it requires large investments insetting up of air separation units as well new packaged gases sites. The supply chain inthe gases business also requires significant investments in the form of distributionassets and storage networks to service bulk volumes as well as in the form of cylinders toservice relatively smaller volumes in packaged gases business. The industry comprises ofmajor users in steel chemicals and refinery sectors and a large number of merchant liquidcustomers primarily in metal glass automobile petrochemicals and pharmaceuticalsectors besides customers for medical gases. New applications continue to provide growthopportunities. This growth is also supported by the increasing outsourcing of gasesrequirement under a "Build Own Operate" (BOO) type of supply schemeopportunities mainly in steel and refinery sectors.

Business segments

Your Company's business has two broad segments viz. Gases and Related Products andProject Engineering in line with the operating model of its parent Linde AG.

Gases and related products

The Gases and Related Products segment comprises of pipeline gas supplies (On-site) tovery large industrial customers - mainly primary steel production and refining industrysupply of liquefied gases through cryogenic tankers (Bulk) to cater to mid-size demandsacross a wide range of industrial sectors and compressed gas supply in cylinders (PackagedGases) for meeting smaller demand for gases mainly across fabrication and manufacturingand construction industry. The primary production of gases (oxygen nitrogen and argon) ismostly achieved through cryogenic distillation of air in Air Separation Units (ASU).

Oxygen Nitrogen and Argon may be produced in the gaseous state and supplied throughpipeline to the on- site customers or produced in liquid form and stored in insulatedcryogenic tanks for supply to bulk customers or further processed in the Packaged Gasplants to bottle compressed gas in cylinders. The strategy of the bulk and packaged gasbusiness continues to be building and sustaining market leadership through application ledgas sales and enhanced service levels.

The Healthcare business provides high quality gases for pharmaceutical use such asmedical oxygen synthetic air nitrous oxide in addition to providing state of the artmedical gas distribution systems to major hospitals. Your Company also provides total gasmanagement solutions to private hospital chains and has ambitious plans to expand beyondits current footprint in metro cities. The strategy of the healthcare business is tosustain its leadership position in the large hospitals in metro cities and increasepenetration in tier 2 cities with particular focus on supporting private hospital chainsin providing total gas management solutions.

The turnover of your Company's gases business for the year 2014 recorded a growth ofabout 22% over 2013 despite general slowdown in industrial activities in several sectors.As explained earlier this growth was primarily achieved by revenues realized from thenewly commissioned plants while the base gases remained subdued. The delay incommissioning of some of the projects impacted the gases business. Merchant and packagedgases business however benefited from cyclical upturn in the automobile industry whichhelped your Company in achieving highest ever argon volumes even in these difficultconditions. During the year your Company was successful in converting a number of itsgases application leads into business with customers including wins in new sectors likecement and aluminium. This further reinforces the strength of Linde's technology solutionsthat is helping your Company to differentiate itself in the markets. As a result yourCompany managed to secure higher oxygen volumes during the year. Higher sale of helium wasachieved due to demand from customers in fibre optic cable segment and Government agenciesin defence and space research.

Operations played a critical role in a difficult year with focus in the areas of powercost reduction loss reduction reliability improvement and plant mode optimization withthe help of the Remote Operating Centre (ROC). During the year the Company commissionedits 2X853 tpd ASUs at SAIL Rourkela works. The Hyderabad 65 tpd ASU was not operationalfollowing an optimisation programme with product being outsourced from other plants.

Your Company continues its development towards positioning itself as a solutionsprovider on the back of gases applications technologies and services. During 2014despite a challenging business climate a large number of business wins were achieved onthe back of this strategy. Linde's REBOX technology for steel reheating has beeninstalled at a number of steel mills in India. The first contract in India for Linde'sworldleading technology for aluminium melting was also signed. Activities in the cementheat treatment foundry chemistry and pharma industries are developing at a high pacewith successful installations of Linde's technical solutions. Opportunities are also beingpursued in the food industry particularly relating to freezing. Your Company has a strongfocus on the automotive industry and its ancillaries. A technology centre with focus onwelding technologies and the automotive industry has been established in Pune. Besides anumber of opportunities are being pursued in the water treatment and clean energy sectorsincluding involvement in an algae-to-oil project.

The Packaged Gases Business (industrial) grew by about 6% in an intensely competitivemarket dominated by smaller retailers and refillers. The packaged gases consist ofcompressed industrial oxygen argon nitrogen electronic and special gases. During theyear your Company created differentiation in its product and service offerings by launchof 230 bar oxygen and argon cylinders in key market zones such as Bangalore Pune andDahej. By leveraging its technical know-how and creating the right value proposition yourCompany has been successful in stepping up the shielding gases volumes by more than 13% in2014.

The Special Products and Chemicals (SP&C) business grew significantly by almost 58%on the strength of helium supplies for manufacture of optic fibre as well as in areas ofspace research and technologically advanced fields of medicine. Since commissioning ofHelium transfilling operation at Taloja in 2012 the Company has penetrated successfullyinto the packaged helium as well as Dewar business. Business in XL grade gasescalibration and process gas mixtures also witnessed good growth - mainly from the Lightingand Automotive Industry. The chemicals and electronics gases business remained subdued dueto weak demand from the industry.

The Healthcare segment continues to provide another growth lever for your Company.However the business is challenged by intense competition and lack of adequate standardsthat creates an uneven playing field where the Company has to compete against a lowerstandard of compliance by local players. This has an impact on the profitability of theHealthcare segment. In this back drop your Company is focusing on reducing cost gettingout of low margin accounts and creating differentiated Product and Service Offers (PSOs)including Total Gas Management where Linde India becomes an integrated part of theHospital by managing the Gas Supply to patients. Another initiative being pursued inHealthcare business is the introduction of best in class lightweight cylinders with LindeIntegrated Valve (LIV) which sets a new benchmark in medical oxygen packaging for usewithin the hospital wards.

During the year the National Pharmaceutical Pricing Authority (NPPA) under Ministry ofChemicals Government of India fixed a ceiling price for medical oxygen and nitrous oxideby classifying them as emergency drugs. This has created a new challenge for theseproducts in the Healthcare markets and your Company has taken adequate steps to addressthe same. Your Company has also made necessary representation to the GovernmentAuthorities in this regard.

Your Company also continues to work on developing the gases pipeline network at Dahejin Gujarat by adding new customers that can be served from the ASU under construction. TheCompany is also focusing to develop a pipeline scheme in the Kalinganagar industrial areain Odisha with a long term strategy to grow the gases business in this prominent steelindustry cluster.

Your Company sees several opportunities in the Gases business in the medium to longterm which include projected increase in India's steel making capacity to 200 millionmetric tonnes by 2020 decaptivation and outsourcing of gases demand by refineries and theGovernment's ambitious "Make in India" campaign with an aim to turn the countryinto a global manufacturing hub. On the other hand rising power costs in West andunreliable power supply faced at some of the tonnage plants such as Hyderabad and Selaquiover capacity in the markets resulting in pricing pressure in merchant business areconsidered as some of the threats.

Project engineering

The Project Engineering Division engages in the business of engineering procurementsupply construction and commissioning of Air Separation Units (ASU) nitrogen generatorshydrogen Pressure Swing Adsorption (PSA) plants compressed air systems and gasdistribution and storage systems. The Project Engineering Division (PED) is engaged forinhouse Gases Division projects as well as for sale of plants to third party customers.

The market condition remained extremely challenging for PED in 2014 as well when theDivision order intake reduced significantly which is also reflected in the decrease inits revenues. PED achieved revenue of Rs. 2001.58 million as compared to Rs. 3676.66million recorded in 2013. During the year PED executed projects involving air separationplants nitrogen plants compressor air stations in steel industry both in public andprivate sectors. The Division has expanded its global reach during the year with a numberof export orders under execution including nitrogen generator revamp for PT. Indo RamaVentures (Indonesia) liquid nitrogen plant sale (UNIT 50) to Medipharm East Africa Ltd.(Nairobi). In a difficult year the Division also managed to recover fixed costs byproviding engineering supervision and commissioning services to Linde Engineering Taiwan.

Major projects executed during the year include Cryogenic N2 Generator for GAIL (India)Ltd Pata Inert Gas and Air Compressor system for ONGC Petro Additions Ltd. Other thanthese projects the Division has also completed execution of Cryogenic Nitrogen Generatorat OMPL Mangalore and MRPL Phase III Mangalore. The Division has thus maintained itsleadership in Cryogenic Nitrogen Plant market. Besides the Division is also constructing2X1250 tpd ASU for NMDC 1000 tpd ASU for Bhushan Steel at Meramandali in Odishautilising technology from Linde Engineering. The execution activities for new compressedair station for RINL's Visakhapatnam Steel Plant and Nitrogen generation package for GSPCLNG Ltd. at Mundra Gujarat is at its initial stages. The execution of these and severalother projects is progressing well.

As a part of the ongoing support to the growth of Gases Business PED completedcommissioning of 2x853 TPD ASUs at SAIL Rourkela.

PED is currently also executing another large in house project for the Gases Divisionfor the commissioning of 2x1000 scale Oxygen plants at Tata Steel's 3 MTPA steelworks atKalinganagar in Odisha which is expected to be completed in 2015. PED is also engaged indismantling and relocating the 110 tpd ASU from Taloja and its commissioning at a new siteat Dahej. The project is in advanced stage of completion and is expected to be on line byH1 2015.

While PED is responsible for execution of in-house ASU projects for the Gases Divisionit also continues to remain focused to strengthen its product offerings leveraging on thetechnological support from Linde Engineering. The Division continues to endeavour toimprove its competitiveness through several initiatives by increasing the indigenouscomponent in its plants. The Division's total third party orders in hand stood at Rs.2420 million as on 31 December 2014.

Risks and concerns

Your Company's business faces various risks such as strategic as well as operationalrisks in both of its segments viz. Gases and Project Engineering which arise from bothinternal and external sources. As explained in the report on Corporate Governance theCompany has an adequate risk management system which takes care of identificationassessment and review of risks as well as their mitigation plans put in place by therespective risk owners. The risks which were being addressed by the Company during theyear under review included risk relating to execution model of the Company for tonnageprojects over dependence of business on steel sector continuing increase in inflationincrease in power costs delay in customer projects competitive risks etc. Some of theabove risks have reached closure as mitigating actions for them have been fullyimplemented. Since the Project Engineering Division of your Company is engaged inexecution of various in house and third party projects it has an inherent risk of timeand cost overruns due to various reasons. Your Board of Directors provides oversight ofthe risk management process in the Company and reviews the progress of the action plansfor each of the identified key risk on a quarterly basis.

Finance

As on 31 December 2014 your Company had three loan facilities by way of ExternalCommercial Borrowing (ECB) aggregating EUR 199.6 million from Linde AG. The facilitieswere executed for funding of large air separation units (ASU) at Tata Steel Jamshedpur(2550 tpd ASU)

SAIL Rourkela (2X853 tpd ASU) Tata Steel Kalinganagar (2X1000 scale Plants) andHydrogen SMR unit at Asian Peroxide. Out of the three facilities two EUR facilitiesaggregating EUR 122 million are fully drawn down. The third facility is a fixed rate INRfacility equivalent to EUR 77.6 million and is partly drawn. During the course of theyear INR equivalent of EUR 29.4 million was drawn down and EUR 21.2 million was repaidleaving a net outstanding position of EUR 155.4 million as at the end of the year. TheECBs are fully hedged both with regard to the principal and interest payments.

During the year the Company has also negotiated and fully drawn down three-yearfloating rate two term loan facilities aggregating to USD 24.90 million equivalent of Rs.1500 million from Citibank. The term loan facility was executed to fund ongoing smallcapital expenditure requirement. This facility is in addition to the two-year USD 16.8million equivalent of Rs. 1000 million term loan executed in the previous year. All thethree facilities are fully hedged with regard to the principal and interest payments.

The overall Working Capital Demand Loan (WCDL) as on 31 December 2014 was Rs. 1500million.

During the year the Company transferred a sum of Rs. 0.81 million of unpaid/unclaimeddividend for the year ended 31 March 2007 to the Investor Education and Protection Fund.

Prescribed particulars

The prescribed particulars required under Section 217(1 )(e) and 217(2A) of theCompanies Act 1956 read with the Rules made there under as amended up to date are givenby way of Annexure to this Report.

There were 12 employees who were employed throughout the year and were in receipt ofremuneration aggregating to Rs. 6 million or more or were employed for part of the yearand were in receipt of remuneration aggregating to Rs. 0.5 million per month or moreduring the year ended 31 December 2014. In accordance with the provisions of Section217(2A) of the Companies Act 1956 and the rules framed there under as amended the namesand other particulars of employees are

set out in the annexure to the Directors' Report. However in terms of the provisionsof Section 219(1 )(b)(iv) of the Companies Act 1956 the Directors' Report is being sentto all the shareholders of the Company excluding the said information. The aforesaidstatement is available for inspection by shareholders at the Registered Office of theCompany during business hours on working days up to the date of the ensuing Annual GeneralMeeting. Any shareholder interested in obtaining a copy of the said information may writeto the Company Secretary at the Registered Office of the Company.

Human resources

As a member of The Linde Group your Company's human resource function is aligned toits global HR strategy with intent to support its business strategy. It therefore derivesrobust support from the Group in areas of recruitment training appraisal compensationmanaging and rewarding performance etc. Human Resources function ensures that allemployees are aligned to the organisation's shared values management principles and ahigh performance culture. Your Company strives to embrace best HR practices to become an"Employer of Choice". Your Company aims to maintain its competitive edge byensuring the right talent for the right job. This is ensured by using multi-prongedselection tools like assessment centres personality tests and one-on-one interviews. Ourrecruitment strategy centres on infusing quality talent aligned to the values of Lindewith potential to take the organisation to a higher level of performance. Socialnetworking sites are actively used - both as a source of candidate database and also as aplatform to create strong employer brand.

At Linde India learning and development is a way of life. The Linde Universitye-campus provides on-time and need-based learning opportunities for employees. Onlinetrainings focused on developing leadership competencies among the managers were introducedin 2014. In certain cases a blend of local site level training or national level andeven international level training programmes leveraging upon the knowledge base andtraining programmes of the Linde Group are used for development of the employees. All newemployees undergo a structured induction program branded as "SAMPARK" and also adetailed Safety Induction program to inculcate the Company's safety culture among all newjoiners.

Your Company continues to actively participate in the Young Talent Developmentprogramme which was launched in 2012 along with other Linde group companies in South Asiaas an initiative to nurture and groom talent through a common talent developmentprogramme.

This is a unique one-year development programme for graduates which received specialrecognition for People Excellence in the 2014 Linde Global HR Awards.

Your Company continued to maintain harmonious industrial relations environment acrossall its manufacturing locations in the country. Long term settlements for wage revision ofunionized staff were concluded at West Bengal Ahmedabad and Jamshedpur and subsequentlyimplemented across the country. The recently concluded Linde Global Employee Survey saw96% participation from employees in India which validates the relationship of mutualtrust that the management enjoys with the employees. Your Company had manpower strength of832 as on 31 December 2014.

Corporate Social Responsibility (CSR)

As informed last year the Board of Directors of your Company had set up a CSRCommittee in February 2014. A CSR Steering Team comprising of cross functional managerswas also set up by the Company to recommend CSR initiatives to the Committee and implementthe decisions of the CSR Committee and the Board. The CSR Policy of the Company wasapproved by the Board in May 2014 and it focuses on four thematic areas of EducationHealth Environment and Skill Development. Particular focus is given to engaging employeesinto the CSR initiatives of the Company. This being the first year of a structured CSRinitiative a part of the year was available for implementation of CSR projects and anumber of initiatives are still in the concept stage while your Company is continuing tofine-tune the execution process. Some of the CSR projects/initiatives that were taken upduring the year include providing special education to physically handicapped children atIndian Institute of Cerebral Palsy (IICP) donation to Jamshedpur colony school adoptionof one classroom at IICP working with Disha (NGO) on school for underprivileged childrensponsoring literacy of 300 women through TARA (NGO) health check-up in Rapcha village inJamshedpur contribution to Prime Ministers' National Relief Fund towards relief of floodvictims in the state of Jammu and Kashmir etc. Your Company hopes to increase its CSRactivities in the coming years towards meeting its obligations on CSR spend under theCompanies Act 2013 thereby making a positive impact on the community.

Safety Health Environment and Quality (HSE)

As a member of The Linde Group your Company aims to improve the quality of theproducts and services constantly while at the same time maintaining highest standards ofsafety health and environmental protection.

Safety is one of the foundation principles upon which the Linde Spirit is built and assuch continues to be the top most priority for your Company.

In order to reinforce on the HSE agenda your Company continues to focus on ensuringcompliance to the Golden Rules of Safety (set of 8 mandatory rules framed to managemitigate and control high risk jobs) at all times. With this objective your Companyregularly conducts Stand Downs to reinforce the Golden Rules of Safety. Stand Downs wereconducted to reinforce Golden Rules around Driving and Vehicles Contractor Management andLifting Operations during the course of 2014. This follows the stand downs related toPermit-to-Work and Working-at-Height which were held in 2013.

You will be happy to note that the Gases Division completed the year without any MIRswhile the combined Gases and Engineering divisions completed the "first ever"365 MIR free days on 26 October 2014 - a significant milestone given the scale andcomplexity of the operations in India. This safety performance stands out given theparticularly difficult road conditions encountered during delivery of our products andchallenges faced by our project teams at construction sites.

Your Company lays great stress on Behavioural Safety which continues to be the keydifferentiator to help create the right safety culture in the organization to sustain andfurther improve safety performance. "Site Safe" programme for operating sitesand "Act Safe" programme for Drivers were conducted at different locationsduring the year. Besides this "Site Safe" sustainability reviews were alsocarried for a number of operating sites that have been certified previously.

Your Company ended the year without any LTI (Lost Time Injury) of its employees whileonly one contactor LTI case was reported in the year. This is indeed a good achievement.However your Company is working steadfastly to further improve the safety performancewith the objective of becoming an "injury free organisation".

Your Company continues to mandate and practice complete transparency in reporting ofall accidents and incidents even the minor ones are reported. Thereafter depending onthe incident the same is duly investigated and corrective actions are identified andimplemented. The "Lessons from Incidents" of all major Incidents are circulatedto prevent repeat of similar incidents.

Your Company has also pushed ahead with the Major Hazards Review Programme (MHRP) andwe are pleased to report that all major high risk sites have been certified with relevantMHRP CAT 1 and CAT 2 certificates. Your Company uses this programme to measure risks andhazards on a uniform basis for all locations and to establish control measures to minimizethese risks as much as possible. In 2014 your Company also focused on MHRP audits oflocations where hazardous materials are used or stored.

Your Company also aims to establish a minimum standard for health management and topromote various measures to improve the health management of our employees andcontractors. On the Health and Occupational Hygiene (HOH) front various training andawareness initiatives have been taken up covering manual handling asbestos and noisemanagement.

Your Company has set up water recycling and rain harvesting facilities at many of itstonnage plant sites. As an integral part of its initiatives to protect the environmentyour Company monitors waste generation emission of greenhouse gases effluents qualityof air etc. at the plant sites.

Outlook

India's economy grew by about 6.2% through 2014. For 2015 the projections showoptimism which is largely due to expectation of policy reforms by the new Government atthe Centre recovery in the global economy easing liquidity speed on policy reforms andnormal monsoons. The economy is projected to achieve a GDP growth of about 8% during2015-16 driven by service sector and industrial growth on the back of policy reforms andlower interest rates.

Steel Production capacity in the country is set to increase to 200 million MT in 2020as compared to a production capacity of 102 million MT in 2013. Majority of the expansionin steel making capacity is driven by country's major steel players like Tata Steel SAILJindal Steel etc. This increase in capacity will make India the second largest steelproducing nation. The Steel industry is set to grow at a CAGR of 8-9% over the next fiveyears.

The industrial gases business is expected to have a strong double digit growth in themedium to long term with demand coming in from Steel Chemicals Energy Automobile etc.Increase in steel production capacity in the country is likely to lead to more on-site gasplants. Besides the "Make in India" campaign of the Government is expected toattract major investments in capital goods infrastructure and pharma sector which augurswell for the growth of Gases industry. Your Company is also focusing on increasing itsfootprint in food and beverage and the oil and gas markets.

The presence of a large domestic population along with the increase in its per capitaincome is expected to provide enough of a demand stimulus to ensure continued economicgrowth for India. All macroeconomic fundamentals will have positive impact on industrialgases and engineering business.

Your Company has been able to develop itself by leveraging the strengths of its parent-both in the gases and engineering segment and putting best commercial practices in placeto win large tonnage gas supply contracts and grow the merchant and packaged gasesbusiness. Your Company is thus poised to become the leading industrial gases company inthe country.

Internal control systems and their adequacy

Your Company has an adequate system of internal control commensurate with the size andthe nature of its business which ensures that transactions are recorded authorised andreported correctly apart from safeguarding its assets against loss from wastageunauthorised use and removal.

The internal control system is supplemented by documented policies guidelines andprocedures. The Company's Internal Audit Department continuously monitors theeffectiveness of the internal controls with a view to provide to the Audit Committee andthe Board of Directors an independent objective and reasonable assurance of the adequacyof the organization's internal controls and risk management procedures.

The Internal Audit function submits detailed reports periodically to the management andthe Audit Committee. The Audit Committee reviews these reports with the executivemanagement with a view to provide oversight of the internal control systems. The Companyreviews its policies guidelines and procedures of internal control on an on-going basisin view of the ever changing business environment.

Your Company's statutory auditors have in their report confirmed the adequacy of theinternal control procedures.

Secretarial audit

The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated 4 April 2014 hadclarified that the financial statements and the documents required to be attached theretothe Auditor's Report and the Board's Report in respect of financial years that commencedearlier than 1 April 2014 shall be governed by the relevant provisions/schedules/ rulesframed under the Companies Act 1956. Therefore although it was not mandatory for theCompany to enclose a Secretarial Audit Report along with its Directors' Report for theyear 2014 your Company has with a view to bring more transparency in compliance withvarious statutory requirements and as a matter of good corporate governance complied withthe provisions of the Secretarial Audit and a Secretarial Audit Report in Form MR-3 givenby Messrs Vinod Kothari & Co. a firm of Practising Company Secretaries is annexedwith this Report. The Report confirms that during the period covered by the Audit theCompany has complied with the statutory provisions listed under Form MR-3 and the Companyhas proper board processes and compliance mechanism in place.

Corporate governance

As a member of The Linde Group your Company attaches great importance to soundresponsible management and good corporate governance. Your Company subscribes to the LindeSpirit and the Code of Ethics of The Linde Group. The Linde Spirit describes the corporateculture manifested in the Linde vision and the values that underpin day to day activitiesand the Linde's Code of Ethics sets out the commitment of all employees to comply withlegal regulations and uphold the ethical and moral values of the Group. Your Company istherefore committed to business integrity high ethical standards and professionalism inall its activities. As an essential part of this commitment the Board of Directorssupports high standards in corporate governance. It is the endeavour of the Board and theexecutive management of your Company to ensure that their actions are always based onprinciples of responsible corporate management. In The Linde Group corporate governanceis seen as an on-going process. Your Company's Board therefore closely follows futuredevelopments in the governance norms and will take lead in ensuring compliance with thesame. A separate report on Corporate Governance along with the certificate of theAuditors B S R & Co. LLP confirming compliance of the conditions of corporategovernance as stipulated under Clause 49 of the Listing Agreement entered into with theStock Exchanges is annexed.

Responsibility statement

As required by Section 217(2AA) of the Companies Act 1956 the Directors state andconfirm:

That in preparation of the annual accounts for the year ended 31 December 2014applicable accounting standards have been followed along with proper explanations relatingto material departures if any.

That they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the aforesaid financial year and ofthe profit or loss of the Company for that period.

That they have 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.

That they have prepared the aforesaid annual accounts on a going concern basis.

Directors

During the year under review there has not been any change in the Board of yourCompany.

At a meeting of the Board of Directors of the Company held on 17 February 2015 on therecommendation of the Nomination & Remuneration Committee Ms. Desiree Co Bacher Headof Finance and Control of RSE Regional Office in The Linde Group was appointed as anAdditional Director (Non-Executive Director) of the Company with effect from that date.Apart from bringing gender diversity on the Board Ms. Bacher also brings with herexperience of over 20 years covering finance and controlling project management anddriving and managing process improvements in finance. The constitution of your Company'sBoard is now fully compliant with the provisions of Section 149 of the Companies Act 2013and revised Clause 49 of the Listing Agreement. Ms. Bacher vacates office as per Article92 of the Articles of Association of the Company at the ensuing Annual General Meeting.Necessary resolution for appointment of Ms. Bacher as Director of the Company is includedin the Notice calling the Annual General Meeting.

Mr. Sanjiv Lamba retires by way of rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment. Necessary resolution for re-appointmentof Mr. Lamba as a Director of the Company is included in the Notice of the ensuing AnnualGeneral Meeting.

The Board recommends the aforesaid resolutions for your approval.

At the Board Meeting held on 17 February 2015 Mr. Binod Patwari stepped down as aDirector of the Company. Mr. Patwari joined the Board as a Director of your Company on 15June 2010 and was later inducted in the CSR Committee of the Board set up last year.During his aforesaid tenure your Board has from time to time benefited from the wisecounsel and experience of Mr. Patwari. Your Directors therefore place on record theirsincere appreciation of the valuable contribution made by Mr. Patwari to the Companyduring his tenure on the Board.

Cost audit

The Central Government's directions vide their Order dated 10 August 2000 pursuant toSection 233B of the Companies Act 1956 requires audit of the cost accounting records ofthe Company relating to Industrial Gases for every financial year. Messrs Ramani Sarkar& Co. a firm of Cost Accountants in Kolkata conducted this audit for the Company'sfinancial year ended 31 December 2013 and submitted their report to the Central Governmenton 27 June 2014. The Company had appointed Messrs Bandyopadhyaya Bhaumik & Co. a firmof Cost Accountants as the Cost Auditor for the year ending 31 December 2014 and necessaryapplication for their appointment was filed by the Company with the Ministry of CorporateAffairs within the due date. The said auditors would be conducting the audit of costrecords for the year 2014 and submit their report in due course.

Auditors

Messrs B S R & Co. LLP Chartered Accountants Statutory Auditors of the Companyretire and being eligible offer them for re-appointment. The Company has obtained awritten consent from Messrs B S R & Co.LLP to the effect that their re-appointment ifmade will be within the limits specified under the Companies Act 2013. In compliancewith the provisions of the Companies Act 2013 it is proposed to reappoint them asstatutory auditors of the Company at the ensuing 79th Annual General Meeting to be held on15 May 2015.

Disclaimer

Certain statements in this report relating to Company's objectives projectionsoutlook expectations estimates etc may be forward looking statements within the meaningof applicable laws and regulations. Although the Company believes that the expectationsreflected in such forward looking statements are reasonable no assurance can be giventhat such expectations will prove to have been correct. Accordingly actual results orperformance could differ materially from such expectations projections etc whetherexpress or implied as a result of among other factors changes in economic conditionsaffecting demand and supply success of business and operating initiatives andrestructuring objectives change in regulatory environment other government actionsincluding taxation natural phenomena such as floods and earthquakes customer strategiesetc over which the Company does not have any direct control.

On Behalf of the Board

S Lamba M Banerjee
Chairman Managing Director
Jaipur
17 February 2015

Annexure to directors' report.

INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT 1956mREAD WITH THE COMPANIES(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES 1988 ('THE RULES')AND FORMING PART OF THE DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2014.

A. CONSERVATION OF ENERGY

a) Energy conservation measures taken:

i) Commissioning of Additional HT Capacitor bank in Selaqui ASU resulting inimprovement of Power Factor and reduction in power cost.

ii) Commissioning of 3 Phase UPS system for Jamshedpur 2550 MAC Motor Excitation Systemfor reduction of plant downtime due to voltage dips resulting in improved plantreliability and reduction in power cost.

iii) Corro-coating of internal parts of cooling water pump and Installation of FRP fanblades on Cooling Tower fans in Jamshepdur ASUs resulting in reduced power consumption.

iv) Reduction in contract demand of Taloja ASU followed by optimum plant loadingresulting in significant savings in power cost.

b) Additional Investments and Proposals:

i) Major investment planned for Vibration Monitoring System to reduce plant outages atupcoming ASU at Kalinganagar Odisha.

ii) Major investment planned for installing Variable Speed Drives in critical CryogenicPumps in Tonnage Operations.

iii) Proposal for investment for auto start implementation in Selaqui ASU to improveoperational efficiency.

c) Impact of above measures on energy consumption and cost of

production:

The above measures will result in savings in consumption of power

improvement in plant reliability and reduction in specific power usage

per unit of output.

d) Energy conservation in respect of specified industries:

Not applicable

B. TECHNOLOGY ABSORPTION

e) As per Form-B of the Rules

I. Research and Development (R&D)

1. Areas in which R&D carried out:

i) Widening application of shielding gases for fusion welding and allied processesspecific to customer requirement was continued during the year.

ii) Testing and analyzing of shielding gases complying to global standards ISO14175:2008.

2. Benefits:

i) Improved quality and production of high quality shielding gases.

ii) Meeting customer specific requirement.

3. Future plan of action:

i) Continue to explore new applications of shielding gases to meet specific need of themarket and roll out similar facilities across multiple packaged gases sites.

ii) As a member of The Linde Group the Company has access to various Research andDevelopment carried out by the Group globally. In view of this the R&D activities ofthe Company are restricted to specific local requirements.

4. Expenditure on R&D:
a) Capital Rs. Nil
b) Recurring Rs. 0.87 million
c) Total Rs. 0.87 million
d) Total R&D expenditure as a percentage of total turnover 0.01%

II. Technology Absorption Adaptation and Innovation

1. Efforts made:

1. Commissioning of 230 bar oxygen filling facility at Bangalore Pune and Kalinganagarpackaged gases plants completed during the year.

2. Ongoing implementation of Individual bar coding and cylinder tracking solution atall Packaged Gas Sites.

2. Benefits derived:

1. Improved productivity and safety in compressed gases business.

2. Improving safety standards in operations.

3. Technology Imported:

Nil

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

f) Activities relating to exports initiatives taken to increase exports etc andexport plans:

The Company's export activities during the year were mainly on account of revenues fromexport orders executed by the Project Engineering Division. The export revenues arelargely towards sale of oxygen plants by the Project Engineering Division to Indonesia andSri Lanka. Besides Gases Division also exported liquid oxygen argon nitrogen andnitrous oxide to Bangladesh. The Company will continue to explore new businessopportunities in the Project Engineering business in the South Asia cluster. In the GasesDivision efforts are on for export of ASU gases and nitrous oxide to neighboringcountries especially Bangladesh in short to medium term.

g) Total Foreign exchange used and earned:

Total Foreign exchange used during the year was Rs. 2112.30 million and total foreignexchange earned during the year was Rs. 439.40 million which included Rs. 242.16 millionfrom exports.