NALCO WATER INDIA LIMITED
(FORMERLY KNOWN AS NLC NALCO INDIA LIMITED)
ANNUAL REPORT 2011-2012
Your Board of Directors have pleasure in presenting the Twenty Fourth
Annual Report on the business and operations of the Company together with
the Audited Accounts for the year ended 31st March, 2012:-
FINANCIAL RESULTS Rs. in Crore
Total Income for the year (Net of excise duty) 297.06
Profit before Tax 2.03
Tax on Profits (0.02)
Profit after Tax 2.05
Prior period expenses -
Net Profit after Tax 2.05
ECONOMY & YOUR COMPANY'S BUSINESS
During the year under review, the global economic environment, which
remained tenuous throughout the year, turned sharply adverse in the month
of August-September 2011 owing to the turmoil in the Eurozone, and
questions about the outlook on the US economy provoked by rating agencies
which indirectly told upon the Indian economy as well. At the same time,
sight must not be lost of the fact that, by any cross country comparison,
India remains among the front-runners. However, political instability,
stiff inflationary pressures, interest rate and foreign exchange rate
fluctuations, fluctuating oil prices and weak manufacturing activity have
led to loss of revenue and a consequent cash crunch in the economy.
Your Company witnessed an increase in sales volumes by 16% during the year
under consideration in comparison to last year which supported recovery of
the loss of previous year marginally. In addition to this, your Company
received a one time subsidy of Rs.65.19 crore from Nalco Company USA, its
holding company towards meeting administrative expenses incurred by your
Company for relocation of its operations and also for materializing the
investment plans that your Company has drawn for sustainable growth. But
the above mentioned macroeconomic factors coupled with rising cost of
capital, raw material cost, steep increase in administrative and
miscellaneous expenses had a negative impact on the revenue earnings of
your Company. Challenges were in managing cash to cash cycle (payment for
procurement to collection for sales) which needs continuous fund infusion
and consequently increases the capital requirements. This risk is
especially relevant for a growth oriented Company like yours and the kind
of business your Company operates in. Efforts to rejuvenate the bottom line
through careful management of the expenses, consolidation of services,
savings linked performance incentive schemes, price hike of products and
sales volume increase remains unabated.
Nalco Holding Company, the parent company of Nalco Company USA, (holding
Company of Your Company) got merged with Ecolab Inc., the global leader in
cleaning, sanitizing, food safety and infection prevention products and
services. Thus Ecolab, Inc. happens to be the ultimate parent company of
your Company as a consequence of this merger. Apart from the same, the
above merger had no immediate legal implication on the legal status of your
The business environment will continue to remain challenging characterized
by intense competition, margin pressures and regulatory interventions.
These changes pose many challenges and opportunities to companies operating
in this environment. Our goal is to leverage our strengths to continue to
expand our capacities in each of our respective business lines and expand.
This growth requires a large pool of trained sales people on continuous
basis for implementation of the system and also require a dedicated dealer
network. We are using advanced automation technologies and chemistries to
manage water effectively and economically in both municipal and industry
space which in turn will resolve the issue of insufficient water for
sustainable development. The growing water scarcity across the Country is a
significant challenge and our water purification, recycle and reuse
initiatives will play an important role in the time to come.
Your Directors does not recommend any dividend for the year under review.
EMPLOYEE SAFETY & MINIMISING RISK
Our endeavor to keep the employees, customers and other stake holders safe,
continues unabated. Regular safety audits at all our direct and indirect
business locations, safety training for the employees within and beyond the
workplace is being given the topmost priority. Across the organizational
pyramid, employees are being trained to be safety conscious through safety
leadership training, emergency response training and making them feel a
sense of oneness with the organization. Your Company values the life of its
employees and it is a no-compromise clause of running and expanding our
business across the world.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility has become a worldwide concept whereby
organizations consider the interests of society by taking responsibility
for the impact of their activities on customers, employees, shareholders,
communities and the environment in all aspects of their operations. It is
one of the most important global issues with serious challenges and
implications on almost all sectors. Surging economies, including India, are
coping with issues related to poverty, child rights, and community welfare.
Government of India through the Ministry of Corporate Affairs has issued
voluntary guidelines asking the Corporates to contribute their bit for the
triple bottom line objective- people, planet and profit. During the year
there were quite a few activities undertaken by your Company in furtherance
of its objectives aimed at enabling our employees evolve into 'Corporate
Citizens'. Some of these included visiting orphanages and old age homes,
spending time with the inmates, and also providing food and rations to
them, blood donation camps. These activities were carried out across all
our district offices. These engagement opportunities witnessed wholesome
participation from the employees to contribute for the underprivileged.
RESEARCH AND DEVELOPMENT (R&D)
The Research and Development (R&D) team comprises of 55 researchers
catering to Oil Field Chemicals (OFC), Downstream Energy Services (DS), and
Water and Process Services (WPS) with the main focus area being Oil Field
Chemicals. The team successfully completed the first Nalco Compliance
Assessment Policy (NCAP) safety review for the R&D lab in November 2011 and
the safety review board commended the R&D team for their attention to
details in safety awareness, risk assessment of all equipment in the lab,
excellent housekeeping, and exemplary safety record with zero incidents in
The team provided advanced technical support to global business team (Asia
Pacific, North America, Middle East, and Europe) with potential account
value of more than 159 MM USD. One of the key activities that the team
participated in 2011 was Water Audit through which a thorough study of
water use is done to understand areas of improvement for the customer to be
sustainable with the ability to reduce their water footprint. This in turn
helped your Company to generate additional revenue opportunities. The team
is geared up to support the regional and global business in meeting their
accelerated growth plans for 2012 through suitable deployment of resources
in critical areas of technical support, project prioritization, and
With an endeavor to build up a committed human capital, focused efforts
were undertaken to develop and nurture human resources through in-house,
external professional development programmes and on-job training for
upgrading technical, marketing and management skills. Your Company
recognizes the importance and contribution of human capital and therefore
appreciates and motivates them to pursue excellence. Congenial work
environment, Performance orientation, corporate ethics, creating trusting
relationships, promoting merit and performance-driven rewards and
recognition systems, employee satisfaction surveys have been the high
priority areas to retain talent.
The current employee strength of your Company has exceeded 600 with the
year 2011 witnessing 201 new employees hiring in divisions like Research
and Development, Nalco 360, Engineering and Projects Division and Sales.
Growth was not restricted to new additions, but also occurred in the form
of employees being transferred or promoted to new roles across the
organization. All new hires also have been put through a thorough onboard
training session which equips them with information about your Company's
policies and standards. During the year, new policies were introduced and
existing policies were modified to make it more employee friendly.
Your Directors wish to place on record their appreciation for the strong
contribution made by employees who have demonstrated consistent and highly
motivated performance throughout the year.
Statement under Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particulars of Employees) Rules 1975 as amended upto date, in
respect of the Company's employees are given in the Annexure which forms
part of this Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 21 7(2AA) of the Companies Act, 1956, your Directors
a. In the preparation of the annual accounts, the applicable accounting
standards have been followed;
b. Appropriate accounting policies have been selected and applied
consistently, and judgments and estimates have been made that are
reasonable and prudent so as to give a true and fair view of the state of
affairs of the Company as at 31st March, 2012 and of the profit and loss
statement of the Company for the period 1st April, 2011 to 31st March,
c. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
d. The annual accounts have been prepared on a going concern basis.
Members are requested to appoint Auditors for the period from the
conclusion of the ensuing Annual General Meeting till the conclusion of the
Annual General Meeting to be held next year and to authorize the Board of
Directors to fix their remuneration. Messrs. Price Water House & Co,
Chartered Accountants, (FRN 007567S), the retiring Auditors have indicated
their willingness to continue and have furnished a letter to the Company in
this respect and has given the requisite certificate in terms of Section
224(1B) of the Companies Act, 1956. The Audit Committee at their meeting
held on 19th June 2012 has recommended the appointment of Price Water House
& Co, Chartered Accountants (FRN 007567S), as statutory auditors of your
Company for the financial year 2012-13.
Pursuant to Section 233B of the Companies Act, 1956, the Central Government
vide their Order dated 24th January 2012 ('said letter') has prescribed
cost audit of the Company's product 'Organic and Inorganic Chemicals. The
cost audit for the financial year ended 31st March 2012 is under process by
M/s. D. K. Gupta & Co., Cost Accountants of 7A, Dacres Lane, Kolkata 700
069 and the Company will submit the Cost Auditor's Report to the Central
Government within the prescribed statutory time limit i.e. within 30th
Your Directors at its meeting held on 20th June 2012 has appointed M/s.
D.K. Gupta & Co., Cost Accountants of 7A, Dacres Lane, Kolkata 700 069 as
cost auditors on recommendation of the Audit Committee to audit the cost
records of your Company for the FY 2012-2013. The requisite certificates
under Section 233B (5) read with Section 224 and sub-section (3) of Section
226 and Section 224(1 ) (B) of the Companies Act, 1956 have been furnished
by the said cost auditor.
We, the Members of the Board, wish to place on record our profound grief
and deep sense of sorrow at the sad and sudden demise of Mr. Provakar
Sengupta, Independent Director and Chairman of the Audit Committee on 1 7th
May 2012, after a short span of illness.
We record our appreciation on the professional service rendered by him,
since he joined as a Director of the Company.
Mr. Karl Sohrab Munshi, has been appointed as Director in casual vacancy in
place of Mr. Provakar Sengupta by your Board of Directors at its meeting
held on 19th June 2012. He has also been appointed as the member and
Chairman of the Audit Committee and a member of the Remuneration Committee
of the Company as on that date. Mr. Munshi is a Chartered Accountant by
profession and he is one of the Board members of Tuskan Ventures, a PE
Company in Mumbai. Across his professional career he has served several
coveted positions and has been a pioneer in Strategic Planning/Business
Development, Large project implementation, organisation redesign and
Mr. Mahesh Rao was inducted as Additional Director by your Board of
Directors with effect from 22nd March 2012.
Mr. Rao is a B.E. in Chemical Engineering and has over 25 years of
experience in Business Development, Sales & Marketing, Key Account
Management, Team Management and Service Operations in the Water Treatment
Industry. Before joining your Company he was associated as the Regional
Marketing Manager-Nalco Asia Pacific Region.
Mr. Alok Kumar Bhadra, the Managing Director of the Company through his
letter dated 1 st June 2012 requested the Board of Directors to relieve him
from the office of Managing Directorship at a shorter notice w.e.f. 18th
June 2012 and from his directorship w.e.f 21st June 2012 as he had been
requested by the Parent Company to take up a special assignment. The
Directors accepted the resignations and placed on record their appreciation
of the valuable service rendered by Mr. Bhadra while he was the Managing
Director. Subsequent to Mr. Bhadra's resignation from the post, the Board
of Directors at their meeting held on 19th June 2012 appointed Mr. Mahesh
Rao as the Managing Director of the Company w.e.f. 19th June 2012 for a
period of 5 years. An abstract of the terms and conditions of his
appointment were duly circulated to the Members within the statutory time
limit. Necessary resolution for obtaining consent of the members for
approval of the appointment and remuneration of Mr. Rao has been included
in the Notice of the Annual General Meeting.
As an Additional Director Mr. Rao will hold office till the date of ensuing
Annual General Meeting and your Company has received notice from a member
pursuant to Section 257 of the Companies Act, 1956, signifying his
intention to propose the candidature of Mr. Mahesh Rao for the office of
Director. Necessary resolution for re-appointment of Mr. Rao as a Director
liable to retire by rotation has been included in the Notice of the Annual
In accordance with the provisions of the Companies Act, 1956 Mr. David M A
Knowles and Mr. Hin Hao Liaw are liable to retire by rotation at the
ensuing Annual General Meeting and being eligible have been proposed for
In respect of excess remuneration to the tune of Rs.36.00 lakhs paid to Mr.
Alok Kumar Bhadra, erstwhile Managing Director of the Company, necessary
application is being made to the Central Government for permission to waive
recovery of excess sums paid to Mr. Bhadra. Necessary resolution in this
regard for obtaining consent of the members for such waiver has also been
included in the Notice of the Annual General Meeting.
PARTICULARS UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956
The information required in accordance with the provisions of Section
217(1)(e) of the Companies Act, 1956 is given in the Annexure which forms
part of this Report.
We thank our customers, vendors, shareholders, bankers and other financial
and non-financial institutions, share transfer agents for their continued
support during the year. We place on record our appreciation for the
contribution made by our employees at all levels for their hard work,
solidarity, cooperation and support.
We thank the Government of India, Direct & Indirect Tax Departments, the
Ministry of Commerce, the Ministry of Finance, the Ministry of Corporate
Affairs, the Reserve Bank of India, the state governments and other
government agencies for their support, and look forward to their continued
support in the future.
By Order of the Board
David M.A. Knowles
Date : 12th July, 2012
ANNEXURE TO THE DIRECTORS' REPORT
Information pursuant to Section 217(1)(e) of the Companies Act, 1956 A)
Conservation of energy
a) The Company's plant is not energy intensive. The plant has been designed
after taking into consideration all factors necessary for maximization of
efficiency of energy.
b) No additional investment is proposed.
c) As stated above, the Company's plant is not energy intensive and as
such, the impact of energy conservation will be minimal.
d) 1. Power & Fuel Consumption
Unit (Lac Kwh) 9.49 9.832
Total amount (Rs. Lacs) 70.46 65.59
Rate/Unit 7.424 6.67
(ii) Own generation
(During power cuts
Unit (Lac Kwh) 0.0157 0.0297
Units/KLof Diesel Oil (Rs. Lacs) 0.41726 0.39386
Cost/Unit (Rs.Kwh) 13.9 9.42
(b) Through steam
Unit (Kwh) N.A. N.A.
Unit/te of Coal (Kwh) N.A. N.A.
Cost/Unit (Rs.Kwh) N.A. N.A.
Quantity (Tes) N.A. N.A.
Total cost (Rs. Lacs) N.A. N.A.
Average rate (Rs./Te) N.A. N.A.
(d) Furnace Oil
Quantity (KL) N.A. N.A.
Total amount (Rs. Lacs) N.A. N.A.
Average rate (Rs/KL) N.A. N.A.
(e) High Speed Diesel
Quantity (KL) 65.452 68.305
Total amount (Rs. Lacs) 27.31 26.9
Average rate (Rs/KL) 41726 39386
2. Consumption per unit of production
Electricity High Speed Diesel
2011-12 2010-11 2011-12 2010-11
Oilfield Chemicals 139.32 162.13 0.0096 0.0113
B) Technology absorption
Research and Development (R&D)
4) As a result of the above, good progress was made in substituting
selected imported raw materials with the indigenous raw materials. Indian
manufacturers certified by the Company are eligible to supply to Nalco
companies in other locations.
5) Local suppliers are being identified and developed to provide raw
materials meeting required specifications.
Research & Development continue to work closely with the Technical
Collaborators with the objective of marketing and manufacturing chemicals,
which will be mostly, used in core sector industries.
6) Expenditure on R&D during the financial year ended 31st March, 2012:
Rs. in Lacs
a) Capital 377.90
b) Recurring 3468.27
c) Total 3846.17
d) Total R&D expenditure as a
percentage of total turnover 0.13%
Technology absorption, adaptation and innovation
1) The Company continues to introduce new products manufactured with the
technical knowhow received from its technical collaborators Nalco
Company,USA.Experts from technical collaborators visit the Company to
impart training in the manufacture and application of sophisticated
chemicals. The Company's employees also visit the technical collaborators
for training in the areas of research, manufacture, plant operation,
analytical testing, product application and service programs.
2) The above measures contribute to successful development of new chemical
products, substituting certain imported raw materials with indigenous raw
materials and cost reduction. The Company's customers are improving their
end products production efficiency.
3) During the accounting period ended 31st March, 1989, the Company had
received from its technical collaborators, Nalco Company, USA the
technology package in terms of its Agreement with them of 1st August, 1988.
The relevant information in respect of the technical knowhow is furnished
a) Technology imported: The Company has received from its technical
collaborators knowhow comprising product specifications, engineering and
technical data, quality control information, manufacturing data, product
application information and other knowhow associated with the construction
of a plant and the manufacture and marketing of the products to be
manufactured under the Agreement with the technical collaborators.
b) Year of import: The knowhow was imported during the accounting period
ended 31st March, 1989.
c) Absorption of technology: The plant of the Company had been commissioned
on 9th March, 1990 and the Company has successfully manufactured at its
plant sophisticated Water Treatment Chemicals, Oilfield Chemicals and
Industrial Additives by using the technology received under the
d) Plan for absorption of technology: The absorption process has progressed
along with increase in the utilization of the plant and expansion of the
product and customer base. New applications result from changing economic
and environmental variables impacting our customers and prospects.
e) Laboratory and Macro-process simulation of industrial unit operations
have been installed at the Pune R&D center and utilized to demonstrate
equivalency with Industrial systems. These can be used to develop new
solutions to known problems. They are also used to predict conditions
before the customer has the problem, allowing a preventative process to be
C) Foreign exchange earnings and outgo
a) As the Company is predominantly in import substitution, currently the
opportunities for export is limited. However in the current year, very
small exports have been made.
b) During the year, the Company achieved export earnings of Rs.11038 lakhs
and total foreign exchange used by the Company on imports and other
expenditure was Rs.12539 lakhs respectively.
By Order of the Board
David M.A. Knowles
Date : 12th July, 2012