Your Directors are pleased to submit their 30th Annual Report of the Companyalong with the Audited financial statements for the year ended 31stMarch 2017:
1. OVERVIEWOF FINANCIAL RESULTS
Highlights of Company's performance during the financial year 2016-17 is as under:
| || ||(Rs In Lacs) |
| ||2016-17 ||2015-16 |
|Export Sales ||8140 ||8198 |
|Domestic Sales (Net of Excise Duty) ||8356 ||6739 |
|Other Operating Income ||27 ||86 |
|Revenue from Operations ||16523 ||15023 |
|Other Income ||22 ||304 |
|Total Income ||16545 ||15327 |
|Less : || || |
|Materials Consumed ||11358 ||10060 |
|Employees Remuneration & Benefits ||665 ||667 |
|Manufacturing Administrative Selling & Other Expenses ||3661 ||3315 |
|Total Expenses ||15684 ||14042 |
|Operating Profit (EBITDA) ||861 ||1285 |
|Less: Finance Cost ||946 ||1080 |
|Profit Before Tax & Depreciation (Cash Profit) ||(85) ||205 |
|Less: Depreciation ||598 ||548 |
|Net Profit Before Tax ||(683) ||(343) |
|Less: Tax Expense || || |
|Current Tax Expense ||- ||4 |
|Tax adjustments relating to ||- ||- |
|prior years Deferred Tax (Credit)/Charge ||(139) ||(263) |
|Net Loss after Tax ||(544) ||(84) |
II. Operating and Financial Performance of the Company
| ||F.Y. 2016 - 2017 ||F.Y 2015 - 2016 ||Change over Previous year |
|i) Exports ||8140 ||8198 ||(1%) |
|ii) Domestic (including Excise duty) ||9343 ||7569 ||23% |
|iii) Other Operating Income ||27 ||86 ||(69%) |
|Gross Sales ||17509 ||15853 ||10% |
|Less: Excise Duty ||986 ||830 || |
|Net Sales ||16523 ||15023 ||10% |
|Other Income ||22 ||304 ||(93%) |
|Total Income ||16545 ||15327 ||8% |
| || || || |
| ||F.Y. ||F.Y. ||Change |
| ||2016 - 2017 ||2015 - 2016 ||over Previous |
| || || ||year |
|Volume Sales (MT) ||13323 ||10446 ||28% |
|Net Sales Value (Rs) ||16523 ||15023 ||10% |
|Average Product Price (Rs per kg) ||124 ||144 ||(14%) |
During the year Sales by Volume went up by 28% from 10446 Mt. to 13323 Mt. the salesin Value terms went up by 10%.
Export Sales went down by 1% from Rs 8198 lacs to Rs 8140 lacs and domestic Sales wentup by 23% from Rs 7569 lacs in 2015-16 toRs 9343 lacs in 2016-17.
EBIDTA was down by 33% at Rs 861 lacs in the year 2016-17 against EBIDTA ofRs 1285 lacsin the previous year.
Cash profit (Profit before Tax & Depreciation) went down by 58% from '205 lacs inthe year 2015-16 to loss ofRs 85 lacs in the year 2016-17.
Losses are mainly on account of forex fluctuations write off of fixed assets which areno longer in use increase in rates and taxes and increases in operating costs. Theincrease in operating cost is mainly on the account of plant upgrades and other corporateprojects related to manufacturing excellence and other excellence programs at plant whichwill help in increased efficiency and productivity of plant in future etc.
In view of losses the Board of Directors does not recommend any dividend for the yearended 31st March 2017.
The paid up Equity Share Capital as on 31st March 2017 was ' 7.35 Crores.During the year under review the Company has not issued new shares.
4. MANAGEMENT'S DISCUSSION AND ANALYSIS : F.Y. 2016-2017
I. Industry Structure & Development :-
The chemical industry is a key enabler for other industries. As chemicals are consumedin varying proportion by every industry (rightly from electronics to paints frompharmaceuticals to cosmetics) without chemicals sustainable development of other sectorsis not possible.
The Chemical Industry is a crucial constituent of the growing Indian Economy providingthe key material for several industries. The Company is operating only in one Segmentnamely 'Specialty Chemicals'. Specialty Chemicals are particular chemical products whichprovide a wide variety of effects on which many other industry sectors rely.
The Company manufactures a wide range of specially formulated and customized productsfor various Industrial applications. Company's customers are well recognized and locatednot only in India but all over the World especially in America Europe and Far- East.
Our customers represent a wide range of Industries such as Wire Insulation Enamel PVCstabilizers Inks Colours Coatings Textiles Agro Chemicals Polymers PlasticsRubber Latex Tyre and Tubes Conveyor belts Lubricants Additives Home care CosmeticSoaps detergents Fertilizers and many more.
Our Customers are always seeking innovative products formulation for their currentprocess needs which is fullfilled by Company's R&D application knowledge andexperience. Solvay Group which represents this worldwide in specialty chemicals supportsthe Sunshield team.
Company's main products belongto:
a. Specialty Surfactant applications which are predominantly Ethylene Oxide (EO) basedproducts. The technologies developed involve surfactants Esters Amides and othercomplementary processes.
b. Specialty Anti-Oxidants for Lubricants Polymers Rubber Tyre & Latex and otherIndustries involving Aminic& Phenolic technologies and
c. Other Non-EO technologies & customized blends for various applications.
The Company's products continue to be well received by World's leading users ofspecialty chemicals for a diverse range of industrial applications. The Company has beenrecognized as a reputable and dependable supplier to many Indian and global consumers ofspecialty products developed in-house.
Company remains optimistic on its future outlook however there is need to watch outfor Implementation of GST Act and transition from current regime of indirect tax to GSTability of the Company to develop new business in new business segments and effect ofproduction cut announcement by Organization of the Petroleum Exporting Countries (OPEC) oncrude oil prices.
III. Risks and Concerns
The Present and future risks are reviewed by the management of the Company at regularintervals. Adequate risk management is a key success factor to mitigate risks associatedwith the solutions we provide.Major risks identified by the business and functions aresystematically addressed through mitigating actions on continuous basis. These arediscussed at Audit Committee and Board of Directors Meetings. Following risks areconsidered as high risks areas:
i. Foreign Exchange Fluctuations
ii. Procurement Risk
iii. Competition Risk
Major Risk arises from main raw material viz. Ethylene Oxide (EO). EO is currentlyconsistently available from only one manufacturer in the country. Some of the major rawmaterials are hazardous and inflammable. The Company has ensured that Safety equipment'sand infrastructure are in place as per statutes and global safety standards.
In addition to above the Company feels that current geopolitical situation may affectdemand from user industry in certain economies which can bring pressures all over and theaggressive pricing can cause concerns about margins.
IV. Internal Financials Controls and its adequacy
Internal Checks and Controls covering operations of the Company are in place and areconstantly being improved upon. The Company had laid down internal financial controls tobe followed by the Company and such policies and procedures adopted by the Company forensuring the orderly and efficient conduct of its business including adherence toCompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information.
V. Human Resources
Employee relationships at all levels continued to be satisfactory. The management wouldlike to record its appreciation of dedicated and strong support provided to your Companyby its employees at all levels. During the year under review the Company successfullyentered into wage settlement agreement with workers of the Company. The number ofemployees on rolls as on 31stMarch 2017 is 98.
(The statement in this report including Management's Discussions & Analysis Reportreflects Company's projections estimates expectations or predictions. These may beforward looking statements within the meaning of applicable securities laws andregulations. Actual results could differ materially from those expressed or implied sinceyour Company's operations are influenced by many external and internal factors beyond thecontrol of the Company.)
The Board meets at regular intervals to discuss and decide on Company / business policyand strategy apart from other Board business.
The Board metfour times in the financial year 2016-17 i.e on 30th May 20169th August 2016 14th November 2016 and 10th February2017.
There are currently six Committees of the Board which are given below:
Audit Committee includes six Directors viz. Mr. Ajit Shah (Chairman/IndependentDirector) Mr. Sanjeev Mukerjee (Independent Director) Mrs. Aruna Soman (IndependentDirector) (effective from 1stJune 2017) Mr. Ranjal Laxmana Shenoy (IndependentDirector) Mr. Manoj Khullar (Managing Director) and Mr. Satish Kelkar (NonExecutiveDirector).
The role includes oversight of Company's financial reporting process and disclosure offinancial information to ensure that the financial statements are correct sufficient andcredible; recommending the appointment re-appointment remuneration and terms ofappointment of auditors and approval of payment for any other services rendered bystatutory auditors; reviewing with the management quarterly results and annual financialstatements before submission to the Board for approval; approval or any subsequentmodification of any transactions of the Company with related parties; review and monitorthe auditor's independence and performance and effectiveness of audit process; scrutiny ofinter corporate loans and investments if any; evaluation of internal financial controlsand risk management system; and reviewing the functioning of the whistle blower mechanism.
Nomination and Remuneration Committee
The Board has constituted Nomination and Remuneration Committee which comprises ofIndependent Directors viz. Mr. Ranjal Laxmana Shenoy Mr. Ajit Shah Mr. Sanjeev Mukerjeeand Mrs. Aruna Soman (effective from 1stJune2017)
The role of the committee include the Formulation of the criteria for determiningqualifications positive attributes and independence of a director and recommend to theBoard a policy relating to the remuneration of the directors key managerial personneland other employees; formulation of criteria for evaluation of Independent Directors andthe Board; devising a policy on Board diversity; and identifying persons who are qualifiedto become directors and who may be appointed in senior management in accordance with thecriteria laid down and recommend to the Board theirappointmentand removal.
Stakeholders' Relationship Committee
Stakeholders Relationship Committee comprises of Mr. Sanjeev Mukerjee (IndependentDirector) Mrs. Aruna Soman (Independent Director) (effective from 1st June2017) Mr. Ajit Shah (Independent Director) and Mr. Manoj Khullar (Managing Director).
The Committee focuses primarily on monitoring and ensuring that all shareholder andinvestor services operate in an efficient manner and that shareholder and investorgrievances / complaints including that of all other stakeholders are addressed promptlywith the result that all issues are resolved rapidly and efficiently.
Corporate Social Responsibility Committee
The Board has constituted Corporate Social Responsibility Committee comprising of Mr.Ajit Shah (Independent Director) Mr. Arun Roy(Director) Mr. Chidananda Bhagwat(Director) and Mr. Manoj Khullar (Managing Director).
The Committee focuses on formulation and Review of CSR policy indicating activities tobe undertaken by the Company; recommendation of the amount of expenditure to be incurredon CSR activities and monitoring and implementing this policy from time to time.
During the year under review the Company was not required to spend on CSR activities.Asa part of societal action the Company has spent on CSR activities during the year underreview.
The CSR policy of the Company and Annual Report on CSR activities is annexed herewithas Annexure A.
Risk Management Committee
The Board has constituted Risk Management Committee comprising of Mr. Manoj Khullar(Managing Director) Mr. Arun Roy (Director) Mr. Chidananda Bhagwat (Director) and Mr.Shekhar Pattekar (Manager Factory).
The role of Risk Management Committee includes reviewing and approving the riskmanagement policies of the Company; assessment and monitoring of all risks associated withthe operations of the Company and development and implementation of internal complianceand control systems and procedures to manage risk.
Committee for Issue of Duplicate Share Certificates
The Board has constituted a Committee for the purpose of issuance of duplicate sharecertificates. The Committee comprises of one Non-Executive Director viz Mr. Satish Kelkarand three Executive Directors Mr. Arun Roy Mr. Chidananda Bhagwat and Mr. Manoj Khullar.
7. DIRECTORS' RESPONSIBILITYSTATEMENT
In pursuance of section 134 (3)(c )of the Companies Act 2013 the Directors herebyconfirm that:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors have prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and operating effectively;
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
As required under Section 134(3) (ca) of the Companies Act 2013 there are noinstances of Fraud being reported by the Auditors.
9. DECLARATION FROM INDEPENDENT DIRECTORS ONANNUALBASIS
The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 that the Independent Directors ofthe Company meet with the criteria of their Independence laid down in Section 149(6).
10. DIRECTORS AND KEYMANANGERIAL PERSONNEL
In accordance with the provision of the Companies Act 2013 Mr. Satish Kelkar and Ms.Valdirene Licht Directors of the Company retire by rotation and being eligible offerthemselves for re-appointment. The profiles of the Directors seeking re-appointment formpart of the Annexuretothe Notice.
The Board of Directors appointed Mr. Chidananda Bhagwat as an Additional Director tohold office as Director of the Company with effect from 26th May 2017 and Mrs.Aruna Soman as an Additional Director to hold office as an Independent Director of theCompany with effect from 1stJune 2017.
Mr. Bhagwat and Mrs. Soman shall hold office of Director upto the date of theforthcoming Annual general meeting of the Company. The Company has received a notice inwriting from a member along with the deposit of requisite amount under Section 160 of theAct proposing the candidature of Mr. Bhagwat and Mrs. Soman for the office of Director ofthe Company.
Details of the proposal for appointment of Mr. Chidananda Bhagwat and Mrs. Aruna Somanare mentioned in the Explanatory Statement under Section 102 of the Companies Act 2013 ofthe Notice of the 30th Annual General Meeting.
None of the Directors is disqualified from being appointed as Directors as specified inSection 164(2) of the Companies Act 2013.
The Company has recognized pursuant to Sections 2 (51) and 203 of the Act Mr. ManojKhullar Managing Director Mr. Chidananda Bhagwat Director Mr. Rajeev Gupte ChiefFinancial Officer and Mr. Amit Kumashi Company Secretary of the Company as Key ManagerialPersonnel of the Company.
11. ANNUAL EVALUATION
Pursuant to the provisions of the Companies Act 2013 the Board has carried out anannual performance evaluation of its own performance the Directors individually as wellas the evaluation of the working of its Committees. The Independent Directors haveevaluated the performance of the non-independent Directors and the Board as a whole. Theyalso assessed the quality quantity and flow of information between Company's managementand the Board that they are necessary for the Board to effectively and reasonably performtheirduties.
12. COMPANY'S POLICY ON DIRECTORS APPOINT- MENTAND REMUNERATION
In accordance with Section 178 of the Companies Act 2013 the Nomination andRemuneration Committee has formulated Remuneration Policy ("the policy").
The objective of the policy is to ensure that Executive Directors and other employeesare sufficiently compensated for their performance. The Policy seeks to provide criteriafor determining qualifications positive attributes and independence of a director.
Remuneration Policy Directors
Nomination and Remuneration Committee shall recommend the remuneration including thecommission based on the net profits of the Company for the Non-Executive Directors andManaging Director and other Executive Directors. This will be then approved by the Boardand shareholders. Prior approval of shareholders will be obtained wherever applicable incase of remuneration to non-executive directors.
The Company pays remuneration by way of salary perquisites and allowances (fixedcomponent) and variable pay to Wholetime Director. Salary is paid within the rangeapproved by the Shareholders. Annual increments effective 1st January eachyear as recommended by the Nomination and Remuneration Committee and is approved by theBoard. Within the prescribed ceiling the perquisites package is approved by theRemuneration Committee.
The remuneration paid to Executive Directors is determined keeping in view the industrybenchmark and the relative performance of the Company to the industry performance.Perquisites and retirement benefits are paid according to the Company policy as applicableto all employees.
Independent Non-Executive Directors are appointed for their professional expertise intheir individual capacity as independent professionals / Business Executives. IndependentNon-Executive Directors receive sitting fees for attending the meeting of the Board andBoard Committees and commission as approved by the Board and shareholders.
The remuneration by way of commission paid to the Independent Non-Executive directorsis determined periodically & reviewed based on the industry benchmarks.
Key Managerial Personnel and Other Employees
The remuneration of employees largely consists of basic salary perquisites allowancesand performance incentives. Perquisites and retirement benefits are paid according to theCompany policy subject to prescribed statutory ceiling.
The components of the total remuneration vary for different grades and are governed bythe industry pattern qualification & experience / merits performance of eachemployee. The Company while deciding the remuneration package takes into considerationcurrent employment scenario and remuneration package of the industry.
The annual variable pay of managers is linked to the performance of the Company ingeneral and their individual performance for the relevantyear measured against Company'sobjectives fixed in the beginning of the year.
Criteria for Board Membership Directors
The Company shall take into account following points:
Director must have relevant experience in Finance/ Law/ Management/ Sales/Marketing/ Administration/ Research/ Corporate Governance/ Technical Operations or theother disciplines related to company's business.
Director should possess the highest personal and professional ethics integrityand values.
Director must be willing to devote sufficient time and energy in carrying outtheir duties and responsibilities.
Independent Director is a director who has no director indirect material relationshipwith Sunshield or any of its officers other than as a director or shareholder ofSunshield.
Independent Director shall meetall criteria specified in Section 149(6) of theCompanies Act 2013 and rules made thereunder.
13. RISK MANAGEMENT POLICY AND INTERNAL CONTROLADEQUACY
The Company has in place a mechanism to identify assess monitor and mitigate variousrisks to key business objectives. Major risks identified by the businesses and functionsare systematically addressed through mitigating actions on a continuing basis. These
are discussed at the meetings of the Audit Committee and the Board of Directors of theCompany.
The Company's internal control systems are commensurate with the nature of its businessand the size and complexity of its operations. These are routinely tested and certified byStatutory as well as Internal Auditors. Significant audit observations and follow upactions thereon are reported to the Audit Committee.
The Company has established a vigil mechanism named as Whistle Blower Policy within theCompany. The policy of such mechanism has been circulated to all employees within theCompany which provides a framework to the employees for guided & proper utilizationof the mechanism. The Whistle Blower Policy has been published on the Company's websitehttp://www.solvayindia.in/en/solvay-in/sunshield- chemical-limited. There have been noinstances of any personnel seeking access to the Audit Committee.
15. SIGNIFICANTAND MATERIALS ORDERS PASSED BY THE REGULATORS/COURTS/TRIBUNALS
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impacts the going concern status and Company's operations in future.
16. AUDITORS Statutory Auditors
The Statutory Auditors M/s. Deloitte Haskins & Sells LLP Chartered Accountantshold office for a term of Five (5) years subject to ratification by members at everyAnnual General Meeting. Accordingly a Resolution seeking Member's ratification for theappointment of M/s. Deloitte Haskins & Sells LLP is included at Item No. 4 of theNotice convening the Annual General Meeting.
They have issued necessary certificate as required under Section 141 of the CompaniesAct 2013.
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 the Company has appointed M/s. Kishore Bhatia &Associates Cost Accountant as the Cost Auditor of the Company for the financial year2016-17.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. Alwyn D'Souza & Co. Company Secretaries to undertake the SecretarialAudit of the Company. The Report of the Secretarial Audit is annexed herewith as AnnexureB. The Report does not contain any qualification reservation or adverse remark.
M/s. Nikhil Narkar & Associates Chartered Accountants has been appointed asInternal Auditor of the Company.
17. COMMENTS ON AUDITORS' REPORT
There are no qualifications reservations or adverse remarks or disclaimers made byDeloitte Haskins & Sells LLP Statutory Auditors in their report and by Mr. AlwynD'souza Company Secretary in Practice in his secretarial audit report.
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as Annexure C.
19. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186
The Company has not provided any loans Guarantees or made investments under Section186 of the Companies Act 2013
20. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO INSECTION 188(1)
All Related Party Transaction (RPT) entered into by the Company during the year underreview were in the ordinary course of business and on arms' length basis.
All RPT are placed before the Audit Committee for its review and approval. Prioromnibus approval of the Audit Committee is obtained for transactions which are ofrepetitive nature. Pursuant to the provisions of the Listing Regulations 2015 as well asthe Rule 6A of the Companies (Meetings of Board and its Power) Rules 2014 Audit Committeeat its meeting held on 10th February 2016 had granted omnibus approval for theproposed RTP to be entered into during the year under review. Since there are no materialRTP and also all the transactions with related parties are at arms' length and are inordinary course of business no transactions need to be reported in AOC-2.
The Company has not accepted any fixed deposits during the year.
The Company does not have any subsidiary or associates or jointventures as on the dateof this report. Therefore separate section for report on the performance and financialposition of Subsidiaries Associates and Joint Venture Companies is not required.
23. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the financial statements relate and the date of the report.
The information required pursuantto Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is annexed herewith as Annexure D.
25. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
The status of complaints received from female employees with regard to sexualharassment during the year is as under:
|Number of Complaints of sexual harassment received during the period April 2016 to March 2017 ||Number of complaints disposed off during the period April 2016 to March 2017 ||Nature of action taken by the employer |
|NIL ||Not applicable ||Not applicable |
26. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGSANDOUTGO
As required by Section 134(3)(m) of the Companies Act 2013 read with Rule 8 of theCompanies (Accounts) Rules 2014 relevant data pertaining to Conservation of EnergyTechnology Absorption and Foreign Exchange Earnings and Outgo is annexed herewith asAnnexure E to this Report.
27. CORPORATEGOVERNANCE REPORT
Regulation 15 (2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 with respect to Corporate Governance report and certain regulations are notapplicable to Sunshield Chemicals Limited ("Company") since Company's paid-upCapital is less than ' 10croresand net worth is less than ' 25crores.
28. ENVIRONMENT HEALTH AND SAFETY
Your Company recognizes importance of Health and Safety of its employees and itsneighborhood. Regular Safety Audits are being conducted. Your Company has adopted aHealth Safety and Environment (HSE) Policy which applies to all employees andactivities.
Your Directors place on record their sincere appreciation of the wholehearted supportextended by the Company's bankers business associates employees' union shareholdersauditors and various statutory authorities both central and state Government.
| ||For and On Behalf of the Board of Directors |
| ||R L Shenoy |
| ||Chairman |
|Mumbai 26th May 2017 ||DIN No. 0074761 |