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Sunshield Chemicals Ltd.

BSE: 530845 Sector: Industrials
NSE: N.A. ISIN Code: INE199E01014
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OPEN 281.10
CLOSE 285.80
VOLUME 2495
52-Week high 403.00
52-Week low 245.00
P/E
Mkt Cap.(Rs cr) 198
Buy Price 268.20
Buy Qty 20.00
Sell Price 270.00
Sell Qty 628.00

Sunshield Chemicals Ltd. (SUNSHIELDCHEM) - Director Report

Company director report

Dear Members

Your Directors are pleased to submit their 29th Annual Report of the Company along withthe Audited financial statements for the year ended 31st March 2016:

1. OVERVIEW OF FINANCIAL RESULTS

Highlights of Company’s performance during the financial year 2015-16 is asunder:

(Rs In Lacs)

2015-16 2014-15
Export Sales 8139 6509
Domestic Sales 6798 5346
(Net of Excise Duty)
Other Operating Income 86 45
Revenue from Operations 15023 11900
Other Income 304 69
Total Income 15327 11969
Less :
Materials Consumed 10060 8627
Employees Remuneration & Benefits 667 630
Manufacturing 3315 2428
Administrative Selling &
Other Expenses
Total Expenses 14042 11685
Operating Profit (EBITDA) 1285 284
Less: Finance Cost 1080 349
Profit Before Tax & 205 (65)
Depreciation (Cash Profit)
Less: Depreciation 548 326
Net Profit Before Tax (343) (391)
Less: Tax Expense
Current Tax Expense 4 -
Tax adjustments relating to prior years - 17
Deferred Tax (Credit)/Charge (263) (90)
Net Loss after Tax (84) (318)

2. DIVIDEND

In view of losses the Board of Directors does not recommend any dividend for the yearended 31st March 2016.

3. SHARE CAPITAL

The paid up Equity Share Capital as on 31st March 2016 was Rs 7.35 Crores. During theyear under review the Company has not issued new shares.

4. MANAGEMENT'S DISCUSSION AND ANALYSIS : F.Y. 2015-2016

I. Industry Structure & Development :-

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 chemicalproducts which provide a wide variety of effects on which many other industry sectorsrely.

The Company manufactures a wide range of specially formulated and customized productsfor various Industrial applications. Companys customers are well ’ recognized andlocated not only in India but all over the World especially in the America Europe andFar- 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.

Customers are always expanding and they want to up-grade their products and all theseimprovements need Companys’ R&D and niche formulation and application knowledge& experience. Solvay represents this worldwide knowledge base in specialty chemicalssupporting the Sunshield team.

Company’s main products belong to:

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.

II. Operating and Financial Performance of the Company

(Rs In Lacs)

F.Y. F.Y
2015 - 2016 2014 - 2015 Change over Previous
year
i) Exports 8139 6509 25%
ii) Domestic 7628 6184 23%
iii) Other Operating Income 86 45 91%
Gross Sales 15853 12738 24%
Less: Excise Duty 830 838
Net Sales 15023 11900 26%
Other Income 304 69 341%
Total Income 15327 11969 28%
F.Y. F.Y. Change
2015 2014 over
- 2016 - 2015 Previous
year
Volume Sales (MT) 10446 8576 22%
Net Sales Value (Rs ) 15023 11900 26%
Average Product Price 144 139 4%
(Rs per kg)

During the year Sales by Volume went up by 22% from 8576 Mt. to 10446 Mt. the sales inValue terms went up by 26%. The growth was contributed by increase in average sellingprice of its products from Rs 139 per kg to Rs 144 per kg.

Export Sales went up by 25% from Rs 6509 lacs to Rs 8139 lacs and domestic Sales wentup by 23% from Rs 6184 lacs in 2014-15 to Rs 7628 lacs in 2015-16.

During the year the Company had sold its property situated at Dadar for a totalconsideration of Rs 550 lacs thereby earning a profit of Rs 117 lacs on sale of property.

EBIDTA was up by 352% at Rs 1285 lacs in the year 2015-16 against EBIDTA of Rs 284 lacsin the previous year.

Finance Cost went up from Rs 349 lacs in 2014-15 to Rs 1080 lacs in 2015-16 mainly onaccount of increase in interest cost and Foreign Exchange losses. Interest cost increasedon account of borrowings to finance the capital expenditure. The capital expenditureincurred was during 2014-15 but it was commissioned in 2015-16.

Cash profit (Profit before Tax & Depreciation) was at Rs 205 lacs in the year2015-16 as compared to loss of Rs 65 lacs in the year 2014-15.

III. Outlook

Solvay is actively involved in planning and implementing the current capitalexpenditure through its worldwide professional teams for Products and Project development.The Company now has its Rasal production site upgraded to Solvay standards of safety andefficiency for a multi-product niche specialty product range.

The Companys products continue to be well received ’ by World’s leading usersof specialty chemicals for a diverse range of industrial applications. The Company hasbeen recognized as a reputable and dependable supplier to many Indian and global consumersof specialty products developed in-house.

IV. Risks and Concerns

The Present and future risks are reviewed by the management of the Company at regularintervals. Major risks identified by the business and functions are systematicallyaddressed through mitigating actions on continuous basis. These are discussed at AuditCommittee and Board of Directors Meetings. Following risks are considered as high risksareas:

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 Safetyequipment’s and infrastructure are in place as per statues and global safetystandards.

In addition to above the Company feels that slowdown in world economies will affectdemand from user industry specifically and lower overall demand can bring pressures allover and the aggressive pricing can cause concerns about margins.

V. 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 toCompanys policies the safeguarding of its assets the ’ prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information.

VI. 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 31st March 2016 is 98.

(The statement in this report including Management’s Discussions & AnalysisReport reflects Company's projections estimates expectations or predictions. These maybe forward 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.)

5. BOARD MEETINGS

The Board meets at regular intervals to discuss and decide on Company / business policyand strategy apart from other Board business.

The Board met four times in the financial year 2015-16 i.e on 23rd May 2015 12thAugust 2015 4th November 2015 and 9th February 2016.

6. BOARD COMMITTEES

During the year in accordance with the Companies Act 2013 the Board re-constitutedsome of its Committees. There are currently six Committees of the Board which are givenbelow:

• Audit Committee

Audit Committee includes five Directors viz. Mr. Ajit Shah (Chairman/IndependentDirector) Mr. Sanjeev Mukerjee (Independent Director) Mr. Ranjal Laxmana Shenoy(Independent Director) Mr. Manoj Khullar (Managing Director) and Mr. Satish Kelkar(Non-Executive Director).

The role includes oversight of Companys’ financial reporting process anddisclosure of financial information to ensure that the financial statements are correctsufficient and credible; recommending the appointment re-appointment remuneration andterms of appointment of auditors and approval of payment for any other services renderedby statutory auditors; reviewing with the management quarterly results and annualfinancial statements before submission to the Board for approval; approval or anysubsequent modification of any transactions of the Company with related parties; reviewand monitor the auditor’s independence and performance and effectiveness of auditprocess; scrutiny of inter corporate loans and investments if any; evaluation of internalfinancial controls and risk management system; and reviewing the functioning of thewhistle blower mechanism.

• Nomination and Remuneration Committee

The Board has constituted Nomination and Remuneration Committee which comprises ofthree Independent Directors viz. Mr. Ranjal Laxmana Shenoy Mr. Ajit Shah and Mr. SanjeevMukerjee.

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 their appointment and removal.

• Stakeholders’ Relationship Committee

Stakeholders Relationship Committee comprises of Mr. Sanjeev Mukerjee (IndependentDirector) 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 (Non-Executive Director) and Mr. ManojKhullar (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.

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. Arun Roy (Non-Executive Director) Mr. Manoj Khullar (Managing Director) and Mr. Chidananda Bhagwat(Operation Manager).

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 two Non-Executive Directors Mr. Arun Roy Mr.Satish Kelkar and Mr. Manoj Khullar Managing Director.

7. DIRECTORS’ RESPONSIBILITY STATEMENT

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.

8. FRAUD REPORTING BY AUDITORS

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 ON ANNUAL BASIS

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 KEY MANANGERIAL PERSONNEL

In accordance with the provision of the Companies Act 2013 Mr. Ian Brown and Ms. SzeWee Ong 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 Annexure to the Notice.

During the year Mr. Yogesh Thar and Mr. Pierre Franck Valentin resigned as Directorswith effect from 30 th September 2015 and 29 th February 2016 respectively. Mr. Chen Puceased to be Alternate Director to Mr. Pierre Franck Valentin with effect from 29thFebruary 2016. Your Directors place on record their sincere appreciation of the valuablecontribution made by them during their tenure as Directors of the Company.

The Board of Directors appointed Mr. Ajit Shah as an Additional Director to hold officeas an Independent Director of the Company with effect from 20th October 2015 and Ms.Valdirene Licht as Additional Director with effect from 15th March 2016.

Mr. Shah and Ms. Licht shall hold office of Director upto the date of the forthcomingAnnual general meeting of the Company. The Company has received a notice in writing from amember along with the deposit of requisite amount under Section 160 of the Act proposingthe candidature each of Mr. Shah and Ms. Licht for the office of Director of the Company.

Details of the proposal for appointment of Ms. Valdirene Licht and Mr. Ajit Shah arementioned in the Explanatory Statement under Section 102 of the Companies Act 2013 of theNotice of the 29th 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. Rajeev Gupte Chief Financial Officer and Mr. AmitKumashi Company Secretary of the Company as Key Managerial Personnel 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 working Directors and the Chairman of the Company

12. COMPANY’S POLICY ON DIRECTORS APPOINTMENT AND 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 Managing Director. Salary is paid within the range approvedby the Shareholders. Annual increments effective 1 st January each year as recommended bythe Nomination and Remuneration Committee and is approved by the Board. Within theprescribed ceiling the perquisites package is approved by the Remuneration 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 relevant year measured against Companysobjectives 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 companys 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

Independent Director is a director who has no direct or indirect material relationshipwith Sunshield or any of its officers other than as a director or shareholder ofSunshield.

Independent Director shall meet all criteria specified in Section 149(6) of theCompanies Act 2013 and rules made thereunder.

13. RISK MANAGEMENT POLICY AND INTERNAL

CONTROL ADEQUACY

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 arediscussed 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 itsbusiness and the size and complexity of its operations. These are routinely tested andcertified by Statutory as well as Internal Auditors. Significant audit observations andfollow up actions thereon are reported to the Audit Committee.

14. VIGIL MECHANISM

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’swebsite http://www.solvayindia.in/en/solvay-in/sunshield-chemical-limited. There have beenno instances of any personnel seeking access to the Audit Committee.

15. SIGNIFICANT AND 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 forthe appointment 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.

Cost Auditors

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 year2015-16.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed

M/s. Alwyn DSouza & 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.

Internal Audit

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. AlwynDsouza Company Secretary in Practice in ’ his secretarial audit report.

18. EXTRACT OF ANNUAL RETURN:

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 IN SECTION 188(1)

During the financial year 2015-16 Company has entered into transactions with relatedparties which were in the ordinary course of business and on arms’ length basis andin accordance with the provisions of the Companies Act 2013 Rules issued thereunder.

The details of the related party transactions as required under Accounting Standard -18 are set out in Note 26.9 to the financial statements forming part of this AnnualReport.

The Form AOC- 2 pursuant to Section 134 (3)(h) of the Companies Act 2013 read withRule 8(2) of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure D.

21. FIXED DEPOSITS

The Company has not accepted any fixed deposits during the year.

22. MATERIALCHANGESANDCOMMITMENTSAFFECTING THEFINANCIALPOSITIONOFTHECOMPANY

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.

23. EMPLOYEES

The information required pursuant to 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 E.

24. 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 2015 to March 2016 Number of complaints disposed off during the period April 2015 to March 2016 Nature of action taken by the employer
NIL Not applicable Not applicable

25. CONSERVATION OF ENERGY TECHNOLOGY

ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

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 F to this Report.

26. CORPORATE GOVERNANCE REPORT

Regulation 15 (2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 on the non-applicability of certain regulations of corporate governance is applicableto Sunshield Chemicals Limited ("Company") since Company’s paid-up Capitalis less than Rs 10 crores and networth is less than Rs 25 crores.

27. 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.

28. APPRECIATION

Your Directors place on record their sincere appreciation of the wholehearted supportextended by the Company’s bankers business associates employees’ unionshareholders auditors and various statutory authorities both central and stateGovernment.

For and On Behalf of the Board of Directors

R L Shenoy

Chairman

DIN No. 0074761

Mumbai 30th May 2016