Your Directors are pleased to present the twenty eighth Annual Report and the Company'saudited financial statements for the year ended on March 31 2017.
1. FINANCIAL RESULTS
| ||2016-2017 ||2015-2016 |
| ||(12 months) ||(9 months) |
|Revenue ||322378.93 ||235671.61 |
|Profit before tax ||27784.84 ||8485.04 |
|Tax expenses ||9843.61 ||2780.39 |
|Profit after tax ||17941.23 ||5704.65 |
|Interim/Final Dividend on equity shares (including corporate dividend tax) paid during the year ||1161.52 ||3484.42 |
|Transfer to general reserve ||10000.00 ||4000.00 |
|Balance carried forward ||9845.71 ||3066.00 |
During the year under review your Directors declared an interim dividend of R 1.00 perequity share. Your Directors now recommend a final dividend of R 3.50 per equity shareentailing an out go R 4084.32 lakhs including corporate dividend tax. The total dividendfor the year would thus be R 5245.84 lakhs including corporate dividend tax.
3. REVIEW OF OPERATIONS
The price of Styrene Monomer (SM) the main raw material for your Company's products wasgenerally stable in the first half of the year under review resulting in volume growth inall your Company's products. However the tight availability of SM during the latter halfof the year due to declaration of force majeure in two large plants in USA and bunching ofturnarounds of plants in Europe and Asia lead to volatility in SM price and had an adverseimpact on all styrenics products. This was further compounded by demonetisation withconsequent cash crunch in the unorganised sector dampening business sentiment. Theseevents culminated in a modest sales volume growth for your Company during the year underreview.
The domestic Polystyrene (PS) industry witnessed a fall in demand during the year underreview due to the reasons mentioned earlier even though the industry had shown a healthygrowth upto October 2016. Export volumes were flat for the year under review due to geopolitical issues in some export markets and low net back.
The domestic Expandable Polystyrene (EPS) market grew by 10.70% during the year underreview compared to the previous year. This growth was largely due to demand from fish boxmarket grapes packaging for exports and insulation for cold storages.
The Speciality Polymer and Compounds (SPC) business is showing steady growth withintroduction of new grades like black and coloured masterbatches which are receivingencouraging feedback from customers. SPC business grew at 44% during the year underreview.
Extruded Polystyrene Insulation Board (XPS) grew by 35% during the year under reviewwith your Company supplying XPS to several prestigious educational hospitality medicaland SEZ projects.
Styrene Methyl Methacrylate (SMMA)
The modified PS line with the ability to swing between PS and SMMA was ready forcommercial production after necessary trial runs on February 3 2017. Seed marketing hascommenced and positive feedback has been received from the market. Your Company is thefirst one to manufacture this in India. It is an economical alternate to certainapplications of PMMA Polycarbonate and clear ABS.
Status of Insurance Claim - Chennai Plant
The settlement of the loss/damage to the assets at the EPS plant in Tamil Nadu due tofloods in December 2015 is in progress. Your Company had filed an initial claim of V 1092lakhs. Your Company has till date received interim claim of V 718 lakhs. Your Company hasadequate insurance cover on reinstatement basis for fixed assets and on cost basis for rawmaterials and stores and on market price basis for finished goods the management of yourCompany does not expect any financial loss on account of the same. Your Company is alsoinsured for "Loss of Profit" during the period the plant operations were shut.
4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT & CORPORATE GOVERNANCE
Management Discussion and Analysis for the year under review is presented separately inthe Annual Report. The Report on Corporate Governance forms an integral part of thisReport. The compliance of 'Corporate Governance' conditions has also been certified by theAuditors and the same is annexed to the report on Corporate Governance.
5. HEALTH SAFETY & ENVIRONMENT
Both the Environmental Management System and Occupational Health and Safety ManagementSystem continued to be maintained by your Company as per the ISO 14001:2015 Standard andOHSAS 18001:2007 Standard respectively.
Your Company has continued implementation of HSE management Systems under the GuidingPrinciples of declared Integrated Management System policy. ('Occupational Health andSafety Policy' and 'Environmental Policy').
HSE Performance Index for the period under review stood to be in "Excellent"Range.
The Company has completed 6012 accident free days as on March 31 2017.
6. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Shri Rajan B. Raheja (DIN 00037480) and Shri B. L. Taparia (DIN 00112438) Directors ofthe Company retire by rotation and being eligible offer themselves for re-appointment.
A brief resume of the Directors eligible for re-appointment is given in the report onCorporate Governance.
During the year under review the members re-appointed Shri M. P Taparia (DIN 00112461)and Shri S. J. Taparia (DIN 00112513) as Non-Executive Non-Independent Directors liable toretire by rotation.
During the year under review the members appointed Shri N. Gopal as the Manager of theCompany for the period from April 20 2016 to March 31 2018.
Your Company has received declarations from all the Independent Directors of theCompany confirming that they meet the criteria of independence as prescribed both underthe Companies Act 2013 and the Listing Agreement with the Stock Exchanges.
Your Company has in place criteria for evaluation of performance of the BoardIndependent Directors and Non-Independent Directors approved by the Nomination andRemuneration Committee.
The Independent Directors in their meeting evaluated the performance of the Board theChairperson and the Non-Independent Directors while the Nomination and RemunerationCommittee evaluated the performance of all the Directors. The Board evaluated theperformance of the Independent Directors.
The criteria/policies of the Company for selection of Directors and Remuneration Policyfor Directors Key Managerial Personnel and other Employees are attached herewith markedas Annexure-1
The details ofthe Familiarisation Programme for Independent Directors are placed on thewebsite of the Company and can be accessed at http://supremepetrochem.com/pdf/Familiarisation-Programme-For-Independent-Directors.pdf
7. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 (5) of the Companies Act 2013 your Directors confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;
(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 this 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;
(e) the directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively;
(f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
8. TRANSFERS TO INVESTOR EDUCATION AND PROTECTION FUND
Your Company transferred an aggregate amount of R 25.95 lakhs during the year underreview to the Investor Education and Protection Fund. The aggregate amount transferred tothe fund since January 2002 is R 297.28 lakhs.
The unclaimed dividends on equity shares paid in October 2010 will be due for transferto the Fund in November 2017. Investors who have not yet claimed these dividends arerequested to contact either the Company's Secretarial Department or the R & T Agents.
The Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 as amended by Ministry of Corporate Affairs w.e.f. February 28 2017(the Rules) inter-alia provide for transfer of shares in respect of which dividend has notbeen encashed by the shareholders for seven consecutive years or more in the name ofInvestor Education and Protection Fund (IEPF) Suspense Account.
Adhering to the various requirements set out in the Rules the Company has communicatedindividually to the concerned shareholders whose shares are liable to be transferred toIEPF Suspense Account under the said Rules.
The Company has uploaded full details of such shareholders and shares due for transferto IEPF Suspense Account on its website at www.supremepetrochem.com/ investorrelations.Members are requested to complete formalities for claiming unpaid dividend if any by May31 2017. Please refer to the section Shareholders' Assistance in the Corporate GovernanceReport for further details.
9. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNING AND OUTGO
Information as per Section 1 34(3)(m) read with COMPANIES DISCLOSURE OF PARTICULARS INTHE REPORT OF THE (BOARD OF DIRECTORS) RULE 8 OF THE COMPANIES (ACCOUNTS) RULES 2014forms part of the DIRECTORS' REPORT for the year under review.
A. CONSERVATION OF ENERGY
Energy conservation programmes at both plant locations resulted in savings of energy tothe extent of 722556 KWH (423283 KWH in the Amdoshi Plant and 299273 KWH in the plant inManali Chennai).
The energy conservation progammes consisted mainly of the following :
At the plant in Amdoshi Maharashtra
1) Process optimisation to achieve energy efficiency by elimination of dryer blower inthe EPS plant and optimising use of chilled water unit in the XPS plant.
2) Installation of modern energy efficient devices like motors air conditioners inplace of old high energy consuming devices.
3) Replacing fluorescent lamps tube lights mercury vapour and sodium vapour lightfittings with energy efficient LED fittings.
At the plant in Manali Chennai
1. Improvement in process operations resulting in savings in electrical energy consumedin the production of EPS.
2. Replacing in a phased manner all the old high energy consuming devices likecompressors blowers with modern energy efficient ones.
3. Replacing conventional drives with Variable Frequency Drives (VFDs) whereverpossible.
4. Replacing in a phased manner the existing light fittings with energy efficient LEDfittings.
B. TECHNOLOGY ABSORPTION
During the period under review your Company entered into a technology supply agreementwith Polysty Inc. USA for the modification of one PS line into a swing line capable ofproducing either PS or SMMA. This technology has been absorbed successfully bycommissioning the modified swing line
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
|Foreign exchange earnings and outgo ||2016-2017 |
|a. Foreign exchange inflow ||60325.92 |
|b. CIF value of imports including capital goods ||234334.84 |
|c. Expenditure in foreign currency ||712.67 |
10. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules areprovided in the Annual Report. Disclosures pertaining to remuneration and other details asrequired under Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are providedin the Annual Report. Having regard to the provisions of the first proviso to Section136(1) of the Companies Act 2013 and as advised the Annual Report excluding theaforesaid information is being sent to the members of the Company.
The said information is available for inspection at the registered office of theCompany during working hours and any member interested in obtaining such information maywrite to the Company Secretary and the same will be furnished on request. The full AnnualReport including the aforesaid information is being sent electronically to all thosemembers who have registered their email addresses and is available on the Company'swebsite.
The information required under Section 197 of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:
a. The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
b. The percentage increase in remuneration of Manager CFO and Company Secretary
|Designation ||% increase in remuneration in the financial year |
|Manager (20/04/2016 to 31/03/2017) ||10.58 |
|Chief Financial Officer ||9.45 |
|Company Secretary ||6.99 |
c. The percentage increase in the median remuneration of employees in the financialyear : 8.4%
d. The number of permanent employees on the rolls of Company : 353
e. The explanation on the relationship between average increase in remuneration andCompany performance:
On an average employees received an annual increase of 7.2%. The operating profitsbefore interest depreciation and tax was R 30476.81 lakhs compared to R 10720.91lakhs in the previous year (9 months period). The increase in remuneration is in linewith the market trends. The increments are also linked to Company's performance apartfrom an individual's performance.
f. Comparison of the remuneration of the key managerial personnel against theperformance of the Company:
|Aggregate remuneration of Key Managerial Personnel (KMP) during the year under review (R in lakhs) ||419.78 |
|Revenue (R in lakhs) ||322378.93 |
|Remuneration of KMP (as % of revenue) ||0.13 |
|Profit before Tax (PBT) (R in lakhs) ||27784.84 |
|Remuneration of KMP (as % of PBT) ||1.51 |
g. Variations in the market capitalisation of the Company price earnings ratio asat the closing date of the current financial year and previous financial year i.e. fromJuly 1 2015 to March 31 2016:
|Particulars ||March 31 2017 ||March 31 2016 ||% Change |
|Market capitalisation (R in lakhs) ||292352.68 ||105428.39 ||177.30 |
|Price earnings ratio ||16.30 ||18.49 ||(11.84) |
h. Percentage increase over decrease in the market quotations of the shares of theCompany in comparison to the rate at which the Company came out with the last publicoffer:
|Particulars ||March 31 2017 ||February 21 1994 (IPO) ||% Change |
|Market Price (BSE) ||302.45 ||10 ||2924.50 |
|Market Price (NSE) ||302.95 ||10 ||2929.50 |
i. Comparison of remuneration of each key managerial personnel against theperformance of the Company:
|Particulars ||Manager* ||Chief Financial Officer ||Company Secretary |
|Remuneration during the year under review (R in lakhs) ||184.37 * ||192.29 ||43.12 |
|Revenue (R in lakhs) || ||322378.93 || |
|Remuneration as a % of revenue ||0.06 ||0.06 ||0.01 |
|Particulars ||Manager* ||Chief Financial Officer ||Company Secretary |
|Profit before tax (PBT) (R in lakhs) || ||27784.84 || |
|Remuneration (as % of PBT) ||0.66 ||0.69 ||0.16 |
* 20/04/2016 to 31/03/2017
j. The key parameters for any variable component of remuneration availed by thedirectors:
k. The ratio of the remuneration of the highest paid director to that of theemployees who are not directors but receive remuneration in excess of the highest paiddirector during the year
l. Affirmation that the remuneration is as per the remuneration policy of theCompany:
The Company affirms that the remuneration is as per the remuneration policy of theCompany.
11. AUDITORS AND AUDITORS' REPORT
The members in the Annual General Meeting have appointed M/s. G M Kapadia & Co.Chartered Accountants Firm Registration No. 104767W as Statutory Auditors of the Companyto hold office until the conclusion of the Annual General Meeting to be held in thecalendar year 2018. In accordance with the first proviso of Section 139(1) of theCompanies Act 2013 the appointment of the Auditors is to be ratified by members at everyAnnual General Meeting. The Auditors have confirmed their eligibility to the effect thatthe ratification of their appointment if made would be within the prescribed limits ofthe Companies Act 2013 and that they are not disqualified for such appointment. There areno qualifications or adverse remarks in the auditors' report.
Cost Auditors' report for the year 2015-2016 was filed with the authorities on July 282016 well within the due date. M/s. Kishore Bhatia & Associates Cost Accountantshave been appointed as Cost Auditors to audit the cost accounts of the Company for thefinancial year April 01 2016 to March 31 2017.
The Company had appointed M/s. Parikh & Associates Company Secretaries to conductsecretarial audit for the year under review. The secretarial audit report for thefinancial year ended March 31 2017 is annexed hereto marked as Annexure-2. TheSecretarial Auditors' Report does not contain any qualifications or adverse remark.
12. RELATED PARTY TRANSACTIONS
Transactions with related parties during the year under review were in the ordinarycourse of business and on an arm's length basis. During the year the Company had notentered into any contract or arrangement with a related party which would be considered asmaterial in accordance with the policy of the Company on materiality of related partytransactions.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: http://supremepetrochem.com/pdf/Policv-On-Dealing-With-Related-Partv-Transactions.pdf. Information on related partytransactions are given in Annexure-5 in Form AOC-2 forming part of this report.
13. CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility Committee has formulated and recommended to the Boarda Corporate Social Responsibility Policy (CSR Policy) indicating the activities to beundertaken by the Company. This Policy has been approved by the Board. The CSR Policy isavailable on the Company's website at the link: http://supremepetrochem.com/pdf/Corporate-Social-Responsibility.pdf
The Company has identified the following areas for its CSR activities:
(i) promoting preventive health care and sanitation and making available safe drinkingwater.
(ii) promoting education including special education and employment enhancing vocationskills livelihood enhancement projects granting of scholarships and building/improvinginfrastructure at educational institutions.
(iii) protection of national heritage art and culture including restoration ofbuildings and sites of historical importance and works of art; setting up publiclibraries.
(iv) contribution to the Prime Minister's National Relief Fund or any other fund set upby the Central Government for socio-economic development and relief and welfare of theSchedule Caste the Scheduled Tribes other backward classes minorities and women.
(v) contributions or funds provided to technology incubators located within academicinstitutions which are approved by the Central Government.
(vi) ensuing environmental stability ecological balance conservation of naturalresources and maintaining quality of soil air and water.
(vii) rural development projects.
(viii) Slum rehabilitation.
(ix) Sports nationally recognised sports Paralympics Sports and Olympic Sports
These activities will be carried out in the villages in proximity to your Company'splants in Maharashtra and Tamil Nadu.
The report on CSR activities during the year under review is given in Annexure-4 tothis report.
14. RISK MANAGEMENT
Business Risk Evaluation and Management is an ongoing process within the Company. TheCompany has a robust risk management framework to identify monitor and minimise risk asalso identify business opportunities. As a process the risks associated with the businessare prioritised based on Severity Likelihood and Effectiveness of current detection.
Risk Management approach is composed of three components:
1) Risk Governance
2) Risk Identification
3) Risk Assessment and Control
Each risk factor is monitored periodically by the Management any event arising fromthese likely to impact operations are reported to the Board.
15. INTERNAL FINANCIAL CONTROLS
Your Company has in place adequate internal financial controls with reference tofinancial statements. The Company's internal auditors carry out regular checks on theadequacy of the internal financial controls. Company has specific internal auditors forfunctions such as excise service tax VAT and financial controls and systems.
16. VIGIL MECHANISM / WHISTLE BLOWER POLICY
Your Company has established a vigil / whistle blower mechanism which provides achannel to any employer / director to report to the Management concerns about unethicalbehavior actual or suspected fraud or violation of code of conduct or policy. Themechanism provides for adequate safe guards against victimisation of the whistle blowerand also provides for direct access to the Chairperson/Manager/Chairperson of the AuditCommittee in exceptional cases.
17. MEETINGS OF THE BOARD
Four meetings of the Board of Directors were held during the year under review. Forfurther details please refer to the report on corporate governance in this annual report.
18. PARTICULARS OF LOANS GUARANTEES OR INVESTMENT
There are no loans guarantees or investments under Section 186 of the Companies Act2013 as on March 31 2017.
19. EXTRACT OF ANNUAL RETURN
The extract of the Annual Return in Form MGT-9 is annexed herewith as Annexure-3 tothis annual report.
No disclosure or reporting is required of the following items as there were notransactions on these items during the year under review.
(i) Issue of equity shares with differential rights as to dividend voting orotherwise.
(ii) Issue of shares (including sweat equity shares) to employees of the Company underany scheme.
(iii) No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
The Company does not have any Associate/Joint Venture Subsidiary Companies.
There were no cases filed pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal Act 2013) during the year under review.
The Directors are thankful to its Bankers Customers Suppliers and other BusinessAssociates/Stakeholders for their continued co-operation and support extended to yourCompany and to the employees for their dedicated and sincere services to the Company.
| ||For and on behalf of the Board |
| ||M. P. Taparia |
| ||Chairperson |
|Place: Mumbai || |
|Date: April 26 2017. || |