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Tanfac Industries Ltd.

BSE: 506854 Sector: Industrials
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OPEN 121.00
VOLUME 20038
52-Week high 155.00
52-Week low 46.80
P/E 46.53
Mkt Cap.(Rs cr) 129
Buy Price 129.35
Buy Qty 85566.00
Sell Price 0.00
Sell Qty 0.00
OPEN 121.00
CLOSE 123.20
VOLUME 20038
52-Week high 155.00
52-Week low 46.80
P/E 46.53
Mkt Cap.(Rs cr) 129
Buy Price 129.35
Buy Qty 85566.00
Sell Price 0.00
Sell Qty 0.00

Tanfac Industries Ltd. (TANFACIND) - Director Report

Company director report

To the Members

Your Directors are pleased to present the report on the Company's businessoperations together with the audited statement of accounts for the financial year ended 31stMarch 201 5 for your review:


R in Crores]

Details Year ended 31st March 2015 Year ended 31st March 2014
Net Sales/lncome from Business operations 117.91 116.32
Other Income 2.29 1.24
Total Income 120.20 117.56
Profit/ [Loss] after Interest but before Depreciation and Taxation (1.46) 1.41
Less: Depreciation/ Impairment/Amortisation 5.63 6.93
Profit/[Loss] before Taxation (7.09) (5.52)
Exceptional items - -
Profit/(Loss) after Exceptional items (7.09) (5.52)
Less: Deferred Tax Provision / (Reversal) (1.32) (2.48)
Profit/(Loss) after Tax (5.77) (3.03)
Extraordinary items / Insurance claim* (0.48) -
Net profit/[Lossl for the period (5.29) (3.03)
Add: Balance brought forward (43.60) (40.57)
Profit/(Loss) available for appropriation (48.89) (43.60)
Transferred from General Reserves - -
Balance Carried forward to Balance Sheet (48.89) ' (43.60)

‘Insurance Claim full and final settlement received against claim for BusinessInterruption/Loss of Profit due to natural calamity (cyclone) on 30th December2011.


The Company's sales performance was maintained at the previous year's level despitecontinued drop in demand for HF in domestic markets post-withdrawal of CDM benefits onR22 and stiff competition from China in the Aluminium Fluoride segment. To turn aroundthe operations the Company has taken various steps to improve operational performance:

(a) Continuous focus on cost reduction

(b) Increasing vendor base and developing alternate sources for its main raw materialFluorspar and Sulphur to reduce input costs.

(c) Improving customer and product mix

(d) Continuously engaging with suppliers of other raw materials and packing materialsfor reduction in rates.

(e) Exploring market for HF in Asia Pacific and Europe.

(f) Effective utlilisation of working capital limits.

Profit before depreciation interest and taxation (EBIDTA) was Rs 7.83 crores duringthe year compared to Rs 11.12 crores in the previous year.

However factors such as a significant depreciation of the Indian Rupee against the USDollar currency volatility and higher interest outgo on working capital limits due topoor credit rating impacted cash profits.


As the Company has incurred loss in the current year your Directors have notrecommended any dividend for the year 2014 - 201 5. -


The steps taken by the Company to turn around the operations as enumerated above underthe heading Operations and Overall Performance have started yielding results. Afterincurring continuous losses during the first three quarters of the financial year theCompany has registered improved performance during the f.ourth quarter and registeredProfit After Tax (PAT) of Rs 0.83 crore.

The Company is also taking steps to revive the IBAP plant and increase its viability byworking on value-added products out of by-product generated during production of IBAP.Your company is also working on some other value-added products and will continue to focuson moving up the value chain in speciality products where it can have competitiveadvantage and grow sales volumes and margins.

Your Board of Directors is optimistic about the turnaround of the Company in the comingyears.


Your Company has strategically reduced the production of Aluminium Fluoride due to itslower contribution. However your Company will continue to service its long-term strategiccustomers.


The entire value chain of Fluorspar - Hydrofluoric Acid suffers due to a wide gap insupply and demand. China which continues to enjoy the benefits of backward and forwardintegration in the value chain is competing more aggressively. Capacity shifting ispossible in proximity to Fluorspar sources. The withdrawal of the 10% export duty by Chinahas added further pressure on the price of the product both in the domestic and exportmarkets. However we are continuously working on improving the operational parameters inorder to increase margins. ' '


Export turnover was higher by 9% at Rs 18.63 crores as compared to Rs 17.13 crores inthe previous year despite lower off take by overseas customers on account of marketdemand and stiff competition from China.

Your Company endeavors continuously to increase export revenues by expanding thecustomer base in new markets.



During the year the Company has issued and allotted 500000 - 11% RedeemableCumulative Non Convertible Preference Shares • ('the Preference Shares") of facevalue of Rs 1 00/- each for cash at par on private placement basis to M/s. Aditya BirlaChemicals (India) Limited ("ABCIL") for general corporate purposes and also tomeet the ongoing business requirements of the Company.


The information pertaining to conservation of energy technology absorption ForeignExchange Earnings and outgo as required under Section 1 34 (3)(m) of The Companies Act201 3 read with Rule 8(3) of the Companies (Accounts) Rules 2014 is furnished asAnnexure-A to the Annual Report.


Your Company has not provided any loan (s) guarantee(s) to any person or bodycorporate and has not made any investment(s) during the year under Section 186 of theCompanies Act 2013.


In line with the requirements of the Companies Act 2013 and Equity Listing Agreementyour Company has formulated a Policy on Related Party Transactions which is available on

Company's website at The Policy intends to ensure that properreporting approval and disclosure processes are in place for all transactions between theCompany and Related Parties.

The Company has obtained necessary prior omnibus approval from the Board pertaining toRelated Party Transactions in the ordinary course of business and on an arm's lengthbasis. All such transactions which are of repetitive nature and / or entered in theOrdinary Course of Business and are at arm's Length are placed before the Audit Committeeon a quarterly basis for its review and approval. Details of related party transactionsare made available under Annexure-B.


M/s. Khimji Kunverji & Co. Chartered Accountants Mumbai (Firm RegistrationNo.105146W) were appointed as Statutory Auditors of the Company by the Members at theirAnnual General Meeting held on 13th August 2014.

The Report given by the Auditors on the Financial Statements of the Company forms partof the Annual Report. There were no qualifications reservations or adverse remarks madeby the Auditors in their report.

The Company has received a letter from the above auditors to the effect that theirre-appointment if made would be within the prescribed limits under Section 141 (3)(g) ofThe Companies Act 2013 and that they are not disqualified for reappointment.


The Board has appointed Shri N. Krishnakumar Cost Accountant Cuddalore (Membership

No.27885) for conducting the audit of cost records of the Company pertaining toInorganic and Organic products manufactured by the Company covered under Central ExciseTariff Heading Chapter Nos.28 and 29 respectively


The Board has appointed Ms. Kalyani Srinivasan (Practicing Company Secretary Chennai(C.P. No.3109 & FCS No.5854) to conduct Secretarial Audit for the financial year20142015 which inter alia includes audit of compliance with the Companies Act 2013and the Rules made under the Act Listing Agreement and Regulations and Guidelinesprescribed by the Securities and Exchange Board of India. The Secretarial Audit Reportfurnished under Annexure-C does not contain any qualification reservation or adverseremark.


The Company has already laid down the procedure regarding risk assessment andminimization.

Pursuant to Clause 49(VI) of the revised listing agreement which was made effectivefrom 1st October 2014 the Company has constituted a Risk Management Committee to defineits roles and responsibilities and laid down the procedure to assess the risk andminimization procedures. The risk management includes identifying types of risks and itsassessment risk handling and monitoring and reporting. The Board shall also beresponsible for framing implementing and monitoring the risk management plan for thecompany. The details of identified risk and mitigation plan would be reviewed by theCommittee every quarter and forwarded to the Board with their recommendation if any andthe same will be reviewed and discussed by the Board in their meeting.



Pursuant to the provisions of Section 177 of the Companies Act 2013 read with Rules 6and 7 of the Companies (Meetings of the Board and its Powers) Rules 2014 the Company hasconstituted the Audit Committee comprising of six Members including four IndependentDirectors viz. Shri M.R. Sivaraman IAS (Retd.) Shri Lalit Naik Shri V.T. MoorthyShri R. Karthikeyan Shri Kannan K Unni and Dr. Shankar Narasimhan. All therecommendations made by the Audit Committee were accepted by the Board.

Pursuant to Section. 1 77(9) of The Companies Act 2013 read with Rule.7 of TheCompanies (Meetings of Board and its Powers) Rules 2014 and also as per clause 49(II)(F)of the listing agreement with the stock exchanges the Company has established a vigilmechanism in line with its Group Policy for Directors and Employees to report theirgenuine concerns or grievances.

The audit committee would be monitoring the established vigil mechanism which providefor adequate safeguards against victimization of employees and directors who avail of thevigil mechanism and also provide for direct access to the Chairman of the Audit Committee.


In accordance with the Regulations of The SEBI (Prohibition of Insider Trading)Regulation 201 5 vide its Notification dated 15th January 2015 effective from 1 5thMay 201 5 the Company has established systems and procedures for Code of Practices andProcedures for Fair Disclosure of

unpublished price sensitive information and a Code of Conduct to regulate monitor andreport trading by insiders which includes Directors Employees and their relatives andother connected persons to restrict insider trading on the basis of any unpublished pricesensitive information available to them by virtue of their position in the Company.

The objective of this Code is to prevent misuse of any unpublished price sensitiveinformation and prohibit any insider trading activity in order to protect the interest ofthe shareholders at large. The details of dealing in Company's shares by the insiders ifany would be placed before the Board on a quarterly basis.

The Code of Practices and Procedures for Fair Disclosure of unpublished price sensitiveinformation is available on the Company's website


The Net Worth of the Company for the financial year 2014-2015 has eroded by more than50% of its peak Net Worth during the immediately preceding four financial years.

As required under the provisions of Section 23(1)(a)(i) of The Sick IndustrialCompanies (Special Provisions) Act 1985 your Company shall with in a period of 60 daysfrom the date of adoption of accounts of the Company for the financial 2014-2015 by themembers at their Annual General Meeting to be held on 29.9.2015 report to BIFR under thespecified guideline.


During the year the Board of Directors has appointed Smt. R. Rajalakshmi as anAdditional

Director with effect from 24th March 2015 as required under clause 49 ofthe equity listing agreement after recommendation by the Nomination and RemunerationCommittee. The Committee has evaluated her skills experience and knowledge to hold officeas an Additional Director up to the date of the forthcoming Annual General Meeting. Beingeligible Smt. R. Rajalakshmi offered herself to be appointed as the Independent Directorof your Company and not be liable to retire by rotation. Smt. R. Rajalakshmi will holdoffice of Director for a term up to five consecutive years if approved by the Members atthe ensuing Annual General Meeting as per applicable provisions of the Companies Act 2013and Clause 49 of the Equity Listing Agreement.

The following Independent Directors viz. Shri V.T. Moorthy Shri M.R. SivaramanIAS(Retd.) Shri T.S. Raghavan and Dr.Shankar Narasimhan are seeking their re-appointmentsfor a term of five consecutive years upto March 31 2020.

The Independent Directors of your Company have given their certificates ofindependence stating that they meet the criteria of independence as mentioned underSection 149 (6) of the Companies Act 201 3. The details of the training andfamiliarization programmes and the Annual Board Evaluation process for Directors have beenprovided in the Corporate Governance Report.

The policy on Director's appointment including criteria .for determiningqualifications positive attributes and independence of Director forms part of theCorporate Governance Report of this Annual Report.


The evaluation of Board of Directors and the Board as required under Section 149(8) ofThe Companies Act 2013 read with Schedule IV under Chapter VIII and clause 49 of thelisting agreement were done through selected parameters related to their rolesresponsibilities and obligations of the Board and functioning of the committee. Theevaluation criteria for Directors was based on their participation contribution/ guidanceand suggestions for improvement wherever required made to the Company. The Boardapproved the evaluation results as presented by the Nomination Committee.


The Independent Directors met during the year in the absence of Non-IndependentDirector and discussed inter alia the performance of Non-Independent Directors and theBoard as a whole and the quality quantity and timeliness of the flow of informationbetween the Company management and the Board for effective and reasonable performance oftheir duties.


During the financial year 2014-2015 the Board met six times and the details of whichare given in the Report on Corporate Governance that forms part of the Annual Report. Thetime gap between two meetings as required under the listing agreement was well within theperiod.


Presently the Board has four Committees viz. Audit Committee Nomination andRemuneration Committee Stakeholders' Relationship Committee and Risk ManagementCommittee comprising of the required combination of

Non Independent and Independent Directors. Committeewise details are furnished in theReport on Corporate Governance section of the Annual Report.


The details forming part of the extracts of Annual Return under Form MGT-9 pursuant tothe provisions of Section 92 read with Rule 12 of the Companies (Management andadministration) Rules 2014 is furnished as an Annexure-D.


Your Company successfully commercialized production of a new product which findsapplication in the Water and Waste Water Industry. Your company is working on thedevelopment of two more new products one finding application in the sanitation and foodpreservative industry which will be commercialized in financial year 2015-2016 andanother product a Sulphuric Acid derivative which finds applications in the textileswater treatment and food industries


Your Company is committed to sound Safety Health and Environmental Management Systems and processes and has implemented various best practices during the year which helpedto maintain its good safety record.

Your Company is Integrated Management System (IMS) certified. This comprises ISO9001-2008 for Quality Management System (QMS) ISO 14001-2004 for Environment ManagementSystem (EMS) & OHSAS 18001:2007 for Occupational Health and Safety Assessment Seriesfor Safety Management System by DNV GL AS India.

We ensure that economic considerations do not compromise safety and environmentprotection measures and the Board has mandated accordingly. We are constantly working toreduce the use of corrosive material conserve energy and water reduce chemicalconsumption and recycle water and process wastes.

Your Company regularly updates its safety and risk management processes conductssafety audits and carries out HAZOP study for existing and new projects. Your Directorsalso periodically visit the factory to review the safety arrangements. Their suggestionsare implemented systematically.

Your Company motivates employees workers and contract workmen through training onaspects related to safety and by rewarding the best performers in the area of safety and environment.'

As recommended by the Members of the Audit Committee the Company takes continuousmeasures towards structural and foundation rehabilitation work and takes corrective actionwherever necessary for further strengthening safety features of the plants for safeoperations.

Your Company periodically conducts on-site mock drills and actively coordinates withthe local government and other nearby companies for offsite emergency mock drills andmutual aid.


We at Tanfac Industries Limited ate committed to continual improvement of theprocesses affecting quality cost and delivery and also the environment in order toprevent pollution and to comply with the requirements of customers interested parties andthe public


Your Company's Management Policy entails:

• Meeting customer needs and expectations.

• Compliance with all applicable environmental regulations and other relatedrequirements.

• Continuous improvement of Quality Management System (QMS) and EnvironmentalManagement System (EMS) through monitoring of performance indicators identifying andupdating environmental aspects implementing management programmes and pollutionprevention.

• Establishing and reviewing management objectives at functional level to meetcontemporary requirements for improvement of the management system.

• Elimination of waste and conservation raw materials energy and water.

• Involvement of staff in order to bring about a better work environment andculture.

• To provide value for money to our customers through continuous upgradation oftechnology and enhancing productivity through benchmarking.

• Maintaining a safe and healthy work environment.

• Minimize customer complaints and improve customer perception / feed back.

• Communicate the policy to all persons working for or on behalf of theorganization.

• To take all safety measures as mandated by law and by the Board.

• The Environment Management Cell ensures effective implementation of the policy.

Your management allocates all necessary resources on a priority basis.


Your Company is strongly committed towards its philosophy of Corporate Governance. TheCompany has already constituted a Committee of Directors to assist the Board in goodCorporate Governance. Your Company affairs are managed in a fair manner. The CorporateGovernance Report along with the Auditors certificate regarding compliance of theconditions of the Corporate Governance as stipulated in Clause 49 of the Listing Agreementof the Stock Exchange is attached herewith.

A Certificate of the CEO and CFO of the Company in terms of sub-clause (IX) of Clause49 of Listing Agreement inter alia confirming the correctness of the financialstatements adequacy of the internal control measures and reporting of matters to theAudit Committee is also annexed.

Your Directors are pleased to report that the Company is fully complied with the SEBIguidelines and corporate governance as on financial year ended 31st March 2015and continue to comply with the same.


The Company's properties of fixed asset including building plant and machinery andinsurable assets and currents assets including stock of raw materials finished goodsstores and spares etc. are adequately insured.


As required under clause 49(VI11)(D) of the listing agreement with the stock exchangesthe Management's Discussion and Analysis Report for the year under review has been made asforming part of the Annual Report.


Pursuant to Section 197(12) of The Companies Act 201 3 read with Rule 5(2) of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the detailsof disclosure of remuneration are not applicable to the Company as no employees arecovered under the specified ceiling of drawing remuneration of Rs 5 Lakhs per month.

Except sitting fees for attending the Board Audit Committee and StakeholdersRelationship Committee meetings no other remuneration is being paid to the Directors.Shri Lalit Naik Manager and Director has not drawn any remuneration including sittingfees for attending the Board/Committee meetings.

Details pertaining to remuneration as required under Section 197(12) of The CompaniesAct 2013 read with Rule 5(1) of The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is furnished forms part of the annual report.


Employee relations continued to be cordial throughout the year. The whole-heartedsupport of employees in the implementation of WCM ISO-9002 systems and ISO 14001 amplydemonstrate the high level of team work sense of belonging to the organization andsolidarity with the Management.


The Company has not accepted any deposits from the public during the year and there wasno outstanding towards unclaimed deposit payable to depositors as on 31stMarch 2015.


CSR is a continuing commitment by business to behave ethically and contribute toeconomic development while improving the quality of life of the workforce and theirfamilies as well as of the local community and the society at large.

Your company has continued its commitment to CSR activities despite continuous losses.Your Company's CSR initiatives are an integral part of overall business policy and alignedwith its business goals.

Projects are identified in a participatory manner in consultation with the communityliterally sitting with them and gauging their basic needs. We take recourse to theparticipatory rural appraisal mapping process. Subsequently based on a consensus and indiscussion with the village panchayats and other influentials the projects areprioritised.

Arising from this the focus areas that have emerged are education health caresustainable livelihood infrastructure development and espousing of social causes. Allour community projects are carried out under the aegis of The Aditya Birla Centre forCommunity Initiatives and Rural Development.

Your Company is carrying out its community welfare activities in and around Cuddalorefor more than a decade. Your Company has been . reaching out to under-served communitiesunder the aegis of The Aditya Birla Centre for Community Initiatives and RuralDevelopment. This has entailed transcending business interests and grappling with the"Quality of Life" challenges the poor face and working to make a meaningfuldifference to them.

Our Group vision is:

"To actively contribute to the social and economic development of the communitiesin which we operate. In so doing build a better sustainable way of life for the weakersections of society and raise the country's human development index."

Your Company's focus areas include education health care sustainable livelihoodinfrastructure development and espousing social causes. The specific initiatives include:

• Girl child education under Kasturba Gandhi Balika Vidyalaya (KGBV) Scheme

• Health - including Family Welfare and Total Health (Disease) Management

• Child/Women Empowerment Projects

• Need Assessment

• Identification of funding sources and opportunities

• Link up with Government agencies NGO's and other potential partners

• Implementation of community upliftment projects involving governmentauthorities village Panchayats and end beneficiaries in specific areas of socialdevelopment such as health education water management etc..The projects also cater tothe needs of children women adolescents the physically challenged and to the overalldevelopment of villages and communities.


• There are no significant material orders passed by the Regulators / Courts whichwould impact the going concern status of the Company and its future operations

• Your Company has not issued any shares with differential voting.

• There was no revision in the financial statements.

• Your Company has not issued any sweat equity shares.

• During the year your Company has not received any complaints under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.


Your Company is widely acclaimed for its people development practices and has'reinforced its position in this area. This coupled with the ability to attract besttalent provides a competitive edge to the organization. Business priorities are alignedwith the aspirations of employees culminating in the development of an empowered andresponsive human capital.

Our work environment encourages innovation and creativity and promotes a culture thatfacilitates entrepreneurial activity within the organization while adhering to Groupvalues. Your Company has been investing in progressive employee relations practices tobuild capability at the grass root level. Employees are motivated through various skilldevelopment engagement and volunteering programs for their continuous performanceimprovement.


Your Directors wish to express their appreciation for the continued assistance andcooperation of the consortium banks Government authorities customers vendors andmembers during the year under review.

On behalf of the Directors and all shareholders

I would like to place on record my sincere appreciation of the committed services bythe entire TANFAC family comprising officers staff and workers.

Finally I look forward to your continued understanding and support in taking yourCompany forward in these challenging times.

For and on behalf of the Board
Chennai (LALIT NAIK)
10.8.2015. DIRECTOR


Particulars of Energy Conservation Technology Absorption and Foreign Exchange Earningsand Outgo required under The Companies (Accounts) Rules 2014.


(a) Steps taken for conservation of energy

Your Company has adopted various energy conservation measures during the financial year2014-2015 at its manufacturing facility at Cuddalore viz. Hydrofluoric Acid SulphuricAcid and Specialty fluorides plants.

(b) Major energy conservation initiatives taken during the Financial Year 2014-2015

• Reduction of power consumption in the Hydrofluoric Acid Plant by optimizing theusage of cooling towers and cooling tower pump;

• Optimization of the operational and maintenance practices in manufacturingPotassium fluoride;

• Besides steam condensate recycle process was introduced in the Sulphuric AcidPlant.

• The company has achieved significant savings through these initiatives.

(c) Steps taken by the Company for utilising alternate sources of energy

No alternate sources of energy were utilized in the process carried outin the product mentioned in SI.Nol (b) above.

(d) The capital investment on energy conservation equipment



Your Company -

• Has obtained an order for production of larger quantities of IsobutylAcetophenone (IBAP) for FY1 5-1 6 based on the product performance of material produced& supplied in FY1 4. This was possible because of the R&D-efforts made in previousyears.

• Your company is working on improving the quality of one of its bye productswhich would add value and will be used in a new product being developed. '

• Continues to successfully operate the scheme implemented for reducing waterconsumption and effluent discharge by effective recycling in the plant.

• Continued efforts have enabled the Company to recycle the solid waste in thecement industry through focus on energy conservation. Schemes were also implemented toincrease captive power generation. .

• Planting of saplings to maintain greenery and protect the environment is anon-going activity.


Your Company has formed cross functional teams to implement projects for new productdevelopment and to improve the process for existing products through In-house R&Dthereby achieving self-sufficiency in development of technology.

Continuous implementation of WCM practices and rewarding of Kaizens have motivated theyoung talented Engineers / Scientists to come up with creative ideas to improve efficiencyin the areas of production energy savings safety and systems improvements.


(Rs in Lakhs)

Details 2014-15 2013-14
Forex Earned 1708.13 1886.70
Forex used• 2635.74 4595.18

Details of technology imported during the past five years:


Your Directors would like to inform members that the financial statements auditedaccounts containing the financial statements for the financial year 2014 - 2015 areprepared in accordance mandatory accounting standards as prescribed under Section 133 ofThe Companies Act 2013 ('the Act') read with Rule 7 of The Companies (Accounts) Rules2014 and are in full conformity with the requirement of the Act. They believe that thefinancial statements reflect fairly the form and substance of transactions carried outduring the year and reasonably present the company's financial conditions and results ofoperations.

Your Directors further confirm that -

(a) in the preparation of the annual accounts for the year ended March 31 2015 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;

(b) appropriate accounting policies have been applied consistently and made judgementsand estimates that are .reasonable and prudent so as to give.a true and fair view of thestate of affairs of the Company as at March 31 2015 and of the profit of the Company forthe year ended on that date;

(c) proper and sufficient care have been taken 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 annual accounts have been prepared on a 'going concern' basis;

(e) the internal financial controls have been laid down to be followed by the Companyand that such internal financial controls are adequate and are operating effectively; and

(f) proper systems have been deviced to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.