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Aarti Industries Ltd.

BSE: 524208 Sector: Industrials
NSE: AARTIIND ISIN Code: INE769A01020
BSE 09:23 | 19 Aug 1530.00 -60.60
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NSE 09:07 | 19 Aug 1594.00 2.35
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OPEN

1594.00

HIGH

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1594.00

OPEN 1586.00
PREVIOUS CLOSE 1590.60
VOLUME 1422
52-Week high 1818.82
52-Week low 1059.40
P/E 25.76
Mkt Cap.(Rs cr) 13,329
Buy Price 1529.65
Buy Qty 35.00
Sell Price 1530.00
Sell Qty 15.00
OPEN 1586.00
CLOSE 1590.60
VOLUME 1422
52-Week high 1818.82
52-Week low 1059.40
P/E 25.76
Mkt Cap.(Rs cr) 13,329
Buy Price 1529.65
Buy Qty 35.00
Sell Price 1530.00
Sell Qty 15.00

Aarti Industries Ltd. (AARTIIND) - Director Report

Company director report

To

The Members of

AARTI INDUSTRIES LIMITED

Your Directors are pleased to present this Thirty Fifth Annual Report and the AuditedStatement of Accounts for the year ended March 31 2018.

Financial Highlights

(Figures in Rs Crores)

STANDALONE CONSOLIDATED
Particulars 2017-18 2016-17 2017-18 2016-17
Total Income from Operations (Net) 3699 3050 3806 3163
EBIDTA (without other income) 657 608 699 654
Depreciation & Amortization 136 115 146 123
Profit/(Loss) from Operations before Other Income 521 493 553 531
Finance Costs and Exceptional Items
Other Income/Exceptional Items 2 3 8 2
Profit/(Loss) before Finance Costs 523 496 561 533
Finance Costs 131 117 132 117
Profit/(Loss) before Tax 392 379 429 416
Total Tax Expenses 76 72 83 88
Non-controlling Interest - - (13) (12)
Net Profit/(Loss) after consolidation 316 307 333 316
Earnings Per Share (Rs) 38.92 37.35 40.95 38.45
Book Value Per Share (Rs) 186.37 159.53 203.62 173.69

Financial Performance

Your Company reported Gross Total Income of Rs 3699 Crores for FY 2017-18 as comparedto Rs 3050 Crores for FY 2016-17. Similarly the exports for the year were of Rs 1593Crores for FY 2017-18 as compared to Rs 1415 Crores for FY 2016-17.

Your Company's Earnings Before Interest Depreciation and Taxes stood at Rs 659 Croresfor FY 2017-18 as compared to Rs 611 Crores for FY 2016-17 registering a growth of8%. Net

ProfitBefore Tax rose by 4% to Rs 392 Crores for FY 2017-18 as compared to Rs 379Crores for FY 2016-17.

Net Profit after Tax & Deferred Tax also grew by 3% to Rs 316 Crores for FY2017-18 as compared to Rs 307 Crores for FY 2016-17.

The Consolidated Total Income for FY 2017-18 was of Rs 3806 Crores as compared to Rs3163 Crores for FY 2016-17 and exports for FY 2017-18 were Rs 1691 Crores as compare toRs 1523 Crores for FY 2016-17.

On a Consolidated basis your Company's Earnings Before Interest Depreciation and Taxesstood at Rs 707 Crores for FY 2017-18 as compared to Rs 655 Crores for FY 2016-17registering a growth of 8%. Net Profit after consolidation grew by 5% to Rs 333 Crores forFY 2017-18 as compared to Rs 316 Crores for FY 2016-17. Consolidated EPS surged by about7% at Rs 40.95 for FY 2017-18 as compared to Rs 38.45 for FY 2016-17.

Dividend

Your directors are pleased to recommend a Dividend of Rs 1 (@20%) per Share (of Rs5/-each) amounting to dividend pay out of Rs 8.13 Crores for the financial year 2017-18(Previous Year

Rs 8.21 Crores). Your Company will pay the Tax on dividend as per the provisions of theincome Tax Act 1961.

Transfer to Reserves

Your Company has transferred Rs 32 Crores to General Reserve (Previous Year: Rs 31Crores) and Rs 30 Crores to Debenture

Redemption Reserve (Previous Year: Rs 30 Crores).

Company has transferred to Capital Redemption Reserve

Rs 0.41 Crores equal to the nominal value of the shares bought back as on appropriationfrom the General Reserve.

Share Capital

The Company had on March 15 2018 completed Buyback of 820383 (Eight Lakh TwentyThousand Three Hundred Eighty Three) fully paid up Equity Shares (representing up to about1% of the total number of Equity shares of the Company) from the

Equity Shareholders/ Beneficial owners of the Company who held Equity Shares as on therecord date i.e. January 5 2018 ("Record Date") on a proportionate basisthrough the tender offer using stock exchange mechanism ("Tender offer") ata price of Rs 1200/- (Rupees One Thousand Two Hundred Only) per

Equity Share ("Buyback Price"). The number of Equity Shares thusreduced from 82120383 to 81300000 post Buyback and accordingly Issued Subscribedand Paid-up Capital reduced to

Rs 406500000/-

Apart from the above there were no changes in the Share Capital during the FinancialYear under review.

Investor Education and Protection Fund (IEPF)

Pursuant to the applicable provisions of the Companies Act 2013 read with IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 (‘the Rules') allunpaid or unclaimed dividends are required to be transferred by the Company to the IEPFestablished by the Government of India after the completion of seven years. Furtheraccording to the rules the shares on which Dividend has not been paid or claimed by theShareholders for seven consecutive years or more shall be transferred to the Demat accountof the IEPF Authority. Accordingly the Company has transferred the unclaimed and unpaiddividends of Rs 1499573/- to IEPF and 256266 such shares were transferred as per therequirement of the

IEPF Rules.

Management's Discussion and Analysis Report

Management's Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34 read with

Schedule V to the Securities and Exchange Board of India

(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") is presented in a separate section forming part of the Annual Report.

Corporate Governance

Corporate Governance essentially involves balancing the interests of a Company'sstakeholders. Corporate Governance practices of our Company are a reflection of ourvalues polices and relationship with our stakeholders. Your Company has complied with themandatory Corporate Governance requirements stipulated under Regulation 34(3) of theListing Regulations. Report on Corporate Governance is annexed hereto forming part of thisreport.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Information required under Section 134(3)(m) of the Companies

Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 as amended fromtime to time forms a part of this in Annexure–E.

Directors / Key Managerial Personnel (KMPs)

Vice Chairman Shri Shantilal T. Shah (DIN: 00004850) and Whole time Director ShriParimal H. Desai (DIN: 00009272) of the Company shall retire by rotation at the ensuingAnnual General Meeting (AGM) and being eligible offers themselves for re appointment.

Shri Radheshyam S. Rohra (DIN: 00163318) who was appointed as an additional Directorin the category of Independent Director by the Board of Directors effective from December21 2017 has been proposed by the Board based on recommendation of Nomination andRemuneration Committee (NRC) to be appointed as an Independent Director as such atensuing AGM. Present Term of Prof. Ganapati D. Yadav (DIN: 02235661) and Smt. Priti P.Savla (DIN: 00662996) Independent Directors of the Company would be expiring on September23 2018. Your Directors based on recommendation of Nomination and

Remuneration Committee (NRC) propose their re-appointment as an Independent Directorsfor a second term by passing a special resolution.

Shri Raj Sarraf has been appointed as the Company Secretary and Compliance Officer ofthe Company with effect from

November 16 2017 in place of Smt. Mona Patel who resigned with effect from November14 2017.

Familiarisation Programme

The Independent Directors of the Company were familiarised and the details offamiliarisation programmes imparted to them are placed on the website of the Company andthe web link thereto is http://aarti-industries.com/investors/corporategovernance/

Remuneration and Nomination Policy

The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel and Senior Management of the Company.The policy also lays down criteria for selection and appointment of Board Members.

The details of this policy are given in the Corporate

Governance Report.

Board Evaluation

Pursuant to the provisions of Companies Act 2013 and the SEBI (Listing Obligation andDisclosure Requirements) Regulations 2015 a structured questionnaire was prepared aftertaking into consideration various aspects of the Board's functioning composition of theBoard and its Committees culture execution and performance of specific dutiesobligations and governance.

The performance evaluation of the Independent Directors was completed. The performanceevaluation of the Chairman and Non-Independent Directors was carried out by theIndependent Directors. The Board of Directors expressed their satisfaction with theevaluation process.

Independent Directors' Declaration

All Independent Directors have given declarations in the prescribed format that theymeet the criteria of independence as laid down under Section 149(6) of the Companies Act2013 and Regulation 16 of the SEBI (Listing Obligation and Disclosure Requirements)Regulations 2015.

Directors' Meetings

The details of the number of meetings of the Board held during the Financial Year2017-18 forms part of the Corporate

Governance Report. Maximum gap between two meetings did not exceed 120 days asprescribed in the Companies Act 2013.

Human Resources Development and Industrial Relations

The Company enjoyed excellent relationship with workers and staff during the year underreview. The Company care for its Stakeholders Customers Suppliers and Community at largewhich reflects in company's policy programs and development efforts. Your Company iscommitted to build and strengthen our human capital by defining policies that supporttheir growth goals and help them achieve excellence. As on March 31 2018 the Companyhad 4642 permanent employees at its manufacturing plants and administrative offices.

Disclosure Under the Sexual Harassment of Women at Work Place (Prevention Prohibitionand Redressal) Act 2013

Your Company has Zero tolerance towards any action on the part of any one which mayfall under the ambit of ‘Sexual Harassment' at workplace and is fully committed touphold and maintain the dignity of every women working with the Company. The Policy framedby the Company in this regard provides for protection against sexual harassment of womenat workplace and for prevention and redressal of such complaints.

Particulars No. of Complaints
Number of Complaints pending as on beginning of the Financial Year NIL
Number of Complaints filed during the NIL
Financial Year
Number of Complaints pending as on the end of the Financial Year NIL

Personnel

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is given in an Annexure and forms part of thisreport.

In terms of Section 136(1) of the Companies Act 2013 the

Report and the Accounts are being sent to the Members excluding the aforesaid Annexure.Any Member interested in obtaining a copy of the Annexure may write to the Company

Secretary at the Registered Office of the Company for a copy of it.

Corporate Social Responsibility

Our company through Aarti Foundation & Dhanvallabh Charitable Trust and variousother NGOs has been doing work in following Segments:

Clu ster & Rural Development

E ducation & Skill Development

Childcare & Healthcare Facilities

W omen Empowerment & Livelihood Opportunities

Disaster Relief & Rehabilitation

Er adication of Hunger & Poverty

W ater Conservation & Environment

Resear ch & Development work for upliftment of Society

Rural Education Water Conservation Tribal Welfare Agriculture Animal HusbandryHealth and Hygiene Disaster Relief and Rehabilitation are the main areas of focus in thesocial welfare plans of our CSR Activities. Many of our Pilot projects had beenappreciated by various NGO's and Other Corporate Houses who have also started adoptingthose models thereby multiplying the magnitude of the reach of these social activities forthe benefit of the Society at large.

The detailed policy on Corporate Social Responsibility is available on the website ofthe Company on the weblink http://aarti-industries.com/investors/corporategovernance/

A brief note on various CSR initiatives undertaken during the year is presented earlierin this Annual report.

CSR annual report is annexed as Annexure-A and forms an integral part of theReport.

Material Changes and Commitments

The Board of Directors in their meeting held on June 28 2018 has approved the Schemeof Arrangement pertaining to demerger of Home & Personal Care Segment of the Companyinto Arti Surfactants Limited and demerger of manufacturing under taking of NascentChemical Industries Limited into Company.

Company has incorporated a wholly owned subsidiary Arti Surfactants Limited on June18 2018 for proposed demerger and absorption of Home & Personal Care under taking.

Auditors

Statutory Auditors

In the 35th Annual General Meeting (AGM) of the Company Reappointment ofM/s. Kirtane & Pandit LLP (Firm Registration

No: 105215W/ W100057) Chartered Accountants would be considered by the members of theCompany to hold office from the conclusion of 35th AGM until the conclusion of39th AGM of the Company.

Cost Auditors

The Cost Auditor Ms. Ketki D. Visariya (Fellowship No.16028) Cost Accountant wasre-appointed by the Company under provisions of Section 148(5) read with Section 141 ofthe Companies Act 2013 and she attended the Audit Committee Meeting where cost auditreports are discussed.

The due date for filing the Cost Audit Reports in XBRL mode for the Financial Yearended March 31 2017 was September

30 2017 and the Cost Audit Reports were filed

27 2017. The due date for filing the Cost Audit Reports for the

Financial Year ended March 31 2018 is September 30 2018.

The Company is seeking the ratification for the Remuneration of Ms. Ketki D. VisariyaCost Auditor of the Company for the Financial Year ending March 31 2019 vide resolutionno. 13 of the Notice of AGM.

Secretarial Auditor & Their Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 and rules madethereunder the Company has appointed CS Sunil M. Dedhia (COP No. 2031) Proprietor ofSunil M. Dedhia & Co. Company Secretaries to undertake the Secretarial

Audit of the Company. The Secretarial Audit Report is included as Annexure D andforms an integral part of this Report.

Explanation or Comments on disqualifications reservations adverse remarks ordisclaimers in the auditor's reports:

There have been no disqualifications reservations adverse remarks or disclaimers inthe auditor's reports requiring explanation or comments by the Board.

Risk Management

Risk Management Committee through its dynamic risk management framework continuouslyidentifies and takes appropriate measures to mitigate various elements of risks.

Internal Control Systems and Their Adequacy

Your Company has clearly laid down policies guidelines and procedures that form partof internal control systems which provide for automatic checks and balances. Your Companyhas maintained a proper and adequate system of internal controls. This ensures that allAssets are safeguarded and protected against loss from unauthorized use or disposition andthat the transactions are authorised recorded and reported diligently.

Your Company's internal control systems commensurate with the nature and size of itsbusiness operations. Internal Financial

Controls are evaluated and Internal Auditors' Reports are regularly reviewed by theAudit Committee of the Board.

Statutory Auditors Report on Internal Financial Controls as required under Clause (i)of Sub-section 3 of Section 143 of the Companies Act 2013 ("the Act") isannexed with the

Independent Auditors' Report.

Business Responsibility Reporting

Business Responsibility Reporting for the year under review as stipulated underRegulation 34 read with SEBI Circular No CIR/

CFD/CMD/10/2015 dated November 4 2015 is in a separate section forming part of AnnualReport.

Safety Health and Environment

on September

Your Company is committed to ensure a sound Safety Health and Environment (SHE)performance related to its activities products and services. Your Company had beencontinuously taking various steps to develop and adopt Safer Process technologies and unitoperations. Your Company has been investing heavily in areas such as Process Automationfor increased safety and reduction of human error element Enhanced level of training onProcess and Behaviour based safety adoption of safe & environmental friendlyproduction process Installation of Bioreactors Chemical ROs Multiple effect evaporatorand Incinerator etc to reduce the discharge of effluents commissioning of Waste Heatrecovery systems and so on to ensure the Reduction Recovery and Reuse of effluents

& other utilities. Monitoring and periodic review of the designed SHE ManagementSystem are done on a continuous basis.

Some of the ongoing initiatives in this regard are briefed below:

I ntroducing Aarti Management System: An in-house developed framework of 32 elementsdetailing procedures and processes catering to all Plant Related Activities - 3 elementsnamely

MOC (to manage change) BBS (major root causes of incidents are due to behaviour) andPermit Systems catering to reduce SHE related risks had been launched and beingimplemented at various levels of operations. Other elements are being developed andreviewed and would be adopted in due course

Review Existing Process Safety Parameters: Structured & regular HAZOP meetings arebeing carried out as per scheduled HAZOP calendar to further strengthen process safety ofexisting processes. Also HIRA (Hazard Identification and Risk

Assessment) for procedures and practices are being initiated for some of the units andwould be gradually implemented across various units.

Maintenance element with a purpose to achieve rated performance of assets throughoutrated life is being launched. Standardisation of maintenance practices are under progress.Also the Plant Maintenance module (an IT enabled solution) are also being implemented withan objective to map and monitor all maintenance activities through the IT enabled system.This would help to have online reporting and tracking of various scheduled and unscheduledmaintenance breakdown activities. Systematic and well documented scale up procedureincluding risk assessment and process safety study at each stage of development fromR&D to Pilot to Commercial Scale to ensure inherently safe processes has beendeveloped.

With these and various other initiatives your Company firmly places the SHE at the topof its goals and aims to provide a workplace which is safer and healthier for the societyat large.

Related Party Transactions

All related party transactions that were entered into during the Financial Year were onarm's length basis and carried out in the ordinary course of the business. There are nomaterially

Company significant with Promoters Key Managerial Personnel or other designatedpersons which may have potential conflict with interest of the Company at large.

All related party Transactions are presented to the Audit Committee for approval.Omnibus approval is obtained for the transactions which are foreseen and repetitive innature. A statement of all related party transactions is presented before the AuditCommittee on quarterly basis specifying the nature value and terms and conditions oftransactions.

The related party transactions policy is uploaded on the

Company's website at the web-link given below :

http://aarti-industries.com/investors/corporategovernance/

The details of Related party transactions are provided in the accompanying financialstatements.

Since all related party transactions entered into by the Company were in ordinarycourse of business and were on an arms length's basis Form AOC 2 is not applicable toCompany.

Whistle Blower Policy

The Company has a whistle blower policy to report genuine concerns or grievances. TheWhistle Blower policy has been posted on the website of the Company and the web linkthereto is http://aarti-industries.com/investors/corporategovernance/

Particulars of Loans Guarantees or Investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the Notes to the financial statements.

Deposits

The Company did not have any deposits at the beginning of the year under review. TheCompany has neither accepted nor renewed any deposits during the year under review.

The Company does not have any deposits which are not in compliance with therequirements of Chapter V of the Companies Act 2013.

Annual Return

The details forming part of the extract of Annual Return in the

Form MGT-9 as required under Section 92 of the Companies

Act 2013 is included in the Report as Annexure–B and forms an integralpart of the Report.

Subsidiary Companies

The Company has 7 (Seven) direct subsidiaries namely Aarti Corporate ServicesLimited Alchemie (Europe) Limited Innovative Envirocare Jhagadia Limited GaneshPolychem Limited Aarti USA Inc. Aarti Polychem Private Limited Arti Surfactants Limited(incorporated on June 18 2018) and 2 (two) indirect subsidiaries namely ShantiIntermediates Private Limited and Nascent Chemical Industries Limited both hold throughAarti Corporate Services Limited.

During the year the Board of Directors reviewed the affairs of the subsidiaries. Inaccordance with Section 129(3) of the

Companies Act 2013 we have prepared consolidated financial statements of the Companyand all its subsidiaries which form part of the Annual Report.

Further a statement containing salient features of the financial statement of ourSubsidiaries in the prescribed format AOC 1 is included in the Report as Annexure-Cand forms an integral part of this Report. The statement also provides the details ofperformance financial position of each of the Subsidiaries

Material Subsidiary

The Company does not have any material subsidiary whose net worth exceeds 20% of theconsolidated net worth of the Company in the immediately preceding Financial Year or hasgenerated 20% of the consolidated income of the Company during the previous FinancialYear. A policy on material subsidiaries had been formulated and is available on thewebsite of the Company and the web link thereto ishttp://aarti-industries.com/investors/corporategovernance/

Dividend Distribution Policy

As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the top 500 listed companies shall formulate a dividend distributionpolicy. Accordingly the policy has been adopted to set out the parameter andcircumstances that will be taken in to account by the Board in determining thedistribution of dividend to its shareholders and/ or retaining profits earned by thecompany.

A policy is available on the website of the Company and the web link thereto ishttp://aarti-industries.com/investors/ corporategovernance/

Significant and Material Orders Passed by the

Regulators or Courts

by the There are no significant

Regulators/Courts which would impact the going concern status of the Company and itsfuture operations.

Directors' Responsibility Statement

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013 : a. That in the preparation of the annualfinancial statements for the year ended March 31 2018 the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures if any; b. That the directors had selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the company at the end ofthe Financial Year and of the profit and loss of the company for that period;

c. That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe Assets of the Company and for preventing and detecting fraud and other irregularities;

d. That Directors' have prepared the annual accounts on a going concern basis;

e. The directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;

f. The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Acknowledgement

The Board of Directors places on record its sincere appreciation for the dedicatedservices rendered by the employees of the Company at all levels and the constructiveco-operation extended by them. Your Directors would also like to express their gratefulappreciation for the assistance and support by all Shareholders Government AuthoritiesAuditors Financial Institutions Customers employees suppliers other businessassociates and various other stakeholders.

For and on behalf of the Board
Place : Mumbai Rajendra V. Gogri
Date: June 28 2018 Chairman and Managing Director