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Akzo Nobel India Ltd.

BSE: 500710 Sector: Consumer
NSE: AKZOINDIA ISIN Code: INE133A01011
BSE 10:17 | 15 Apr 2275.15 -13.05
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NSE 10:09 | 15 Apr 2276.00 -14.00
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OPEN 2324.90
PREVIOUS CLOSE 2288.20
VOLUME 34
52-Week high 2510.00
52-Week low 1760.00
P/E 53.53
Mkt Cap.(Rs cr) 10,361
Buy Price 2271.65
Buy Qty 4.00
Sell Price 2275.15
Sell Qty 2.00
OPEN 2324.90
CLOSE 2288.20
VOLUME 34
52-Week high 2510.00
52-Week low 1760.00
P/E 53.53
Mkt Cap.(Rs cr) 10,361
Buy Price 2271.65
Buy Qty 4.00
Sell Price 2275.15
Sell Qty 2.00

Akzo Nobel India Ltd. (AKZOINDIA) - Director Report

Company director report

Dear Members

The Board of Directors hereby presents their 66th report on the business and operationsof your Company along with the audited financial statements for the financial year ended31 March 2020.

Business Environment

Indian Economy

The Indian economy was already facing some headwinds before the outbreak of Covid-19pandemic. India's growth slowed down to multi quarter low in the last quarter of 2019-20to 3.1% as the pandemic affected the economy. Growth for FY 2019-20 was at 4.2% thelowest in a decade. Industrial activity growth across sectors measured by Index ofIndustrial Production (IIP) slipped to 0.7% during the year as against 3.8 per cent in2018-19. Crude prices were relatively range-bound during the year before plunging inMarch 2020. However headline inflation had been on an upward trajectory due to higherfood prices before ending the year at 5.84%.

Factoring the challenges to economic growth RBI continued to move towards a softinterest rate policy by lowering the reference interest rate in a calibrated manner. Inresponse to the crisis due to COVID-19 pandemic RBI cut repo rate by 75 bps to 4.4% thelowest-ever in March 2020. The Central Bank also announced a slew of liquidity measuresto bolster the economy.

Rupee averaged 74.4 against the US Dollar in March 2020 depreciating ~7% since March2019 due to FII risk aversion.

Outlook

Coronavirus-induced lockdowns resulted in supply disruptions and slowdown in demandduring and post lockdown. As a result economic conditions have slipped since the firstlockdown.

Successive lockdowns may have had a non-linear and multiplicative impact on theeconomy which is difficult to quantify. Partial relaxations continue to disrupt supplychain transportation and logistics. There will be a negative impact on GDP despite theeconomic stimulus and easing crude prices.

The impact of the pandemic is evolving and hence difficult to estimate and theapproach of your Company has been to plan for the worst and aim for the best. Despite anincrease in number of cases and predictability becoming a challenge the paints Industryoutlook seems positive in the medium term due to structural opportunities of increasingurbanisation reducing painting cycles shift from unorganized to organized sectorinfrastructure building efforts of the Government to name a few.

Financial Statements

The financial statements include:

1. Stand-alone financial statements of the Company Akzo Nobel India Limited; and

2. Consolidated financial statements of the Group including the operational results ofICI India Research & Technology Centre on which the Company exercises effectivecontrol.

The highlights of the performance during the year are:

( Rs million)
Stand-alone Consolidated
2019-20 2018-19 2019-20 2018-19
Revenue from operations 26618 29184 26618 29184
Operating profit (EBITDA)* 3791 3424 3791 3424
Depreciation (790) (652) (790) (652)
Other income net of finance costs 283 377 283 377
Exceptional items (52) 7 (52) 7
Profit before tax 3232 3156 3232 3156
Tax (858) (1046) (858) (1046)
Profit after tax 2374 2110 2374 2110

*before exceptional items

Key financial Ratios
( Rs million)
Stand-alone Consolidated
Particulars 2019-20 2018-19 2019-20 2018-19
Debtors Turnover 6.7 6.6 6.7 6.6
Inventory Turnover 3.4 4.3 3.4 4.3
Interest Coverage 40.6 76.6 40.6 76.6
Current Ratio 1.6 1.6 1.6 1.6
Operating Profit Margin (%) 11 9 11 9
Net Profit Margin (%) 9 7 9 7

*Interest coverage ratio has dropped because of accounting impact of Ind AS 116. Debtequity ratio not covered as the Company does not have debt.

There is no significant change (i.e. change of 25% or more as compared to theimmediately previous financial year) in the key financial ratios except Interest coverageratio.

2019-20 was a challenging year marked by sluggish economic environment and slowdown inautomobile and real estate our key end-segments. Your Company's revenue declined 9% YoYin 2019-20. After two quarters of muted topline due to extended rainfall season andoverall slowdown in the paints industry Q4 2019-20 had started to show signs ofstability however the lockdown in second fortnight of March led to a decline of 18% inrevenue in fourth quarter. In line with our stated strategy of Value over Volume yourCompany continued its effort on strengthening the mix and driving growth in focussegments. Our business diversity in the Coatings business brought us some growthopportunities even during industry slowdown. We saw revival in the Power sector last yearand expansion in Oil & Gas segments. Although Auto sector is yet to gain a growthtraction we are poised to grow through Railways and Consumer Electronic segments.AkzoNobel Group has bagged a 44-countries' (including India) supply deal with BMW and weare confident of delivering value for our Auto and Specialty Coatings business. We arealso very proud to have partnered with the Indian Railways in coating the Vande BharatExpress also known as Train 18. Overall our strategy has reflected in improved GrossMargins and EBIT margins. At 46% we achieved our highest ever GM% in recent yearsimproving ~400 bps since last year.

Our transformation journey continued during the year. From getting the Company under asingle ERP platform to transforming Functions and adapting new technology platforms wesuccessfully built in efficiency and agility in the way we operate. The company hasattained sustainable double-digit EBIT% in last few quarters on the back of:

1. Growth in focus segments

2. Structural cost interventions like a single ERP platform setting up of Sharedservices Integrations across businesses etc.

3. Relentless focus on driving cost and working capital efficiency across areas.

This has enabled us to not only grow our EBIT by 8% and ~200 bps Y-o-Y but also kept usstrong in the current challenging times.

In addition reduction in corporate tax rates has further helped in improving the netprofit by 13% Y-o-Y in 2019-20.

Subsidiary

A statement containing the salient features of financial statements of subsidiary ofthe Company in the prescribed Form AOC – 1 forms part of this report in compliancewith section 129(3) and other applicable provisions if any of the Companies Act 2013(‘the Act') read with Rule 5 of the Companies (Accounts) Rules 2014. The said Formalso highlights the financial performance of the subsidiary included in the ConsolidatedFinancial Statements (‘CFS') of the Company pursuant to Rule 8(1) of the Companies(Accounts) Rules 2014.

In accordance with section 136 of the Act the financial statements of the subsidiaryare available for inspection by the members at the registered office of the Company duringbusiness hours on all days except Saturdays Sundays and Public holidays up to the date ofthe Annual General Meeting (‘AGM'). Due to prevailing COVID-19 restrictions membersare requested to email a request for obtaining a copy of the said financial statements atinvestor.india@akzonobel.com so that necessary arrangements can be made at the registeredoffice of the Company. The financial statements including the Consolidated FinancialStatement and all other documents required to be attached to this report have beenuploaded on the website of the Company at www.akzonobel.co.in.

Share Capital

The paid up share capital of the Company as on 31 March 2020 was Rs 455403140comprising 45540314 of equity shares of Rs 10 each (Previous year Rs 455403140comprising 45540314 equity shares of Rs 10 each).

Dividend

The Board of your Company continuously looks for opportunities to maximise shareholdervalue including a consistent dividend pay-out policy. Despite prevailing pandemicsituation and the uncertainties around it the Board is pleased to recommend a dividend ofRs 14 per share compared to Rs 24 per share in the previous year which will be paidafter your approval.

Company's Dividend Distribution policy is annexed to this report. The Policy is alsouploaded on Company's website www.akzonobel.co.in

Transfer to Reserve

During the financial year there was no amount proposed to be transferred to theReserves.

Management Discussion and Analysis

Industry structure

India's Paints & Coatings industry is a fairly structured one with organizedplayers accounting for ~ 65-70% of the industry's sales. ‘Paints' account for around75% of the overall market and ‘Coatings' account for the rest. Product performancedifferentiation and quality service continue to be the key differentiators across thismarket. While Paints is a B2C business Coatings is essentially a B2B business and istechnology intensive with a diverse set of growth drivers with strong emphasis on sellinga solution rather than a product. Entry of several new players in recent years hasintensified the competition in the market.

Business Performance

Your Company has a well spread out foot print across India to service different partsof the country with manufacturing capacity to support growth for the next few years. Yourcompany has been an integrated player covering all segments and coating all surfaceswhile having a strong presence in the premium/niche segments. With access to globalR&D technology your Company continues to focus on innovations by bringing best inclass differentiated products to the Indian consumer and focussing on key brands. Keepingcustomer centricity at the core of our operations your Company continues to manufacturebest in class quality products. Your Company has expanded footprint into adjacentcategories of waterproofing (Dulux Acquatech) and woodcare (Sadolin) during the year. Thecompany has strengthened its distributor footprint with the much-needed reach into theunder-served districts of India.

Sustainability remains at the heart of everything we do. Taking a leap towardsAkzoNobel's ambition to use 100% renewable energy by 2030 all our factories have startedderiving significant portion of their energy requirements through solar energy.

Paints business has a presence across segments with strong positioning in thepremium segment. It is focused on buildings and infrastructure end-user industriesserving both consumers and professional painters. In this we are supported by our parentcompany in maintaining a technology-led differentiation. During the year we introducedtwo new premium products in this segment. Some of our noteworthy achievements this yearhave been as follows:

• Launch of global sub brand Ambiance under Dulux in the Super Premium Interiorrange in India was enthusiastically received catapulting Dulux to feature among the top15 Household Care brands in ET's Brand Equity:

o Brought alive through a brand-new TVC for Dulux Ambiance on TV and Digital Media

o Special effect paints inspired by artisans categorized under six collections -Potter's Collection (inspired by Clay) Stonemason's Collection (inspired by Stone)Jeweller's collection (inspired by Jewel) Stylist Collection (inspired by Cloth)Carpenters Collection (inspired by Wood) and Blacksmith Collection (inspired by Metal)

o Dulux Ambiance Velvet Touch Elastoglo paint powered by cutting edge elastomerictechnology that allows paint film to cover hairline cracks and protect the wall.

• Introduction of Smart Release Technology in the core exterior brand –Weathershield Protect offering consumers advanced algae and fungus protection

• Launch of brand-new TV campaign with Boman Irani focusing on creating awarenessfor the new 2X crackproof and 2X fungus proof benefits of Weathershield Powerfiexx

• Launch of Weathershield Signature – Ultra Premium Stone Finishes forExteriors providing unmatched aesthetics & protection to home Exteriors

• Dulux Aquatech the waterproofing range expanded with the launch of AquatechRoof Waterproof for household & commercial building roofs and Aquatech InteriorWaterproof Basecoat for protecting Interior home walls

• Dulux Professional range of products were felicitated with the coveted"GreenPro" certification by CII-GBCI

• Dulux Professional introduced curated colour themes for Hospitality and Leisuresector in the B2B space in India enabling Developers & Specifiers to seamlessly aligntheir aesthetics with Hip Design Classical Chic Modern Simplicity or Easy Living colourthemes.

Coatings business has a presence across segments and allied Industries. Summary ofeach of the businesses along with highlights of the year are given below:

- Marine Coatings business mainly deals in providing anti-corrosive foulingcontrol technologies and aesthetic solutions for ships vessels tankers barges etc.Supported by high quality customer service and in-field support around the globe ourtechnologically advanced International product range strives to satisfy customer's needsnow and in the future. This business continued to experience tough market conditionsmainly in the new build category because of oversupply in the market. Current marketconditions will have an adverse impact on this business in the near term as global tradeis hit by adverse economic conditions.

During the year we launched a new product called Intershield 4000 USP which is a highperformance Universal System primer based on passivation enhanced alkylated amine epoxytechnology. It is developed as an alternate for zinc-based primers cures rapidly and hasa very low VOC content of 227 gram/litres.

- Protective Coatings business services a wide range of industrial sectorslike oil & gas power infrastructure projects and wind energy. The main drivingfactors for the markets are boost in government projects for renewable & cleanerenergy and acceleration of infrastructure projects along with rehabilitation of Oil &Gas and Chemical Industries assets. Continued innovation in sustainable technologies withnew product launches will sustain the momentum of the business.

- Powder Coatings business caters to multiple segments like architecturalgeneral trade coaters general industries automobiles functional and domesticappliances. Our comprehensive range of powder coatings helps protect a variety of metalsurfaces in applications including window and door frames pipes car componentsradiators metal furniture home appliances etc. Powder coating is also used onunderbody-chassis exterior trims primers and clear for wheels and coatings for springsin the automobile segment. The sector has seen some headwinds from slowdown in automotiveindustry and IT (Telecom) sector because of 4G rollout.

During the year we launched Interpon Redox Corossion protection range which findsusage in Electrical Charging stations Transformers and Electrical Panels.

- Industrial Coatings business covers coil packaging and wood coatings.Coil coatings market is dominated by roofing building & construction productcategory aluminium composite panels and domestic appliance segments. This business hasseen a difficult year due to challenges faced by the steel sector. Packaging coatingsbusiness supplies coatings and inks for the protection & aesthetics of foodbeverages aerosol and general line metal cans metal closures and collapsible tubes. YourCompany helps its customers keep building facades kitchens and wooden floors protected& beautiful and 50% of all canned drinks safe.

During the year we introduced ‘Antibacterial Coatings' in Coil coatings for localcoil coaters.

- Automotive and Specialty Coatings (ASC) business covers vehiclerefinishes commercial vehicles railways and specialty coatings. The year was extremelychallenging and difficult for the Automotive industry. The industry recorded a decline. Weused this time to channelize our focus on profitable revenue growth by relooking at Routeto Market (RTM) strengthening our brand portfolio and optimizing costs.

At AkzoNobel India our focus has always been to continuously look at delivering valueto our customers through constant innovation - both in products and services. Our valuebrand WANDA continued its accelerated growth across India aided by wider channelacceptance and end user advocacy. Our premium brand Sikkens has a lineage of more than200 years and over the years we have constantly improved and brought innovations to thisbrand.

During the year we launched :

1) Sikkens Auto Surfacer UV - One of the fastest curing fillers in the refinishingmarket which requires 30-120 seconds of UV-A LED exposure to fully cure. This rapid curefiller enables body shops to work more efficiently and to cut down on labour and energycost.

2) Liquid Chrome - We have introduced Liquid Chrome to meet the needs of Auto OEMs toeliminate harmful carcinogenic ingredients like Lead and Cadmium present in traditionalchrome plating.

Company's Business Strategy

Your Company's strategic objective is to build a sustainable business for long-termvalue creation. To achieve this objective your company is focusing on:

a) Leveraging world class global brands and colour expertise and developing relevantofferings for the Indian market to create sustainable profitable growth

b) Growing profitably while increasing returns to all our stakeholders and

c) Driving digital and sustainable innovation.

COVID-19 update

There has been an unprecedented downturn in business activity sharpest in the decadeowing to countrywide lockdowns and lack of demand. With cases on the rise a second phaseof COVID in the offing and reverse urbanisation causing migrant labour to move back totheir villages there are indeed challenges in returning to normalcy once markets open up.

The non-essential and labour-intensive sectors of the Industry have been affected themost. Auto & Auto Components Infrastructure Construction Consumer durables andShipping have had an impact due to production shutdown supply chain disruption andadverse consumer sentiment while Oil & Gas sector has had an economic challenge due tofalling crude price. Industries are seeing varying challenges in the current businessenvironment but opportunities are also emerging in a few segments.

During this unprecedented situation your company's focus has been on the safety of itsemployees & operations while ensuring we stay connected with our customers preserveCash & liquidity and work on reducing costs:

• Business and Customer

The cycles of containment and outbreak required flexibility and agility in planning andresponse.

The large towns and metros have been more impacted than the others and the Industrycould also see movement towards value for money offerings and functional paints in theshort term. Being a discretionary segment the customers have been playing cautioustowards painting leading to extension of painting cycles. The Company also provided PPEkits to the painters and dealer community to enable them to resume their work safely andensure safety of customers as well.

• Managing Cash and Cost

While your Company has always maintained a strong liquidity position the need toconserve cash continues. It has become imperative for your Company to rationalize its coststructure and build more efficiencies with minimal impact on employees.

• People

During the lockdown the company had shutdown warehouses plants and offices in linewith government directives. In accordance with guidelines issued by the Ministry of HomeAffairs and various State Government authorities your company has obtained approvals forresuming operations where restrictions have been lifted. We advocated "Own yourfamily at work and at home" concept for driving safety and higher connect during theCOVID crisis. Various virtual engagement programs and learning challenges were drivenacross businesses and functions.

The Company's priority continues to keep our employees their families and ourpartners safe.

Responding to the new normal

The Company has seen a significant amount of transformation on the organisational andprofitability front that has helped the business steer these tough times. Our futurestrategy shall address the emerging trends of changes in the ecosystem negative buyingsentiment rise of AI and digital strengthening of the supply chain shift to e-commerceand alternate channels and focussing on health and hygiene.

The Company has evaluated the impact of COVID-19 on its operations & financialposition. Based on its review of the macro economic conditions & current outlook forthe Indian economy there is no additional impact on the financial statements apart fromthe financial impact already considered in financial statements of the Company as on 31March 2020. However given the evolving scenario & uncertainties with respect to itsnature & duration the impact may be different from estimates as on the date ofapproval of financial results. The Company will continue to monitor any material changesto its future business and economic conditions.

Risks and Concerns

The Board of Directors of the Company has formed a Risk Management Committee to frameimplement and monitor the risk management plan for the Company. The Committee isresponsible for monitoring and reviewing the risk management plan and ensuring itseffectiveness. The Audit Committee has additional oversight in the area of financial risksand controls. The major risks identified by the Company are systematically addressedthrough mitigating actions on a continuing basis. Listed below are some of the key riskstheir anticipated impact on the Company and mitigation strategies:

People risk: This is a critical risk for any company and includes a risk of talentretention due to the fast pace of the Industry and demand for experienced people. TheCompany is carrying out initiatives around talent management across levels buildingcapability and skills to prepare them for enriched careers within Akzonobel. Theorganization is also using various creative ways to stay connected with talent and taketheir inputs in co-creating the people strategy.

Commodity/Raw Material risk: Prices of several raw materials used by the Company aredriven by crude oil price and foreign exchange movement. The Company monitors this basedon international forecasts and price trends. Further there are ongoing localisation andvalue creation initiatives to reduce dependency on imported raw materials and mitigate thecost increase.

Cyber security risk: Cyberattacks can impact the business operations and cause loss ofsensitive information intellectual property cash and reputation. The Company's serviceprovider has a program to manage IT security which encompasses Cyber Security training toemployees phishing tests diagnostics tests on firewalls and vulnerability / penetrationtests done at regular intervals. Further a Security Operating Center (SOC) is beingestablished to monitor security performance across systems.

Statutory Compliance: The risk of non adherence to compliances in view of regulatorychanges during COVID-19 or otherwise leading to a fine penalty reputation damagecustomer claims etc. The Company ensures complete adherence to the compliancerequirements and has a structured framework to manage and report compliance to the Board.Regular audits are also undertaken to reduce the risks.

Currency risk: The risk of adverse movement in exchange rates can impact Company'smargin and profitability. The Company tries to balance its risk by close monitoring andtaking forward contracts to hedge foreign currency exposure.

Corporate Governance

Your Company continues to uphold the highest standards of corporate governance andseeks to consistently enhance its corporate governance performance emphasizingtransparency and embedding a sustainable culture of long-term value creation.

A report on Corporate Governance of the Company along with a certificate from apracticing Company Secretary confirming compliance with the conditions of corporategovernance is attached as Annexure I to this report.

Board Evaluation

Your Company has a mechanism to evaluate the performance of all Board members. Detailsof the evaluation are given in the Corporate Governance report.

Vigil Mechanism / Whistle blower Policy

Your Company has adopted a Vigil Mechanism / Whistle blower Policy as detailed in theCorporate Governance Report. The Policy may be accessed on the company's websitewww.akzonobel.co.in

Sustainability

Sustainability for the Company means delivering long-term value for all ourstakeholders. It underpins your Company's purpose and brands its core principles andemployee value proposition. It also acts as the driver of growth innovation andproductivity.

Your Company focuses on resource productivity and value selling as key drivers ofsustainability with verifiable goals.

A Business Responsibility Report is attached as Annexure II-A.

Corporate Social Responsibility

CSR forms an integral part of our sustainability agenda as we strive to make a positivedifference to the world around us. We engage with local communities and stakeholders topartner them in supporting sustainable social developmental projects and causes. YourCompany's CSR agenda is based on pillars of education economic development through skillbuilding community health and safety. Over the years our commitment to the developmentof our country and our communities has always remained significant and a guidingprinciple of the way we do business. Some of the highlights of the CSR activitiesconducted during the year are given below:

AkzoNobel Paint Academy

Your Company continued its focus on empowering the youth in India by providing skilltraining in painting. This year we trained 2680 youngsters and post training they werelinked to employment with painting contractors and automobile body shops. During the yearyour Company opened a new Paint Academy campus at Navi Mumbai offering ultra-moderntraining facilities along with accommodation.

Your Company rolled out a paints training project for the inmates of Faridabad districtjail as a part of its rehabilitation programme for prison inmates. Under this project125 inmates were provided training post which some of them were provided employment aftercompletion of their prison term.

E Arogya Kendra Project

AkzoNobel initiated the second E Arogya Kendra at Hoskote Bengaluru. With this thereare two E Arogya Kendras in Hoskote which provide access of super specialist doctors to~10000 villagers through tele medicine.

Education Projects

Your Company in partnership with Government Education Department schools andnon-formal schools continue to support education to underprivileged children in sixstates of India.

This year AkzoNobel N.V. CEO Mr Thierry Vanlancker and Global CFO Mr Maarten De Vriesvisited your Company's non-formal school in Gurugram and interacted with school childrenand teachers.

Response to COVID-19 pandemic

In order to fight the pandemic your Company has taken the following initiatives:

• Donation to the PM Cares fund to strengthen Government of India's fight againstCOVID-19

• Provision of PPE kits to frontline healthcare workers police force & dailywage labourers

• Distribution of essential food items to family members of daily wage earnersaround our sites

• E-Health initiative near Bangalore for symptomatic screening of villagers todetect COVID-19 symptoms

• Partnering with Faridabad District Prison for creating triple layered masks fordistribution to villagers near Gurugram.

Details of the CSR policy of the Company is available on our website atwww.akzonobel.co.in

A report on the CSR activities undertaken by your Company during the _scal year 2019-20is attached as Annexure II-B. It is pertinent to note that significant part of CSR spendis incurred in local areas where your Company has its operations.

Awards

Your Company was awarded:

• The Golden Globe Tiger Award 2019 in Kuala Lumpur for undertaking CSR project inVocational Skill Training in Painting and

• Honored with Excellence in Supply Chain Planning in an event organised by TheAlden Global the 7th Infection Conference & Awards in India.

Human Resources

Your Company had cordial relations with employees across all locations during the year.The total number of employees on the rolls of the Company as at 31 March 2020 was 1482(previous year 1695). The reduction in employees is mainly because of transformationinitiatives in recent years. Your Company considers Human Resources as a vital asset andgive utmost importance to employee engagement development and wellbeing.

• Engagement: During the year employees' participation moved to 95% in theOrganizational Health Index Survey (OHI) carried out worldwide by McKinsey & Company.While the year saw various creative actions notable amongst them was the introduction ofArtificial Intelligence (AI) engagement chatbot to gauge the sentiments of employees.

• Capability building: The year saw several programs launched to upskill technicaland behavioural competence. A few focused programs specially designed to drive culture andleadership such as "HPT-High Performing Team" were delivered across businesses.ILEAD program was launched to build commercial managers. In line with the ‘Growingwith AkzoNobel' philosophy we have globally launched the new Talent Management framework

• Rewards: Annual Compensation Process (ACP) for all employees was fairly andeffectively executed. In order to enhance the effectiveness and experience of employeeswe revamped Employee Outpatient Treatment policies with more employee friendly interfacesproviding a seamless speedy and digital experience.

Information as per section 197 of the Act read with the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended forms part of this report.However as permitted under the provisions of section 136 of the Act the Report andFinancial Statements are being sent to the members excluding the statement containing thesaid information. Any member interested in obtaining such particulars may inspect thesame at the registered office of the Company by writing an email toinvestor.india@akzonobel.com .

The disclosures below are made in terms of Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended:

(i) (ii)
Name Status Ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2019-20 Percentage increase in remuneration during 2019-20 over 2018-19
Mr Amit Jain Non Executive 2.16 Nil
Mr Rajiv Rajgopal Managing Director 32.78 NA - only part of the year in 2018-19
Mr Lakshay Kataria Wholetime Director and CFO 19.50 NA - only part of the year in 2018-19
Mr Oscar Wezenbeek (from 4 May 2019) Non Executive - NA - no remuneration was paid to him during his tenure as a Director
Mr Raj S Kapur (upto 14 August 2019) Non Executive – Independent 0.94 NA - only part of the year in 2019-20
Ms Kimsuka Narsimhan (upto 14 August 2019) Non Executive – Independent 0.60 NA - only part of the year in 2019-20
Mr Arvind Uppal Non Executive – Independent 1.95 Nil
Mr Hemant Sahai Non Executive – Independent 1.82 NA - only part of the year in 2018-19
Mr Rahul Bhatnagar (from 16 August 2019) Non Executive – Independent 1.15 NA - only part of the year in 2019-20
Ms Smriti Rekha Vijay (from 16 August 2019) Non Executive – Independent 1.15 NA - only part of the year in 2019-20
Mr Rajasekaran Guha (upto 29 February 2020) Company Secretary NA NA
Ms Harshi Rastogi (from 1 March 2020) Company Secretary NA NA
Description Remarks
(iii) Percentage increase in the median remuneration of employees in the financial year 6.9%
(iv) Number of permanent employees on the rolls of the Company 1482 as on 31 March 2020
(v) Average percentile increases already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration. Average increase in base salary of non- managerial personnel was 6.9% which is considered in line with the prevailing market conditions and other relevant factors.

It is hereby affirmed that the remuneration to managerial personnel referred to aboveis as per the remuneration policy of the Company.

Notes:

1. The aforesaid details are calculated on the basis of remuneration for the financialyear 2019-20.

2. Remuneration to Directors includes sitting fees paid to them for the financial year2019-20.

3. Median remuneration in the Company (Base Salary) for all its employees was Rs740859 for the financial year 2019-20.

4. Remuneration to Directors is within the overall limits approved by the shareholders.

Conservation of Energy Technology Absorption and Forex Earnings and Outgo

Your Company continues to use its research and development base to bring consumers newproducts with improved performance features and products for special applications.Particulars in respect of conservation of energy technology absorption and foreignexchange earnings and outgo pursuant to Section 134 of the Act are given in Annexure IIIto this report.

Information Technology

Your Company continues to take all opportunities to leverage IT to become customercentric and win in the market.

Over the year the PRISM program enabled the Company to operate through a single ERPplatform which is aligned to AkzoNobel's strategic technology journey.

The Company has gone through significant digital transformation and completed the NextGen Workplace Program that has given significant boost to consolidate and digitalize itsIT assets and services.

AkzoNobel is embracing the AI (Artificial Intelligence) platform and analytics to getmore employee and customer insight to deliver outcomes that will ensure organizationalsuccess.

Internal Control Systems

Your Company has an effective risk management framework which helps the Board tomonitor the state of controls in key business processes. Your Company has well-establishedprocedures for internal controls commensurate with its size and operations. Theorganisation is appropriately staffed with qualified and experienced personnel forimplementing and monitoring the internal control environment.

The Board periodically reviews the state of compliance with all laws applicable to theCompany. The Company has an IT enabled tool incorporating all applicable legal complianceswhich are marked to their respective owners. The compliance library is updatedperiodically covering all changes with respect to Laws/Regulations.

The Board has constituted a Risk Management Committee clearly defining its role andresponsibilities. The Board has also delegated the monitoring and reviewing of the riskmanagement plan to the committee which updates the Board from time to time.

Policy against Sexual Harassment

Your Company has formulated a policy for the prevention of sexual harassment within theCompany. It seeks to prevent and deter acts of sexual harassment and communicateprocedures for their resolution and settlement. Internal Complaints Committees have beenconstituted in accordance with the requirements of the law. There were two complaintsreported during 2019-20 which were investigated and resolved to the satisfaction of thecomplainants as per the guidelines. A copy of the Policy against sexual harassment hasbeen disseminated amongst all employees and is posted on the Company website which can beaccessed from www.akzonobel.co.in.

Related Party Transactions (RPTs)

Your Company enters into various transactions with related parties as defined undersection 2(76) of the Act. All the RPTs are undertaken in compliance with the provisionsset out in the Act and the Listing Regulations. Your Company has a robust process for RPTsand the transactions with related parties are referred to the audit committee for itsapproval at the scheduled quarterly meetings or as may be called upon from time to timealong with all relevant information.

Your Company's Policy on materiality of RPTs and dealing with RPTs may be accessed onthe Company's website at www.akzonobel.co.in.

All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis and/ or have been duly approved as required under law. During the year the Companyhad not entered into any contract / arrangement/ transaction with related parties whichcould be considered material in accordance with the policy of the Company on materialityof RPTs.

Your Directors draw attention of the members to Note 33 to the financial statementswhich contains the requisite disclosures in respect of RPTs.

Form AOC - 2 pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of theCompanies (Accounts) Rules 2014 forms part of this report.

Loans Guarantees & Investments

There are no loans given or guarantees issued that are covered under Section 186 of theAct read with the Rules made thereunder. Details of investments made under the saidsection are covered in Notes 5.1 and 8.1 of the financial statements.

Auditors

Statutory Auditors

M/s Price Waterhouse Chartered Accountants LLP have been continuing as the Auditors ofthe Company for a term up to the conclusion of the Annual General Meeting in 2021. Theyhave informed the Company that they duly ful_l the requirements under applicable laws andregulations to function as the Auditors of the Company for the financial year 2020-21.

Pursuant to amendment to section 139 of the Act effective 7 May 2018 rati_cation byshareholders every year for the appointment of the statutory auditors is no longerrequired and accordingly the Notice of ensuing AGM does not include any proposal forseeking shareholders' approval / ratification in this regard.

The Statutory Auditors of the Company have not reported any Fraud as Specified underSection 143(2) of the Act.

Secretarial Auditors

In terms of section 204 of the Act Secretarial Audit was conducted for the financialyear 2019-20 by M/s A K Labh & Co. Kolkata. Their report is appended.

Secretarial audit report for financial year 2019-20 contained one area of noncompliance by a promoter entity in respect of dematerialization of its shareholding. Theshareholding entity has completed the necessary formalities in this regard and submittedthe equity shares for demat as of date of this report and dematerialisation is in process.

The Board has re-appointed M/s A K Labh & Co. Kolkata to conduct Secretarial Auditfor the financial year 2020-21.

Cost Auditors

In terms of Section 148 of the Companies Act 2013 Cost Audit was conducted for theyear 2019-20 by M/s Chandra Wadhwa & Co. New Delhi. Their report for the year 2018-19has been filed with MCA within the stipulated time.

The Board has re-appointed M/s Chandra Wadhwa & Co. New Delhi as the Cost Auditorsfor conducting Cost Audit for the financial year 2020-21 whose remuneration is subject torati_cation by the shareholders at the forthcoming AGM.

Cost Records

The Cost Accounts and records as required under section 148(1) of the Act are dulymaintained by the Company.

Extracts of the Annual Return

Extracts of annual return in Form MGT-9 as required under the provisions of Section92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules 2014is annexed as Annexure IV to this Annual Report. The same has also been placed at theCompany's website www.akzonobel. co.in in terms of the provisions of the Act.

Directors & Key Management Personnel

The following changes were made in the composition of the Board during 2019-20:

Mr Oscar Wezenbeek Non-Executive Director Appointed with effect from 4 May 2019
Ms Kimsuka Narsimhan Independent Director Resigned with effect from 14 August 2019
Mr Raj Kapur Independent Director Retired with effect from 14 August 2019
Mr Rahul Bhatnagar Independent Director Appointed with effect from 16 Aug 2019
Ms Smriti Rakha Vijay Independent Director Appointed with effect from 16 Aug 2019

Mr Lakshay Kataria will be retiring by rotation at the forthcoming Annual GeneralMeeting (AGM) and has offered himself for reelection.

A brief resume of Mr Lakshay Kataria as required under regulation 36 of the ListingRegulations is given in the Notice convening the AGM.

During the year Ms Kimsuka Narsimhan and Mr Raj Kapur ceased to be the Directors ofthe Company with effect from 14 August 2019. The Board places on record its appreciationfor their invaluable contribution and guidance.

Mr R Guha relinquished his office as the Secretary of the Company with effect from 29February 2020 after having served the Company for over three decades in differentcapacities. The Board records its appreciation of the valuable services rendered by MrGuha. Ms Harshi Rastogi was appointed as the Company Secretary with effect from 01 March2020.

Mr Rajiv Rajgopal Managing Director Mr Lakshay Kataria Chief Financial officer andMs Harshi Rastogi Company Secretary are the whole-time Key Managerial Personnel of theCompany in terms of Section 203 of the Act.

Committees of the Board

The composition of all the Committees of the Board has been provided in the CorporateGovernance Report.

Board Meeting Dates

The Board Meeting Dates and the attendance of the Directors at the meetings have beenprovided in the Corporate Governance Report.

Declaration by Independent Directors

The Company has received necessary declarations from each Independent Director that he/she meets the criteria of independence as laid down in Section 149(6) of the Act and theListing Regulations.

Familiarization Programme for Independent Directors

The Company has adopted a policy on familiarization programme for independentdirectors. All new Independent Directors (IDs) inducted into the Board are presented withan overview of the Company's business operations products organization structure andabout the Board procedures. Details of the familiarization programme for IndependentDirectors can be accessed at www.akzonobel.co.in.

Directors' Responsibility Statement

As required under section 134(5) of the Act the Board states that:

a) in the preparation of the annual accounts the applicable Indian accountingstandards had been followed along with proper explanation relating to material departures;

b) the Directors had selected such accounting policies and applied them consistentlyand made judgements 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 had 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 had 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; and

f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

General

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year underreview:

1. The Company has issued only one class of equity shares with equal voting rights.

2. The Company has not issued any shares during the year under ESOPs or Sweat Equityor otherwise.

3. The Managing Director or Whole time Directors of the Company did not receive anyremuneration or commission from any other company belonging to AkzoNobel Group orassociate companies.

4. No significant or material orders were passed by the Regulators or Courts orTribunals which could impact the going concern status and the Company's operations infuture.

5. There has been no change in the nature of business of your Company during thefinancial year.

6. Your Company has not accepted any public deposits during the year and no amount onaccount of principal or interest on public deposits was outstanding as on the date of thebalance sheet.

7. Your Company has complied with the Secretarial Standards as applicable issued byThe Institute of Company Secretaries of India.

8. The Corporate office of the Company was shifted to a new premise within Gurugram at9th Floor Magnum Towers Golf Course Extension Road Sector 58 Gurugram 122 011 witheffect from 11 November 2019.

Cautionary Statement

Some of the statements in this report describing your Company's objectives andexpectations expressed in good faith may constitute ‘forward looking statements'within the meaning of applicable laws and regulations. Actual results might differmaterially from those in the event of changes in the assumptions/ market conditions.

Acknowledgment

The Board of Directors conveys their gratitude and appreciation to all the employees ofyour Company for their valuable contribution during the year. They also wish to place onrecord their appreciation for the customers shareholders investors bankers agentssuppliers distributors government and regulatory authorities stock exchanges and otherbusiness associates for their cooperation and continued support. The Directors regret theloss of life due to COVID-19 pandemic and have immense respect for every person who riskedtheir life and safety to fight this pandemic.

On behalf of the Board
Amit Jain
Place: Gurugram Chairman
Date: 20 June 2020 DIN 01770475

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