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Apar Industries Ltd.

BSE: 532259 Sector: Engineering
NSE: APARINDS ISIN Code: INE372A01015
BSE 00:00 | 26 May 607.55 -4.85
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NSE 00:00 | 26 May 606.65 -6.20
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OPEN 610.90
PREVIOUS CLOSE 612.40
VOLUME 665
52-Week high 868.45
52-Week low 500.10
P/E 11.47
Mkt Cap.(Rs cr) 2,325
Buy Price 0.00
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Sell Price 0.00
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OPEN 610.90
CLOSE 612.40
VOLUME 665
52-Week high 868.45
52-Week low 500.10
P/E 11.47
Mkt Cap.(Rs cr) 2,325
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Apar Industries Ltd. (APARINDS) - Director Report

Company director report

Dear Shareholders

Your Directors take immense pleasure in presenting the 32nd Annual Report of theCompany together with the Audited Annual Financial Statements (Standalone andConsolidated) showing the financial position of the Company for the Financial year endedMarch 31 2021.

1. FINANCIAL PERFORMANCE

The financial performance of your Company for the Financial year ended March 31 2021is highlighted below:

(Rs. in crore)

Particulars

Company

Consolidated

2020-21 2019-20 % of Increase 2020-21 2019-20 % of Increase
Sales Turnover 5960.82 7017.15 -15% 6388.02 7425.45 -14%
Other income 25.77 24.53 5% 22.26 17.99 24%
Profit for the year before finance cost depreciation and tax expenses. 398.81 469.90 -15% 437.75 484.18 -10%
Deducting therefrom:
- Depreciation/amortization 84.87 79.15 7% 93.44 87.12 7%
- Finance Costs 129.24 219.08 -41% 136.04 227.65 -40%
PROFIT BEFORE TAXATION FOR THE YEAR 184.70 171.67 8% 208.27 169.41 23%
Deducting therefrom:
- Tax expenses 47.88 32.69 46% 47.77 34.26 39%
NET PROFIT FOR THE YEAR AFTER TAXATION AND BEFORE MINORITY INTEREST 136.82 138.98 -2% 160.50 135.15 19%
Adjustment of :
Share in Profit (Loss) of Associate - - - - - -
NET PROFIT AFTER TAXATION AND ABOVE ADJUSTMENTS 136.82 138.98 -2% 160.50 135.15 19%
Add: Profit brought forward from previous year 645.78 608.44 6% 716.24 682.73 5%
Amount available for appropriations :
- Reserves (14.00) (14.00) 0% (14.00) (14.00) 0%
- Dividend (including tax) - (87.64) -100% - (87.64) -100%
Leaving balance of profit carried to balance sheet 768.60 645.78 19% 862.74 716.24 20%
Earnings per equity share (EPS)
- Basic & Diluted before & after extraordinary items 35.75 36.32 -2% 41.94 35.32 19%

2. NOTE ON COVID-19

The Company has assessed the possible impact of COVID-19 on its financial statementsbased on the internal and external information available up to the date of approval ofthese financial accounts and concluded that no adjustment is required in these results.Based on its assessment of business/economic conditions the Company expects torecover the carrying value of its assets. The Company will continue to evaluate thepandemic related uncertainty arising from the on-going second wave and will continue toassess its impact.

3. INDIAN ACCOUNTING STANDARDS

The Financial Statements for the year ended on March 31 2021 have been prepared inaccordance with the Companies (Indian Accounting Standard) Rules 2015 prescribed underSection 133 of the Companies Act 2013 ('the Act') and other recognized accountingpractices and policies to the extent applicable.

4. DIVIDEND

Pursuant to the Requirements of Regulation 43A of the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 ('the Listing Regulations') the Company hasformulated its Dividend Distribution Policy the details of which are available on theCompany's website at www.apar.com.

Considering the financial results and the performance of the Company during the yearunder review as compared to the previous year the Board of Directors has recommended thedividend of Rs.9.50 (95 %) per share on 38268619 Equity Shares of the face value ofRs.10/- each for the Financial Year 2020-21.

This dividend amounting to Rs.36.36 Crores is payable after declaration by Shareholdersat the ensuing Annual General Meeting (AGM) and you are requested to declare the same.

5. TRANSFER TO RESERVES

The Company proposes to transfer an amount of Rs.14 Crore to the General Reserves. Anamount of Rs.862.74 Crores is proposed to be retained in the Consolidated Statement ofProfit and Loss for FY 2020-21.

6. MANAGEMENT DISCUSSION AND ANALYSIS (MDA)

ECONOMIC OVERVIEW

Global Economy & Outlook

The global economy contracted by an estimated 3.3% in 2020 due to the impact of theCOVID-19 pandemic. Many countries faced multi-layered crises comprising domestic economicdisruptions plummeting of external demand capital flow reversals and commodity pricecollapse.

The IMF has projected the global economy to grow at 6% in 2021 before moderating to4.4% in 2022. The growth is however subject to high uncertainty. Future growth willdepend on the path the health crisis takes including whether the new COVID-19 strainsprove susceptible to vaccines or they prolong the pandemic the effectiveness of policyactions to limit the persistent economic damage the evolution of financial conditions andcommodity prices and the adjustment capacity of the economy.

Indian Economy & Outlook

India's GDP contracted by 7.3% in FY21. The COVID-19 pandemic significantly affectedthe Indian economy with the national lockdown in April 2020 followed by phased unlockingand localized lockdowns in March 2021 as the second wave of the pandemic hit the country.Despite such unprecedented circumstances Q3 & Q4 FY21 saw GDP growth led byagriculture construction electricity gas water supply and other utility services.

RBI has forecasted India's FY22 GDP to grow at 9.5%. The forecast of a normal monsoonthe resilience of agriculture and the farm economy the adoption of COVID-19-compatibleoperational models by businesses and the gathering momentum of global recovery are forcesthat can provide tailwinds to revival of domestic economic activity when the second waveabates.

INDUSTRY OVERVIEW

APAR Industries is a leading global manufacturer of conductors cables specialityoils polymers and lubricants. Your Company has identified six major growth drivers:

Growth Drivers APAR Products APAR Advantage
Rising Global ESG Conductors Cables and • Largest conductor manufacturer.
Investments Transformer oils (T-oils) • 3rd largest manufacturer of transformer oils.
• Largest in India for special application cables.
Accelerating Indian Railways Industry Copper Conductors XLPE & Elastomeric Cables & Harnesses • Largest in India for special application cables and harnesses.
Strong pullback for Auto Lubes Automotive • 10th largest domestic player in lubricants.
Automotive Sector Cables • OEM relationships with leading Tier 1 tractor players.
Telecom Industry Optical Fiber Cables (OFC) Optical Ground Wire (OPGW) • Significant player in both these segments.
Defense Sector Infra Spending Elastomeric Cables & Speciality Cables • Major supplier of speciality elastomeric cables to the Indian Navy manufacturing establishments and to DRDO.
Exports 41% of revenue contribution in FY21 • Exports to over 125 countries.
• Al-Hamriyah Sharjah plant.

T&D Industry

Rising global Environmental Social and Governance (ESG) investments:

All major economies of the world are increasingly becoming more cognisant of the impactof global warming and are trying to reduce environmental impact by shifting tononconventional energy that includes wind and solar. The Biden government in the US isalso in the process of passing a $500-bn plus infrastructure-spending bill which includesnumerous ESG proposals.

Renewable Energy

Globally efforts continued towards transition to a low- carbon-energy regime. Globalrenewable generation capacity reached 2799 GW in 2020 with capacity increase of 261 GW.Solar energy was up 127 GW (22% YoY) followed by wind energy at 111 GW (18% YoY). Asiaaccounted for 64% of new capacity in 2020 increasing its capacity by 167.6 GW to reach1.29 TW. Capacity in Europe and North America expanded by 34 GW and 32 GW respectively.Oceania remained the fastest growing region (18.4% YoY).

Renewable Energy Outlook

IEA estimates global energy demand to increase by 4.6% in 2021 more than offsettingthe 4% contraction in 2020. Renewables dominate investment in new power generation andare expected to account for 70% of 2021's total of $530bn spend on all new generationcapacity.

India aims at 450 GW of renewable energy generation capacity by 2030. Against itsrenewable energy target of 175 gW by 2022 India is at 94.5 GW and is on track to achieve65-69% of the target. Solar is expected to add capacity additions in the range of 15-20 GWand wind is expected to add between 6-8 GW in FY22.

T&D progress as targeted in 13th Plan

16462 ckms of transmission lines were added in FY21 6.1% more than targeted and up41% YoY. 33120 MVA of substation transformation capacity was added in FY21 down 46% YoY.

Other T&D

• Electricity consumption contracted by 0.8% YoY in FY21 due to lower demand fromthe industrial and commercial sector impacting DISCOM revenues. ICRA estimates a revenuegap of Rs.30000 crore for DISCOMs in FY21 due to lockdown restrictions and absence oftariff revisions.

• The government sanctioned a liquidity package of Rs.1.35 lakh crore in FY21 tohelp the stressed DISCOMS. This resulted in a 3.4% YoY reduction in outstanding dues owedby DISCOMs to power generators to Rs.74510 crore as on 31st March 2021.

• Power transmission projects structured on the tariff- based competitive bidding(TBCB) mechanism and associated with large-scale evacuation of renewable energy gainedtraction in FY21. Four new LOIs were issued in FY21 for these projects.

Other T&D Outlook

Global power sector investment is set to increase by ~5% in 2021 to over $820 bn. Theprojected requirement for new T&D lines is 80% greater over the next decade than inthe last 10 years (IEA WEO 2020). The global market for power transmission anddistribution conductors is expected to reach $6.6 bn and $26.9 bn respectively in 2024.Global transformer oil market is set to expand from $2.2 bn in 2020 to $3 bn by 2025— or 6.9% CAGR - by power grid updates in developing countries.

Budget 2021-22 allocation for the Indian Power Sector

• Rs.15322 crore to Power Ministry up 40% YoY over FY21 Revised Estimate (R.E.):

• IPDS at Rs.5300 crore up 33% YoY.

• DDUGJY at Rs.3600 crore up 80% YoY.

• Rs.575 crore outlay to Ministry of New and Renewable Energy up 60% YoY overFY21 R.E.:

• Green energy corridors at Rs.300 crore up 88% YoY.

• Wind Power (grid interactive + off-grid) at Rs.1100 crore up 4% YoY.

• Solar power (total) at Rs.2606 crore up 66% YoY.

Revamped reforms-based result-linked power distribution sector scheme:

The scheme is to be launched with an outlay of Rs.305984 crore over 5 years providingassistance to DISCOMS. It targets:

• Reduction of AT&C losses to 12-15% by FY25.

• 1005 metering booths for consumers and agriculture.

• Reduce ACS and ARR losses to 0 by FY25.

• Capital Expenditure outlay for metering and infrastructure work is Rs.1.5 lakhcrore each for a period of 5 years.

Indian Railways Industry

The Indian Railways is also accelerating its addition of locomotives and coaches thatrequire specialised cables and harnesses. In FY21 there was a great slowdown inproduction across government units but planning to accelerate the catch up in FY22 andFY23. Indian Railways has set a target to achieve 100% 'Made in India' production of railcoaches by the end of 2022. Indian Railways achieved highest ever electrification ofsections in FY21 covering 6015 rkms in a single year. It has now electrified 45881 rkmsor 71% of total broad-gauge network. It also commissioned a record 56 Traction SubStations in FY21 up 33% YoY. 706 locomotives and 7276 coaches were added in FY21.

Indian Railways Industry Outlook: The entire Indian Railways network in order toreduce its carbon footprint will be electrified by 2023. Further they are targeting toinstall 20GW of solar power by 2030 to support the electrification process.

Automotive Industry

There has been a substantial expansion in the demand for agriculture equipment such astractors. We expect this trend to continue for the next few years. Recovery in domesticautomobile sales is expected from Q2 FY22 onwards contingent on a faster vaccinationdrive and no new waves of Covid-19.

Overall domestic automobile sales volumes declined 13% YoY in FY21. However tractorsales the segment your Company focuses on recorded a boom of 26.9% YoY with strong ruraldemand enabled by healthy farm cash flows and stable crop prices supported by thegovernment's focus on procurement and support programmes.

Automotive Industry Outlook: CRISIL estimates tractor sales to grow at 3-5% in FY22.Budget FY22 allocated Rs.757 crore (up 138% compared to FY21 R.E.) to the Faster Adoptionand Manufacturing of Hybrid and Electric Vehicle (FAME India) scheme to provide cleanmobility solutions.

Telecom Industry

India is currently implementing BharatNet — the world's largest rural broadbandaccess network. As the telecom industry matures with increased data traffic and speed thedemand for optical fibre networks is poised to grow. 521322 Km of Optical Fibre Cables(OFC) was laid as on 14th May 2021 under the Bharat Net program. Number of GramPanchayats for which agencies decided to install Wi- Fi/FTTH stood at 132600.

Telecom Industry Outlook: FY22 Budget allocation to Bharat Net was Rs.7000 crore up27% YoY.

Defence Industry

Under the Atmanirbhar Bharat campaign the defence sector has been identified as one ofthe core areas to boost 'Make in India'. The government's push to promote indigenousdefence equipment is evident in the Defence Acquisition Procedure 2020 which prioritisescapital acquisitions from domestic players over foreign ones.

Defence Industry Outlook: Union Budget 2021-22 has given a historic push to defencemodernisation by increasing the defence capital outlay by 18.8% to Rs.135061 crore.

Exports

With the spread of COVID-19 through multiple waves hitting countries at differenttimes your Company is focusing on exports to hedge geographic diversification andcapture the ESG derived opportunities in the US Europe Australia and Latin America.

Exports Outlook: The Federation of Indian Export Organisations has set an export targetof $ 400 bn in FY22. This is being buoyed by demand from western nations where the impactof COVID-19 is waning.

OVERALL BUSINESS PERFORMANCE

In Rs.Cr FY17 FY18 FY19 FY20 FY21
Revenue 4832 5819 7964 7443 6410
EBITDA 433 419 483 484 438
PAT 177 145 136 135 161
Cash Profit 222 201 203 222 254
ROE 19% 13% 12% 11% 12%
D/E 0.1 0.2 0.1 0.1 0.1

Numbers are as per Ind AS.

The Company posted 19% YoY growth in PAT in FY21 despite the unprecedented disruptionscaused by the pandemic. Consolidated revenue in FY21 was at Rs.6410 crore down 14% YoYmainly due to lower domestic revenues as a result of the national lockdown in the initialmonths of the year coupled with persistent low demand. Export revenue increased 3% YoYcontributing 41% to revenues in FY21. Consolidated EBITDA was at Rs.438 crore and EBITDAmargin improved to 6.8% in FY21 from 6.5% in FY20 with increasing share of higher-valueproducts. Speciality Oils achieved a historically highest EBITDA of Rs.7032 per KL in theyear up 135.2% YoY.

SEGMENT-WISE PERFORMANCE

Conductors - Largest manufacturer globally

Your Company is the largest global manufacturer of Conductors with 180000 MTPAcapacity. Rs.344 crore of strategic capex was undertaken over FY15-FY21 to launch severalinnovative solutions in the space:

• Pioneered turnkey solutions for re-conductoring with HEC live line installationwith OPGW.

• 1st to develop copper-magnesium conductors as per R.D.S.O. specifications.

Revenue for the conductors' segment declined 19.2% YoY to Rs.2908 crore as domesticrevenues declined 37.0% YoY mainly due to COVID-19-related headwinds.

In Rs.Crore FY21 FY20 Growth (%)
Order Book 1649 2003 -18%
Turnover 2908 3600 -19%
Segment Profit/(Loss) 68 158 -57%
Volume (MT) 128460 158104 -19%

• Exports' contribution was up to 52.1% versus 40.6% in FY20.

• Higher-value products (High-Efficiency Conductors (HEC) + Copper Conductors +OPGW + Copper Transpose Conductors (CTC)) contribution was at 32.6% vs. 39.4% in FY20.

• HEC: Revenue was down 36.9% YoY.

• Copper conductor for Railways: Revenue was down 45.9% YoY.

• CTC: Revenue up 286.4% YoY.

• OPGW: Revenue up 83.3% YoY.

• New order inflow of Rs.2425 crore in FY21 was down 7.4% YoY.

EBITDA per MT after forex adjustment down 26.5% YoY at Rs.7926: Unprecedented lowprofitability realized in Q4 FY21 due to steep increase in international freight costsaluminum premium and steel prices for fixed-price orders. Global freight costs were up3-4x due to scarcity of containers in this quarter. Additionally there was delay incustomers' clearances due to COVID-19/travel restrictions. The MEIS benefit of 2% of FOBvalue of exports was withdrawn by the government in Q3 and the alternate scheme was notfinalized. These factors were beyond the Company's control to manage.

Outlook

• Expect the ongoing 2nd COVID-19 wave to impact H1 FY22 operations and H2 FY22 tobe closer to pre- COVID-19 times.

• Rs.500 crore+ worth orders already received in April 2021 though EPC playershave delayed ordering due to steep rise in aluminum and steel prices.

• As COVID-19 gets in control strong T&D demand is expected from therenewable projects under construction/ bidding and the government's commitment to highershare of clean energy. Similarly Railways electrification and EV charging infrastructurewill be key demand drivers.

• Focus on higher-value products such as HEC Copper Conductors CTC and OPGW tohelp profitability.

Risks and Concerns: Additional shutdowns due to higher COVID-19 spread and additionalwaves in India and other major markets may impact operations and demand. Internationalfreight prices remain high and container availability remains a major issue. In the largerTBCB projects where your Company is a vendor profitability may be impacted because ofthe fixed-price nature of the contracts and the lag between the pre-bidding stage andactual ordering. Increase in steel prices and no hedgeable mechanism for the same mayaffect future profitability. Increasing competition in the domestic market with fixed-price contracts may put pressure on the profitability of the Company. Delays in ordersfrom state DISCOMS may impact performance. The cyclical nature of the power business hasan obvious impact on our performance. Project delays from customers' side may have animpact. Regional political instability and changes in the external environment in certainexport markets may affect execution.

Speciality Oils - Highest EBITDA per KL

The Company is the 3rd largest global manufacturer of transformer oils. In FY 21 yourCompany became the 10th largest lubricant marketer in India. This puts the Company at anadvantage in terms of economies of scale for manufacture and distribution adding to thepremiumization of the oil division business. Rs.208 crore was invested in FY15-21 onhigher-value products:

Introduced the best performing Premium Natural Ester- based transformer oil in theworld:

• This oil provides a high degree of safety is 99% biodegradable has the lowestcarbon footprint in its manufacture and offers the best viscosity and oxidation stability(parameters to determine the life of the oil) in its class globally.

• NE Premium has been showcased to various global OEMs and is under field trials.

FY21 became the best performing year for the division:

Revenue grew 2% YoY to Rs.2364 crore driven by 11.4% YoY growth in exports. This wasspread across industry sub-verticals.

In Rs.Crore FY21 FY20 Growth (%)
Turnover 2364 2311 2%
Segment 266 121 121%
Profit/(Loss)
Volume (MT) 399214 403626 -1.1%

• Exports contribution up to 41% versus 37% in FY20.

• White oil sales volumes up 16.1% YoY driven by strong growth in exports.

• Transformer oil volumes down 16.4% as domestic volumes declined due to bothdemand and cash flow issues.

• Revenue from automotive oils and industrial oils up 14.6% YoY in FY21.

Recorded highest-ever profitability:

EBITDA per KL after forex adjustment in FY21 was at Rs.7032 up 135.2% YoY withimproved premiumization of product- mix supported by stable base oil prices and strictfocus on working capital management.

Reached Capacity Utilization target ahead of its time:

The new state-of-the-art Hamriyah (Sharjah) plant operated at 79% utilization in FY21up from 69% in FY20.

Outlook

• The Company expects FY22 to be tougher with both offtake and margins affecteddue to the 2nd wave of COVID-19 especially with rural areas also being affected thistime.

• The domestic T&D equipment market is expected to continue to benefit fromvarious regulatory initiatives leading to both new and replacement demand for transformeroils.

• Another growth year expected for tractor sales in FY22.

• Rising ESG Investments will support the innovative NE Premium product.

Risks and Concerns: Your Company is exposed to volatility in the prices of rawmaterials and foreign exchange rates. Competition in both the transformer oils and autolubricants sub-segments may impact performance. However in order to mitigate risks yourCompany continues to exercise prudence in inventory control and hedging strategies. Alsoadditional global refining capacities have resulted in a mismatch in demand and supplywhich has had an effect on base oil prices. The prices of long-term buy contracts taketime to correct in case of fluctuations in crude prices as formula prices are alwaysbackward looking. Your Company had to implement strict credit controls to limit exposureto customers facing cash-flow issues. Rapid commoditization taking place at the lower endespecially at technical grade white oils may have an impact on margins. Geopoliticaluncertainties may impact global oil supply causing volatility in base oil prices and mayimpact your Company's performance.

b^>— Cables segment — Largest domestic player in renewables

The Company is the largest domestic player in renewables with one of the widest rangesof medium-voltage and low- voltage XLPE cables elastomeric cables fibre optic cables andspeciality cables. The Company boasts of 60% share in

domestic wind sector. Rs.265 crore has been invested over FY15-21 developing new-agesolutions:

• Launched India's most advanced E-beam facility and now has 3 operating machines.

• High-voltage power cables using the latest CCV technology.

• Introduced Medium Voltage Covered Conductor (MVCC) for increased safety anduninterrupted power distribution in high population density and forested areas.

Focus on exports during low domestic demand:

Revenues from the Cables segment declined 21% YoY to reach Rs.1270 crore asElasto/E-beam cable business was affected due to reduced offtake in solar wind railwaysand defence business.

In Rs.Crore FY21 FY20 Growth (%)
Turnover 1270 1600 -21%
Segment Profit/(Loss) 33 155 -79%
Segment Profit margin 2.6% 9.7% -73%

• Exports contribution at 20% versus 17% in FY20.

• Power cable continues to be highly competitive.

• During the year the Company installed the 3rd E-beam machine of 2.5 MeV classwith in-house expertise.

• Telecom cables/OFC revenue was up by 21.2% YoY.

• EBITDA margin post forex adjustments down 66.4% YoY to Rs.60 crore in FY21.

Taking giant leaps to bolster exports revenue:

• Received various UL approvals which are mandatory for the sale of electricalcables to the US market.

• The Company received global supply approvals from some of the largest windmillproducers in the world including General Electric and Vestas.

Outlook

• In FY22 the Company will continue its focus on growing exports and premiumproducts: MVCC automotive cables and harnesses.

• Expecting increased sales in FY22 with our solar wind railways and defencecustomers starting up from June-July of 2021.

• The Company is planning Rs.95 crore capex over next 12 to 18 months tosubstantially increase cables for solar & wind segment as well as target the USmarket as the Company sees an opportunity in the China plus One strategy.

Risks and Concerns: The excess capacity in the power cables segment impacts pricing.Collection periods can get extended and delivery schedules delayed due to lack offinancial arrangements by key customers in the renewable energy sector and by EPCcontractors. In optical fibre cables low or zero ordering by major telecom companies mayimpact performance. The cyclical nature of their tendering too has a bearing on theorder situation in the industry. Any volatility in fibre prices may impact performance.

General risks and concerns

Continued pandemic and additional shutdowns may impact performance. The Company'sperformance may be impacted by fluctuating commodity prices technological changesexchange rate fluctuations and due to any impact in the general macro-economic outlook.Any geopolitical or economic upheavals at the local regional or global levels mayadversely impact demand or create input cost volatility that may impact performance. YourCompany is exposed to risk of volatility in LIBOR rates that may increase our interestcosts and impact performance. Debtors' collection period can increase on account of thestressed financial condition of customers.

Internal Control Systems (ICS) and Their Adequacy

The Company has established adequate ICS in respect of all the divisions of theCompany. The ICS aims to promote operational efficiencies and achieve savings in cost andoverheads in all business operations. System Application and Product (SAP) a world-classbusiness process integration software solution which was implemented by the Company atall business units has been operating successfully. The Company has appointed M/s.Deloitte Touche Tohmatsu India LLP as its Internal Auditors. The system-cum-internal auditreports of the Internal Auditors were discussed at the Audit Committee meetings andappropriate corrective steps have been taken. Further all business segments prepare theirannual budgets which are reviewed along with performance at regular intervals.

Development of human resources

The Company promotes an open and transparent working environment to enhance teamworkand build business focus. The Company gives equal importance to development of humanresources (HR). It updates its HR policy in line with the changing HR culture in theindustry as a whole. In order to foster excellence and reward those employees who performwell the Company has performance/production- linked incentive schemes andintroduced the Employees Stock Option Scheme. The Company also takes adequate steps forin-house training of employees and maintaining a safe and healthy environment.

Key Financial Ratios with details of significant changes

The Company has identified the following as key financial ratios:

Consolidated Ratios FY21 FY20 % Change
EBITDA Margin 6.9% 6.5% 5.1%
PAT Margin 2.5% 1.8% 38.0%
ROE 12.5% 11.4% 9.2%
Debtor Turnover 108 99 8.4%
Inventory Turnover 98 75 30.5%
Current Ratio 1.22 1.13 7.3%
Debt/Equity Ratio 0.17 0.19 -10.0%
Interest Coverage Ratio 2.5 1.7 45.1%
Net Fixed Asset Turnover 6.9 8.5 -18.4%

During the year the Company strictly focused on working capital management asdomestic revenues were impacted by COVID-19-related issues. The reduction in interestrates and strict focus on working capital management were the main drivers behind the 42%YoY decrease in interest costs that reflected in improved Interest Coverage Ratio and PATmargin. PAT margin was also helped by 31 bps improvement in EBITDA margin driven byimproved Oils profitability and focus on per-order metrics. Towards the end of the yearthe second wave of COVID-19 had started resulting in local-level lockdowns and travelrestrictions at places resulting in transient higher inventory as customers' clearancesto inspect and dispatch finished goods got delayed.

Cautionary statement:

The statements made in the Management Discussion & Analysis section describing theCompany's goals expectations and predictions among others do contain someforward-looking views of the management. The actual performance of the Company isdependent on several external factors many of which are beyond the control of themanagement viz. growth of Indian economy continuation of industrial reformsfluctuations in value of Rupee in the foreign exchange market volatility in commodityprices applicable laws/regulations tax structure domestic/internationalindustry scenario movement in international prices of raw materials and economicdevelopments within the country among others.

7. SUBSIDIARY AND ASSOCIATE COMPANIES

Your Company has the following subsidiaries and associate as at March 31 2021:

1. Petroleum Specialities Pte. Ltd. Singapore (PSPL) — Wholly Owned Subsidiary ofthe Company

2. Petroleum Specialities FZE Sharjah (PSF) - Wholly Owned Subsidiary of PSPL

3. APAR Transmission & Distribution Projects Private Limited (ATDPPL) — WhollyOwned Subsidiary of the Company

4. APAR Distribution & Logistics Private Limited — Wholly Owned Subsidiary ofthe Company and

5. Ampoil Apar Lubricants Private Limited — Associate of the Company with 40%stake along with PPS Motors Pvt. Ltd. and Others.

The Company has not attached the Balance Sheet Statement of Profit & Loss Accountsand other documents of its four Subsidiaries and Associate. As per the provisions ofSection 129(3) read with Section 136 of the Companies Act 2013 a statement containingbrief financial details of the Subsidiaries and Associate for the financial year endedMarch 31 2021 in Form AOC — 1 is included in the annual report and shall form partof this report as "Annexure VIII". The annual accounts of the said Subsidiariesand Associate and other related information will be made available to any member of theCompany seeking such information at any point of time and are also available forinspection by any member of the Company at the registered office of the Company.

Further pursuant to provisions of Section 136 of the Act the financial statementsincluding Consolidated Financial Statements of the Company along with relevant documentsand separate audited accounts in respect of Subsidiaries and Associate are available onthe website of the Company at www.apar.com.

8. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed during the year by the regulatorsor courts or tribunals impacting the going concern status and operations of the Company infuture.

9. CORPORATE GOVERNANCE

Your Company believes in conducting its affairs in a fair transparent and professionalmanner and maintaining good ethical standards transparency and accountability in itsdealings with all its constituents. As required under the Listing Regulations a detailedreport on Corporate Governance along with the Auditors' Certificate thereon forms part ofthis report as "Annexure — V".

10. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report as stipulated under Regulation 34 of the ListingRegulations is annexed herewith as "Annexure — VI" and forms part of thisAnnual Report.

11. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Re-appointments

At the 32nd Annual General Meeting (AGM) Mr. Rishabh K. Desai Director(DIN: 08444660) shall retire by rotation and being eligible offers himself for re-appointment.

The Board of Directors on the recommendation of the Nomination andCompensation-cum-Remuneration Committee has recommended re-appointment of Mr. Rishabh K.Desai.

Key Managerial Personnel:

Mr. Kushal N. Desai Managing Director and Chief Executive Officer Mr. Chaitanya N.Desai Managing Director Mr. V. C. Diwadkar Chief Financial Officer and Mr. SanjayaKunder Company Secretary are the Key Managerial Personnel of the Company as on March 312021.

12. MEETINGS

During the year four Board Meetings and four Audit Committee Meetings were convenedand held. In view of the pandemic situation due to COVID-19 all the Meetings were heldthrough Video Conferencing as permitted by Ministry of Corporate Affairs (MCA) &Securities and Exchange Board of India (SEBI). The intervening gap between the Meetingswas within the period prescribed under the Act except the relaxation given by MCA and SEBIto hold such meetings. The details of these Meetings with regard to their dates andattendance of each of the Directors thereat have been set out in the Report on CorporateGovernance.

13. DECLARATION BY INDEPENDENT DIRECTORS

Mr. F. B. Virani Mr. Rajesh Sehgal and Mrs. Nina Kapasi were the Independent Directorsof the Company as on March 31 2021.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence prescribed under the Act and theListing Regulations.

14. BOARD EVALUATION

Pursuant to the provisions of the Act and the Listing Regulations the Board hascarried out an annual performance evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Audit Committee Nominationand Compensation-cum- Remuneration Committee Corporate Social Responsibility (CSR)Committee Risk Management Committee and Share Transfer and ShareholdersGrievance-cum-Stakeholders Relationship Committee. The manner in which the evaluation hasbeen carried out has been explained in the Corporate Governance Report.

15. 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 Act:

I. that in the preparation of the Annual Financial Statements for the financial yearended March 31 2021 the applicable accounting standards have been followed along withproper explanation relating to material departures if any.

ii. that such accounting policies as mentioned in Note 1 of the Notes to the FinancialStatements have been selected and applied consistently and judgments and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at March 31 2021 and of the profit of the Company for theperiod ended on that date.

iii. that proper and sufficient care has 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.

iv. that the annual accounts have been prepared on a going concern basis.

v. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.

vi. that systems to ensure compliance with the provisions of all applicable laws weredevised and in place and were adequate and operating effectively.

16. REMUNERATION POLICY

The Board has on the recommendation of the Nomination andCompensation-cum-Remuneration Committee framed a policy for selection and appointment ofDirectors Senior Management and their remuneration. The Remuneration Policy is stated inthe Corporate Governance Report.

Particulars of Information as per Section 197 of the Act read with Rule 5(2) of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 - a Statementshowing the names and other particulars of the Employees drawing remuneration in excess ofthe limits set in the Rules and Disclosures pertaining to remuneration and other detailsas required under Section 197 (12) of the Act read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided as"Annexure — III" forming part of this Report.

17. RISK ASSESSMENT & MINIMISATION PROCEDURES

The Board of Directors has constituted a Risk Management Committee. Your Company hasimplemented a mechanism for risk management and formulated a Risk Management Policy. Thepolicy provides for identification of risks and formulating mitigation plans. The RiskManagement Committee Audit Committee and the Board of Directors review the riskassessment and minimization procedures on regular basis.

18. ANNUAL RETURN

In compliance with Section 92(3) and 134(3)(a) of the Act Annual Return is uploaded onCompany's website and can be accessed at https://apar.com/investor/.

19. RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. Form AOC-2 relating to Disclosure of Particulars ofContracts/arrangements entered into by the Company with related parties is annexedas "Annexure — IX" and forming part of Directors' Report.

All related party transactions are placed before the Audit Committee as also the Boardfor approval. A statement giving details of all related party transactions is placedbefore the Audit Committee and the Board of Directors for their approval on a quarterlybasis.

The policy on related party transactions as approved by the Board has been uploaded onthe Company's website.

There were no materially significant related party transactions.

20. AUDIT COMMITTEE

The Company has an Audit Committee pursuant to the requirements of the Act read withthe rules framed thereunder and Listing Regulations. The details relating to the same aregiven in the report on Corporate Governance forming part of this Report.

During the year under review the Board has accepted all recommendations of the AuditCommittee and accordingly no disclosure is required to be made in respect ofnonacceptance of any recommendation of the Audit Committee by the Board.

21. REPORTING OF FRAUDS

There have been no instances of fraud reported by the Auditors under Section 143(12) ofthe Act and rules framed thereunder either to the Company or to the Central Government.

22. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY WHICH HAVE OCCURRED FROM THE END OF THE FINANCIAL YEAR TILL THE DATE OF THE REPORT

Please refer para 2 on COVID 19 and Para 6 on MDA.

23. DEPOSITS

The Company has not accepted deposits within the meaning of Section 73 and 74 of theAct read with the Companies (Acceptance of Deposits) Rules 2014 during the year and hencethere were no outstanding deposits and no amount remaining unclaimed with the Company ason March 31 2021.

24. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Act are given in the notes to the Financial Statements.

25. STATUTORY AUDITORS

The observations made by the statutory auditors in their report read with the relevantnotes as given in the notes to the financial statement for the financial year ended onMarch 31 2021 are self- explanatory and are devoid of any reservation qualification oradverse remarks.

The present Statutory Auditors M/s. C N K & Associates LLP Chartered Accountants(Firm Registration No. 101961W/ W100036) Mumbai were appointed at the 31st Annual GeneralMeeting of the Company held on 17th August 2020 for a first term of 5 years so as to holdoffice upto the 36th Annual General Meeting of the Company.

26. COST AUDITORS

Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit)Amendment Rules 2014 the cost audit records maintained by the Company in respect ofConductors Oils Cables and Polymer Divisions of the Company are required to be auditedby a qualified Cost Accountant.

The Board of Directors of the Company on the recommendation of the Audit Committeehas appointed M/s. Rahul Ganesh Dugal & Co. a Proprietary Firm who are in Whole TimePractice as Cost Accountant having Firm Registration no. 103425 and Membership no. 36459as the Cost Auditor to conduct the audit of the cost records of the Company for thefinancial year ending on March 31 2022 (2021-22) on a remuneration not exceedingRs.120000/- p.a.

A Resolution seeking members' ratification of remuneration payable to M/s. Rahul GaneshDugal & Co. Cost Auditor is included at Item No. 4 of the Notice convening the AGMand Board recommends the said Resolution.

27. SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed Mr. Hemang M.Mehta Proprietor of M/s. H. M. Mehta & Associates Practicing Company SecretariesVadodara Gujarat to undertake the Secretarial Audit of the Company for the financialyear 2020-21. The Secretarial Audit Report is annexed herewith as "Annexure -I". The Secretarial Audit Report does not contain any qualification reservation oradverse remarks.

28. VIGIL MECHANISM

As per the provisions of Section 177 (9) of the Act read with Regulation 22(1) of theListing Regulations the Company is required to establish an effective vigil mechanism fordirectors and employees to report genuine concerns. The Company has introduced a WhistleBlower Policy (APAR's OMBUDSMEN Policy) effective from 1st March 2014 by setting a vigilmechanism in place.The details of the whistle blower policy are provided in the report onCorporate Governance forming part of this report.

29. INTERNAL CONTROL SYSTEMS (ICS) AND THEIR ADEQUACY

The Company has established adequate ICS in respect of all the divisions of theCompany. The ICS are aimed at promoting operational efficiencies and achieving savings incost and overheads in all business operations. The System Application and Product (SAP) aworld class business process integration software solution which was implemented by theCompany at all business units has been operating successfully. The Company has appointedM/s. Deloitte Touche Tohmatsu India LLP as its Internal Auditors. The system cum internalaudit reports of the Internal Auditors are discussed at the Audit Committee meetings andappropriate corrective steps have been taken. Further all business segment prepare theirannual budget which are reviewed along with performance at regular intervals.

30. OTHER INFORMATION

a. Green Initiative :

To support the "Green Initiative" undertaken by the Ministry of CorporateAffairs (MCA) to contribute towards a greener environment the Company has alreadyinitiated/implemented the same since 2010-11. As permitted delivery of noticesdocuments annual reports etc. are being sent to shareholders via electronic mode.

Further the Company has started using recyclable steel drums in place of woodenpallets in order to protect the environment and reduce costs for the Company and otherinitiatives are provided in the Report of conservation of Energy in Annexure IV andBusiness Responsibility Statement in Annexure VI.

b. Corporate Social Responsibility (CSR)

The Corporate Social Responsibility (CSR) Committee constituted by the Board ofDirectors in terms of the provisions of Section 135(1) of the Act reviews and restates theCompany's CSR policy in order to make it more comprehensive and aligned with theactivities specified in Schedule VII of the Act.

With the strong belief in the principle of Trusteeship APAR Group continues to servethe community through a focus on healthcare and upliftment of weaker sections of societyEducation and Medical Environmental sustainability and Rural Develoment Empowerment ofphysically/mentally challenged and underprivileged children adults and providingfree education Relief and rehabilitation for combating with COVID-19 pandemic relatedactivities Free ration in the rural areas Empowering women socially & economicallyetc.

The Annual Report on CSR activities is annexed herewith as "Annexure - II".

c. Employee Stock Options:

Members' approval was obtained at the Annual General Meeting held on August 9 2007 forintroduction of Employee Stock Option Plan to issue and grant upto 1616802 Options andit was implemented by the Company. Out of the above Options 175150 Options have beengranted in 2008 of which 26338 Options were exercised upto May 2015 and balance optionswere lapsed. Please refer "Annexure -VII" forming part of this Report.

d. Particulars relating to conservation of energy technology absorption research& development and foreign exchange earnings and outgo in accordance with Section134(3)(m) of the Act read with the Companies (Accounts) Rules 2014 is annexed hereto as"Annexure - IV" and forms part of this Annual Report.

31. GENERAL

The Company has complied with all the applicable provisions of Secretarial Standards 1and 2 issued by the Institute of Company Secretaries of India.

No disclosure or reporting is required in respect of the following items as there wereno transactions on these items during the year under review:

1) Issue of equity shares with differential rights as to dividend voting or otherwise.

2) Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and except ESOP referred to in this Report.

3) No Managing Director of the Company receives any remuneration or commission from anyof its subsidiaries.

4) The Company has in place the Policy on Prevention of Sexual Harassment at Workplace(POSH) in line with the requirements of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. There were no complaints during theyear under review.

5) There is no proceeding pending under the Insolvency and Bankruptcy Code 2016.

6) There was no instance of onetime settlement with any Bank or Financial Institution.

32. ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation for the continuouscooperation support and assistance provided by all stakeholders financial institutionsbanks government bodies technical collaborators customers dealers and suppliers of theCompany. We thank the Government of Sharjah UAE and Singapore where we have operations.

Your Directors also wish to place on record their sincere appreciation for thecontribution made by our dedicated and loyal employees at all levels particularly duringthe pandemic. Our consistent growth was made possible by their hard work solidaritycooperation and support.

For and on behalf of the Board
Kushal N. Desai
Place : Mumbai Chairman & Managing Director
Date : : May 31 2021. DIN - 00008084

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