The Board of Directors (Board) presents the annual report of Atul Ltdtogether with the audited Financial Statements for the year ended March 31 2022.
01. Financial results
| ||2021-22 ||2020-21 |
|Sales ||4929 ||3460 |
|Revenue from operations ||4993 ||3512 |
|Other income ||90 ||104 |
|Total revenue ||5083 ||3616 |
|Profit before tax ||804 ||828 |
|Tax expenses ||(196) ||(197) |
|Profit for the year ||608 ||631 |
|Balance in retained earnings at the beginning of the year ||3143 ||2513 |
|Transfer from comprehensive income ||(28) ||(1) |
|Dividend ||(59) ||- |
|Balance in retained earnings at the end of the year ||3664 ||3143 |
Sales increased by about 42% from Rs 3460 cr to Rs 4929 cr mainly dueto higher price levels (of both inputs and finished goods) in 2021-22 and also because ofthe low sales in Q1 of 2020-21 on account of the COVID-19 pandemic. Sales in Indiaincreased by about 32% from Rs 1885 cr to Rs 2479 cr. Sales outside India increased byabout 56% from Rs 1575 cr to Rs 2450 cr. Profit before tax decreased by 3% from Rs 828cr to Rs 804 cr mainly due to non-recurring dividend income of Rs 55 cr received in2020-21.
Sales of Life Science Chemicals (LSC) segment increased by 29% from Rs1124 cr to Rs 1445 cr mainly because of higher sales prices and volume in thesub-segments Crop Protection and Pharmaceuticals; the EBIT decreased by about 4% from Rs199 cr to Rs 191 cr. Sales of Performance and Other Chemicals (POC) segment increased byabout 49% from Rs 2336 cr to Rs 3484 cr mainly because of higher sales volume in threesub-segments; the EBIT increased by about 2% from Rs 574 cr to Rs 586 cr. More details aregiven in the Management Discussion and Analysis.
03. Dividend and buy-back of equity shares
The Board recommends payment of dividend of Rs 25 per equity share ofRs 10 each fully paid-up.
During 2021-22 the Board approved Rs 70 cr for buy-back of equityshares through the open market stock exchange route to return surplus funds to the membersof the Company and to improve earnings per share by a decrease in the equity base therebyleading to an long-term increase in value for the members. Till date 53748 equity sharesare bought back at an aggregate consideration of Rs 52.72 cr. The buy-back is still inprocess.
04. Conservation of energy technology absorption foreign exchangeearnings and outgo
Information required under Section 134 (3)(m) of the Companies Act2013 (the Act) read with Rule 8 (3) of the Companies (Accounts) Rules 2014 as amended fromtime to time forms a part of this report which is given at page number 30.
The Company has taken adequate insurance to cover the risks to itsemployees property (land and buildings) plant equipment other assets and thirdparties.
06. Risk management
Risk management is an integral part of business practice of theCompany. The framework of risk management concentrates on formalising a system to dealwith the most relevant risks building on existing management practices knowledge andstructures. With the help of a reputed international consultancy firm the Company hasdeveloped and implemented a comprehensive risk management system to ensure that risks tothe continued existence of the Company as a going concern and to its growth are identifiedand remedied on a timely basis. While defining and developing the formalised riskmanagement system leading standards and practices have been considered. The riskmanagement system is relevant to business reality pragmatic and simple and involves thefollowing:
i) Risk identification and definition - Focuses on identifying relevantrisks creating updating clear definitions to ensure undisputed understanding along withdetails of the underlying root causes contributing factors.
ii) Risk classification - Focuses on understanding the various impactsof risks and the level of influence on its root causes. This involves identifying variousprocesses generating the root causes and a clear understanding of riskinter-relationships.
iii) Risk assessment and prioritisation - Focuses on determining riskpriority and risk ownership for critical risks. This involves assessment of the variousimpacts taking into consideration risk appetite and the existing mitigation controls.
iv) Risk mitigation - Focuses on addressing critical risks to restricttheir impact(s) to an acceptable level (within the defined risk appetite). This involves aclear definition of actions responsibilities and milestones.
v) Risk reporting and monitoring - Focuses on providing to the AuditCommittee and Board periodic information on risk profile evolution and mitigation plans.
Roles and responsibilities
The Board has approved the Risk Management Policy of the Company. TheCompany has laid down procedures to inform the Board on i) to iv) listed above. The AuditCommittee Risk Management Committee periodically reviews the risk management system andgives its recommendations if any to the Board.
The Board reviews and guides the Risk Management Policy.
Implementation of the Risk Management Policy is the responsibility ofthe Management. It ensures functioning of the risk management system as per the guidanceof the Audit Committee Risk Management Committee. The Company has a risk managementoversight structure in which each sub-segment has a Chief Risk and Compliance Officer.
The Management at various levels takes accountability for riskidentification appropriateness of risk analysis and timeliness as well as adequacy ofrisk mitigation decisions at both individual and aggregate levels. It is also responsiblefor the implementation tracking and reporting of defined mitigation plans includingperiodic reporting to the Audit Committee and Board.
07. Internal financial controls
The internal financial controls over financial reporting are designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of the Financial Statements. These include policies and procedures that:
i) pertain to the maintenance of records which in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany
ii) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of the Financial Statements in accordance with GenerallyAccepted Accounting Principles and that receipts and expenditures are being made only inaccordance with authorisations of the Management and Directors of the Company
iii) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the assets that can have amaterial effect on the Financial Statements. A reputed international consultancy firm hasreviewed the adequacy of the internal financial controls with respect to the FinancialStatements.
The Management assessed the effectiveness of the internal financialcontrols over financial reporting as of March 31 2022 and the Board believes that thecontrols are adequate.
08. Fixed deposits
During 2021-22 the Company did not accept any fixed deposits.
09. Loans guarantees investments and security
Particulars of loans guarantees investments and security provided aregiven at page numbers 142 and 144.
10. Subsidiary associate and joint venture entities
During 2021-22 Atul Healthcare Ltd Atul Paints Ltd and Sehat FoodsLtd were incorporated as wholly-owned subsidiary companies of the Company. OsiaInfrastructure Ltd became a wholly-owned subsidiary of the Company. There were no otherchanges in the subsidiary associate and joint venture entities which were reportedearlier.
11. Related party transactions
All the transactions entered into with the related parties were inordinary course of business and on arm's length basis. Details of such transactions aregiven at page number 156. No transactions were entered into by the Company that requireddisclosure in Form AOC-2.
12. Corporate social responsibility
Composition of the Corporate Social Responsibility (CSR) Committee theCSR Policy and the CSR Report are given at page number 34.
13. Annual return
Annual return for 2021-22 is available on the website of the Companyat: www.atul.co.in/investors/annual-general-meetings/
14. Auditors Statutory Auditors
Deloitte Haskins & Sells LLP Chartered Accountants (DHS) wereappointed as the Statutory Auditors of the Company at the 40th Annual General Meeting(AGM) held on July 28 2017 until the conclusion of the 45th AGM. The first term of fiveyears of DHS is expiring at the ensuing AGM. Pursuant to Section 139 of the Companies Act2013 and Rules made thereunder the Company can reappoint DHS for a second term of fiveyears. Accordingly based on the recommendation of the Audit Committee the Board at itsmeeting held on April 26 2022 recommended the reappointment of DHS as the StatutoryAuditors of the Company for second term of five years. DHS will hold the office for aperiod of five consecutive years from the conclusion of the 45th AGM of the Company tillthe conclusion of the 50th AGM to be held in the year 2027 subject to the approval of themembers of the Company at the ensuing AGM. DHS have given their consent to act as theAuditors and confirmed their eligibility for reappointment.
The Auditor's Report for the financial year ended March 31 2022 doesnot contain any qualification reservation or adverse remark. The report is enclosed withthe Financial Statements in this annual report.
The Company has maintained cost records as required under the Act. Themembers ratified the appointment of R Nanabhoy & Co as the Cost Auditors for 2021-22on July 31 2021.
SPANJ & Associates Company Secretaries continue to be theSecretarial Auditors for 2021-22 and their report is given at page number 40.
15. Directors' responsibility statement
Pursuant to Section 134(5) of the Act the Directors confirm that tothe best of their knowledge and belief:
15.1. In preparation of the annual accounts for the financial yearended March 31 2022 the applicable accounting standards have been followed and there areno material departures.
15.2. The accounting policies were selected and applied consistentlyand judgements and estimates thus made were reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company at the end of the financial year andof the profit and loss of the Company for that period.
15.3. Proper and sufficient care was taken for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities.
15.4. The attached annual accounts for the year ended March 31 2022were prepared on a going concern basis.
15.5. Adequate internal financial controls to be followed by theCompany were laid down and they were adequate and operating effectively.
15.6. Proper systems were devised to ensure compliance with theprovisions of all applicable laws and the same were adequate and operating effectively.
16.1. Appointments Reappointments Cessations
i) According to Article 86 of the Articles of Association of theCompany Mr T R Gopi Kannan retires by rotation and being eligible offers himself forreappointment at the AGM scheduled on July 29 2022.
ii) Subject to the approval of the members in the AGM:
a) Mr B N Mohanan was reappointed as a Whole-time Director from January01 2023 till May 25 2025.
b) Mr P J Banerjee was appointed as an Independent Director effectiveMay 01 2022 for a period of five years.
In the opinion of the Board the Independent Directors possessintegrity rich experience and expertise relevant to the Company.
16.2. Policy on appointment and remuneration is displayed on thewebsite of the Company at www.atul.co.in/investors/policies
The salient features of the Policy are as under:
While recommending appointment of Directors the Nomination andRemuneration Committee considers the following factors:
i) Qualification: well-educated and experienced in senior leadershippositions in industry profession
ii) Trait: positive attributes and qualities
iii) Independence: criteria prescribed in Section 149(6) of the Act forthe Independent Directors including no pecuniary interest and conflict of interest
16.2.2. Remuneration of the Non-executive Directors
i) Sitting fees: up to Rs 35000 for attending a Board Committee andany other meeting
ii) Commission: up to 1% of net profit as may be decided by the Boardbased on the following factors:
a) Membership of committee(s)
d) Category (Independent or Non-executive)
16.2.3. Remuneration of the Executive Directors This is given underpara number 17.2.
16.3. Criteria and method of annual evaluation
16.3.1. The criteria for evaluation of performance of
i) the Executive Directors
ii) the Non-executive Director (other than Independent Directors)
iii) the Independent Directors iv) the Chairman v) the Committees ofthe Board and vi) the Board as a whole are summarised in the table at the end of theDirectors' Report at page number 29.
16.3.2. The Independent Directors have carried out annual:
i) review of performance of the Executive Directors
ii) review of performance of the Non-executive Director (other thanIndependent Directors)
iii) review of performance of the Chairman and assessment of qualityquantity and timeliness of the flow of information to the Board
iv) review of performance of the Board as a whole
16.3.3. The Board has carried out annual evaluation of performance of:
i) its committees namely Audit Corporate Social ResponsibilityInvestment Nomination and Remuneration Risk Management and Stakeholders Relationship
ii) the Independent Directors
The templates for the above purpose were circulated in advance forfeedback of the Directors.
16.4. Familiarisation programs for the Independent Directors
The Company has familiarisation programs for its Independent Directors.It comprises amongst others presentations by and discussions with the Senior Managementon the nature of the industries in which it operates its vision and strategy itsorganisation structure and relevant regulatory changes. A visit is organised to one ormore of its manufacturing sites. Details of the familiarisation programs are alsoavailable at www.atul.co.in/about/directors/
17. Key Managerial Personnel and other employees
17.1. Appointments and cessations of the Key Managerial Personnel
There were no appointments cessations of the Key Managerial Personnelduring 2021-22.
The Remuneration Policy of the Key Managerial Personnel and otheremployees consists of the following:
i) Fixed pay
a) Basic salary
ii) Variable pay
17.2.2. Factors for determining and changing fixed pay:
i) Existing compensation
iv) Salary bands
vi) Market benchmark
17.2.3. Factors for determining and changing variable pay:
i) Business performance
ii) Individual performance
18. Analysis of remuneration
The information required pursuant to Sections 134 (3)(q) and 197(12) ofthe Act read with Rule 5 of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company forms a part of thisReport. However as per the provisions of Sections 134 and 136 of the Act the Report andthe Accounts are being sent to the members and others entitled thereto excluding theinformation on particulars of employees which are available for inspection by themembers.
Any members interested in obtaining a copy of such statement may writeto the Company Secretary at the registered office of the Company.
19. Management Discussion and Analysis
The Management Discussion and Analysis covering performance of the tworeporting segments namely LSC and POC is given at page number 44.
20. Corporate Governance Report
20.1. Declaration by the Independent Directors
The Independent Directors have given declarations under Section 149(6)of the Act.
The Corporate Governance Report along with the certificate from thePracticing Company Secretary regarding compliance of the conditions of CorporateGovernance pursuant to Regulation 34(3) read with Schedule V of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 is given at page number 51. Details about the number of meetings of the Board heldduring 2021-22 are given at page number 56. The composition of the Audit Committee isgiven at page number 59.
All the recommendations given by the Audit Committee were accepted bythe Board.
20.3. Whistleblowing Policy
The Board on the recommendation of the Audit Committee had approved avigil mechanism (Whistleblowing Policy). The Policy provides an independent mechanism forreporting and resolving complaints pertaining to unethical behaviour actual or suspectedfraud and violation of the Code of Conduct of the Company and is displayed on the websiteof the Company at www.atul.co.in/investors/policies
No personnel have been denied access to the Audit Committee.
20.4. Secretarial standards
Secretarial standards as applicable to the Company were followed andcomplied with during 2021-22.
20.5. Prevention prohibition and redressal of sexual harassment
Details required under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and rules thereunder are given at pagenumber 64.
21. Business Responsibility and Sustainability Report
As per Regulation 34 of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 the BusinessResponsibility and Sustainability Report is given at page number 71.
22. Dividend Distribution Policy
As per Regulation 43A of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 the DividendDistribution Policy is displayed on the website of the Company atwww.atul.co.in/investors/policies
23. Fire incident
An incident of fire occurred on April 20 2022 in one of the plants atAtul Gujarat. There was no fatality or injury to any person and damage was restricted tothe affected plant. The Company is in the process of assessing the impact of the fire onthe plant and related operations and filing necessary claims with the insurance company.
The Board expresses its sincere thanks to all the employees customerssuppliers lenders regulatory and government authorities stock exchanges and investorsfor their support.
| ||For and on behalf of the Board of Directors |
| ||(Sunil Siddharth Lalbhai) |
|Mumbai ||Chairman and Managing Director |
|April 26 2022 ||DIN:00045590 |