CLARIANT CHEMICALS (INDIA) LIMITED
Your Directors are pleased to present the 63rd Annual Report together withthe Audited Statement of Accounts for the Year ended March 31 2020.
1. Financial performance of the Company
| || ||(Rs. in lakhs) |
|Particulars ||Year ended ||Year ended |
| ||31.03.2020 ||31.03.2019 |
|Sales ||71991.97 ||67746.63 |
|Profit before tax from continuing operations ||3429.04 ||2199.13 |
|Less : Tax expenses (Incl. deferred tax) ||1573.49 ||1046.48 |
|Profit after tax from continuing operations ||1855.55 ||1152.65 |
|Profit before tax for discontinued operations ||3634.04 ||815.00 |
|Less : Tax expenses (Incl. deferred tax) ||419.08 ||112.00 |
|Profit aftertax for discontinued operations ||3214.96 ||703.00 |
|Add : Balance brought forward from previous period ||47379.38 ||48304.09 |
|Amount available for appropriation ||52449.89 ||50159.74 |
|Appropriations || || |
|Dividend (including interim and final) ||1154.09 ||2308.18 |
|Corporate tax on dividend ||237.23 ||474.46 |
|Other comprehensive income (OCI) ||300.00 ||(2.28) |
|Transferred to retained earnings ||(26.76) ||- |
|Balance carried forward to the balance sheet ||50785.33 ||47379.38 |
2. Review of operations
The Company's continued operations reported sales of goods for the year ended March 312020 stood at ` 71991.97 lakhs as against ` 67746.63 lakhs for the previous year endedMarch 31 2019. Of the total sales revenue for the year under review 26% is contributedby exports. The Pigments business showed a growth of 6.8%; the Additives business de-grewby 14.7%; while the Masterbatch business grew by 7.8% due to the strategic shift in focuson differentiated product offerings viz. emphasis on specialized products and not oncommoditized products. This shift in strategic approach resulted in an operating profitgrowth of more than 200%.
Following the COVID-19 a Company wide lockdown was announced on March 16 2020.However limited production activities were undertaken in line with Government approvalsto meet demand for essentials needed for the fight against the pandemic.
Post lifting of the lockdowns both partial and complete the Company has been runningproduction capacities sub-normally bearing in mind safety of its workforce and demand forits products. Production dispatches sales and account receivables have been affected butis improving.
An assessment conducted on the recoverability of the carrying value of assets such asproperty plant and equipment inventory trade receivable investment and other currentassets as at Balance Sheet date concludes that there is no impact of COVID-19 thereon.Further an assessment of the Company's capital financial resources liquidity positionsability to service debt and other financing arrangements for the next one year indicatesfinancial stability.
An evaluation of impact of COVID-19 on internal financial controls over financialreporting concluded that there is no impact of COVID-19 thereon.
There is no materially adverse impact of COVID-19 on the financial statements/resultsof the Company for the financial year ended March 31 2020.
The Board of Directors are pleased to recommend a Final Dividend of ` 11/- per share(110 %). The Final Dividend entails cash outflow of ` 2539 Lakhs and a payout of 50% ofProfit for the year ended March 31 2020. The total dividend for the period under reviewamounts to ` 11 /- per share (110 %) as compared to ` 10/- per share (100%) paid for theprevious year.
Pursuant to the requirement of Regulation 43A of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company have formulated and adoptedDividend Distribution Policy which is available on the website of the Company at www.clariant.com.
4. Sale of Additives Business
In accordance with the approval granted by the Board pursuant to the provisions ofSection 179 of the Companies Act 2013 and the powers conferred upon the Board by Articlesof Association of the Company and as per the Valuation Report of M/s. Ernst & Youngalong with Fairness Report from M/s. BDO the Company sold its Additives Business alongwith employees assets liabilities and including all licenses permits consents andapprovals thereto on a going concern by way of a slump sale on a as is where isbasis' to Clariant India Limited a Related Party for a total consideration of ` 13.77Crore effective from
January 1 2020. The profit on sale of the Additives business amounting to ` 8.45 Croreis shown under discontinued operations.
As per Ind AS 105 on Non-current Assets held for sale and discontinued operationsadditives business operations have been disclosed as discontinued operation. Discontinuedoperations are excluded from the results of continuing operations and are presented as asingle amount as profit or loss before tax from discontinued operations in the statementof profit and loss.
5. Sale of Masterbatch Business
To align with the strategy of ultimate holding Company Clariant AG to divest theentire Masterbatch Business and considering the fact that it would not be sustainable tocontinue the Masterbatch business in India without technical Intellectual Property (IP)support and key customer accounts of the Global parent Company the Board of Directors attheir meeting held on December 19 2019 decided to sell its Masterbatch Business as agoing concern by way of a slump sale under Section 2(42C) of the Income Tax Act 1961 toPolyOne Polymers India Private
Limited or its affiliate in India for a consideration of not less than ` 426 Croresubject to the necessary adjustment if any and on the terms and conditions as stated inthe Business Transfer Agreement and other documents. The Masterbatch Business comprises ofthe divestment assets of the Masterbatch Business (including transferring real estatetransferring intellectual property transferring contracts permits and licensesequipment machinery assets at the transferring real estate goodwill etc.) and thedivestment liabilities (including liabilities included in the net working capitalliabilities under or in connection with any transferring contract all liabilities to theextent relating to or arising out of any divestment asset etc.).
Pursuant to the provisions of Section 180(1)(a) and other applicable provisions of theCompanies Act 2013 (the Companies Act') read with the Companies (Management andAdministration) Rules 2014 (the Rules') (including any statutory modification orre-enactment thereof for the time being in force) the Articles of Association of theCompany and the provisions of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (the LODR Regulations') (as amended from time to time) theCompany obtained the approval of shareholders through Postal Ballot on February 10 2020.
The sale of the Masterbatch business is subject to such other approvals consentspermissions and sanctions from any regulatory or governmental authority or third party asmay be required and which may be agreed to by the Board. The sale transaction is expectedto be completed by 2nd Quarter of Financial Year 2020-21.
As per Ind AS 105 on Non-current Assets held for sale and discontinued operationsmasterbatch business operations have been disclosed as discontinued operation.Discontinued operations are excluded from the results of continuing operations and arepresented as a single amount as profit or loss before tax from discontinued operations inthe statement of profit and loss.
6. Corporate Governance Management Discussions and Analysis Report &Business Responsibility Report
The Company is committed to compliance standards ensuring checks and balances betweenthe Board and Management as well as a sustainable approach to create value for allstakeholders. As stipulated under SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 Report on Corporate Governance
Management Discussion and Analysis as well as Certificate confirming the compliancewith the conditions of corporate governance are annexed herewith and forms part of thisannual report.
SEBI vide its notification dated December 26 2019 has amended Regulation 34 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. As per the saidamendment top one thousand listed entities based on market capitalization (calculated ason March 31 of every financial year) are required to prepare and include in its annualreport a business responsibility report describing the initiatives taken by them from anenvironmental social and governance perspective in the format as specified by the SEBIfrom time to time.
Accordingly the Business Responsibility Report for the financial year ended March 312020 has been prepared and the same forms the part of the Annual Report.
7. Significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future
During the year under review there has been no such significant and material orderspassed by the regulators or courts or tribunals impacting the going concern status andCompany's operations in future.
8. Material changes between the date of the Board report and end of financialyear
There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the financial statements relate and the date of the report.
9. Subsidiary Company
As on March 31 2020 the Company does not have any subsidiary.
10. Details of Directors and Key Managerial Personnel
During the year under review consequent to resignation from the leadership role ofClariant Group Mr. Karl Holger Dierssen has resigned from the Directorship of the Companyeffective from closing working hours of May 31 2019. The Board placed on record theirsincere appreciation to Mr. Karl Holger Dierssen for the contribution made during histenure.
Further Mr. Sanjay Ghadge was appointed as Director
Finance & Chief Financial Officer of the Company effective from August 8 2019subject to approval of the members. The members accorded their consent for appointment ofMr. Sanjay Ghadge by passing a Special Resolution via Postal Ballot on October 7 2019.Consequent to his transfer to leadership role within Clariant group globally
Mr. Sanjay Ghadge resigned as the Chief Financial Officer of the Company effective fromJanuary 1 2020. He acts as Non-Executive Director of the Company with effect from January1 2020. Pursuant to the provisions of Section 161 of the Companies Act 2013 Mr. SanjayGhadge holds office upto the date of this Annual General Meeting. The Board of Directorsrecommends the appointment of Mr. Sanjay Ghadge as a Director liable to retire by rotationto the shareholders at the ensuing Annual General Meeting. The Company has received noticein writing from one of the Members of the Company under the provisions of Section 160(1)of the Companies Act 2013 as amended proposing the candidature of Mr. Sanjay Ghadge forthe office of Director of the Company.
Also the first term of Mr. Adnan Ahmad as a Vice-
Chairman and Managing Director of the Company expired on April 2 2020. The Board ofDirectors on the recommendation of Nomination and Remuneration Committee at theirrespective meeting held on February 14 2020 approved the re-appointment of Mr. AdnanAhmad for a second term of three consecutive years from April 3 2020 to April 2 2023subject to the approval of member by a special resolution. The Members have accorded theirconsent for re-appointment of Mr. Adnan Ahmad as Vice-Chairman and Managing Director ofthe Company by passing Special Resolution via Postal Ballot on March 31 2020.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Thomas Wenger retires by rotation at the ensuingAnnual General Meeting and being eligible he offers himself for re-appointment.
The above appointment/re-appointment forms part of the Notice of the 63rdAnnual General Meeting and the respective Resolutions are recommended for your approval.
The brief profiles of Directors seeking appointment/re-appointment covering detailsof their qualification and experience as required pursuant to the SEBI (ListingObligations & Disclosure Requirements) Regulations 2015 and Secretarial Standards onGeneral Meetings issued by The Institute of Company Secretaries of India is annexed to thenotice of this Annual General Meeting.
All Independent Directors of the Company have given declarations that they meet thecriteria of independence as prescribed under Section 149(6) of the Companies Act 2013 andSEBI (Listing Obligations & Disclosure Requirements)
Regulations 2015 amended. They have also confirmed that they have registered theirname in the data bank of Independent Directors.
The Board of Directors on recommendation of Nomination
& Recommendation Committee and Audit Committee at their meeting held on June 172020 have appointed Mr. Ashish Agarwal Taxation Head India as the Interim
Chief Financial Officer of the Company with effect from
June 17 2020. There were no other changes in the Key Managerial Personnel of theCompany during the year.
11. Audit Committee
The details on the composition meeting attendance etc. of the Audit Committee areprovided in the Corporate Governance Section of the Annual Report. The Board has acceptedall the recommendations of the Audit Committee during the Financial Year under review.
12. Number of meeting of the Board
During the year under review the Board of Directors met 5 times on May 16 2019August 8 2019 November 6 2019 December 19 2019 and February 14 2020.
13. Conservation of energy technology absorption foreign exchange earnings and outgo
As required under section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 the relevant information and data for the year endedMarch 31 2020 are annexed to this report as
14. Corporate Social Responsibility
In terms of the provisions of Section 135 of the Companies Act 2013 read withCompanies (Corporate Social Responsibility Policy) Rules 2014 the Board of Directors ofyour Company has constituted a Corporate Social Responsibility (CSR') Committeewhich constitutes of following members:
Dr. (Mrs.) Indu Shahani Chairperson Independent Director Mr. Kewal Handa IndependentDirector Mr. Adnan Ahmad Vice-Chairman & Managing Director
Your Company also has in place a CSR policy and the same is available on the website ofthe Company at www.clariant.com. A detailed report as per Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 is annexed as Annexure B' formingpart of this report.
15. Nomination and Remuneration Policy
The Board has on the recommendation of Nomination and Remuneration Committee framed apolicy on Nomination and Remuneration of its Directors and Key Managerial Personnel whichis available on the website of the Company at www.clariant.com.
16. Board Evaluation and Familiarization programme
Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 the Board has carried out the annualevaluation of its own performance and Board Committees by seeking the inputs of Directorson various aspects of the Board/Committee Governance. The Board have reviewed theperformance of the individual Directors and the Chairperson. The manner in which theevaluation has been carried out is stated in the Corporate Governance Report.
The details of programme for familiarization of the Independent Directors of yourCompany is available on the Company's website at www.clariant.com.
17. Particulars of Employee
As per provisions of Section 197 of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 disclosurepertaining to the particulars of employees who are in receipt of remuneration asprescribed under the Section is annexed as Annexure C'.
The statement of particulars of employees pursuant to Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of thisAnnual Report. However pursuant to proviso to Section 136 (1) of the Companies Act 2013the report and accounts are being sent to members excluding this statement of particularsof employees. Any member interested in obtaining a copy of this statement may write toCompany Secretary at investor.relations_India@clariant.com.
18. Directors' Responsibility Statement
Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors'
Responsibility Statement it is hereby confirmed that:
(i) In the preparation of the annual accounts for the year ended March 31 2020 theapplicable accounting standards have been followed along with proper explanation relatingto material departures;
(ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the
Company as at March 31 2020 and of the profit and loss of the Company for that period;
(iii) The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
(iv) The Directors have prepared the annual accounts on a going concern basis;
(v) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(vi) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
19. Statutory Auditor & Audit Report
M/s. Price Waterhouse Chartered Accountants LLP Statutory Auditors have intimated theCompany vide their letter dated June 17 2020 that they would resign as the StatutoryAuditors of the Company post issuance of their Limited Review Report (LRR) for the Quarterending June 30 2020. They informed that Price Waterhouse Network of Firms in Indiaannounced of the decision to not provide non audit related services to their audit clientsin India which are governed by National Financial Reporting Authority (NFRA). There arecertain ongoing non-audit services that are provided by a Price Waterhouse Networklicensee entity in India (not being audit firms) to the Company. Due to this voluntaryaction by the Price Waterhouse Network of Firms in India as above the Company chose toavail the non audit related services.
The Audit Committee at their meeting held on June 17 2020 took on record theintimation letter from M/s. Price Waterhouse Chartered Accountant LLP and also placed onrecord their sincere appreciation to M/s. Price Waterhouse Chartered Accountant LLP fortheir commendable service to the Company during their tenure.
Consequent to the proposed resignation of M/s. Price Waterhouse Chartered AccountantLLP the Board of Directors of the Company on the recommendation of the Audit Committeeat their meeting held on June 17 2020 have approved the appointment of M/s. MSKA &Associates Chartered Accountants (ICAI Firm Registration No. 105047W) as StatutoryAuditors of the Company in the casual vacancy to be caused by the resignation of M/s.Price
Waterhouse Chartered Accountant LLP for a term of five years subject to approval ofShareholders by an Ordinary Resolution.
The proposed resolution is mentioned in the Notice of the Annual General Meeting.
M/s. Price Waterhouse Chartered Accountants LLP Statutory Auditors in their Auditreport for the Financial year ended March 31 2020 have commented that the backup of thebooks of accounts and other books and papers maintained in electronic mode has not beenmaintained on servers physically located in India. The Company would like to clarify thatthe Company's SAP is centralized in global Data Centers outside India where the backupstorage is maintained. The Company is reviewing the maintenance of backup of SAP data inIndia as required under Rule 3 of the Companies (Account) Rules 2014.
20. Cost Audit
The Board of Directors in pursuance of order under Section 148 of the Companies Act2013 appointed M/s. RA & Co. Cost Accountants as Cost Auditors of the Company tocarry out the audit of the cost accounts of the Company for the Financial year 2020-21subject to approval of Central Government if any. The cost audit report for the 12 monthsended March 31 2019 has been filed on due date.
21. Secretarial Audit Report
Pursuant to provisions of Section 204 of the Companies Act 2013 and Rule 9 ofCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Boardhas appointed M/s J. R. Ahuja & Co. Company Secretary as Secretarial Auditor tocarry out the secretarial audit for the Financial year 2019-20.
The Secretarial Audit Report is annexed herewith as Annexure D'. TheSecretarial Auditors Report does not contain any qualification reservation or adverseremark and is self explanatory and thus does not require any further comments.
22. Internal Financial Controls and their Adequacy
The details in respect of Internal Financial Controls and their adequacy are includedin the Management Discussion & Analysis Report which forms part of this Report.
23. Extract of Annual Return
Pursuant to the provisions of Section 92(3) of the Companies Act 2013 an extract ofthe Annual Return in Form MGT-9 is annexed herewith as Annexure e' to thisreport.
24. Risk management policy
The Company has a robust Risk Management to identify evaluate business risks andopportunities. This framework seeks to create transparency minimize adverse impact on thebusiness objectives and enhance the Company's competitive advantage. Many risks identifiedby the business and functions are systematically addressed through mitigating actions on acontinuing basis. The Company has framed a Risk Management Policy to manage the risksinvolved in all activities of the Company to maximize opportunities and minimizeadversities.
25. Related Party Transactions
In line with the requirements of Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has framed a Policy on MaterialRelated Party Transactions which is available on Company's website at www.clariant.com.
All the Related Party Transactions entered during the year under review were inordinary course of business and on arm's length basis. All the Related Party Transactionsare placed before Audit Committee for review and approval. Prior omnibus approvals aregranted by Audit Committee for Related Party Transactions which are of repetitive natureentered in the ordinary course of business and are on arm's length basis.
The disclosure of Related Party Transactions as required under Section 134(3)(h) of theCompanies Act 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014 in the FormAOC-2 is annexed as Annexure F' to this report.
26. Particulars of loans guarantees or investments
The details of loans guarantees and investments covered under the provisions ofSection 186 of the Companies Act 2013 is given in the notes forming part of FinancialStatements.
27. Public Deposits
During the year under review the Company has not accepted any deposits from the publicfalling under Section 73 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014 and as such no amount of principal or interest was outstanding as onthe balance sheet date.
28. Vigil Mechanism
The Company believes in upholding professional integrity and ethical behavior in theconduct of its business. To uphold and promote these standards the Company has adoptedGroup's Integrity Line Policy which is akin to Whistle Blower Policy or Vigil MechanismPolicy for its Directors and Employees to report genuine concerns about unethicalbehavior actual or suspected fraud or violation of the Code of Conduct without fear ofreprisal.
29. Prevention of Sexual Harassment of Women at Workplace
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013.
During the year under review there was one instance of an allegation of SexualHarassment which stands addressed.
30. Constitution of Internal Complaints Committee
The Company has constituted an Internal Complaint Committee (ICC) and complied with allthe requirements of provisions of Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
31. Details in respect of frauds reported by auditors under sub-section (12) of Section143 of the Companies Act 2013 other than those which are reportable to the CentralGovernment'
No matters of actual or alleged fraud has been reported by the auditors undersub-section (12) of Section 143 of the Companies Act 2013.
The Board of Directors wish to place on record its sincere appreciation for the supportreceived from its stakeholders including shareholders bankers distributors suppliersand business associates. The Directors recognize and appreciate the sincere and hard workloyalty dedicated efforts and contribution of all the employees that ensured sustainedperformance in a challenging business environment. The Directors also express theirappreciation of the assistance and unstinted support received from Clariant groupCompanies.
Chairman DIN (00056826)
Mumbai June 17 2020
For and on behalf of the Board of Directors
Vice-Chairman & Managing Director DIN (00046742)
Information under Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 and forming part of the Report of the Directors
A. Conservation of Energy
(i) Steps taken or impact on conservation of energy:
?Water consumptions optimized by: ? Filter press washing time reductions
? Re-cycling of treated waste water for Plant floor washing Scrubber system Limesolution in ETP Drum washings
? Use of rainwater harvesting pond water for gardening purpose
? Zero leak type filter presses being used
Steam consumption optimized by high pressure filtrations
Utilities consumptions optimized by increasing various batch sizes
?Electricity consumptions optimized by: ? Use of VFD's to all motors above40 HP ? Timer based controls for centralized A/C
? Promoted use of LED lights across site-
Plants & offices
??Waste recovery of boiler for improve of efficiency.
(ii) Steps taken by the Company for utilizing alternate sources of energy:
??Use of Bio Diesel as fuel in place of Diesel for
Dryer which resulted in environment benefit and also cost
??Use of transparent roof sheets for natural lights thereby leading to reduction inenergy consumption on lighting equipment
(iii) Capital investment on energy conservation equipment: ` 83.23 Lakhs
B. Technology Absorption
(i) the efforts made towards technology absorption:
??New products were introduced which generated ammonia gas. A fully automatedconvertor was installed to convert the ammonia gas to nitrogen and water and to maintain asustainable environment.
??Installation of high-performance mills in production to reduce specificelectricity consumption.
(ii) the benefits derived like product improvement cost reduction product developmentor import substitution:
??Ongoing product development activities to reduce cost optimize processes andimport substitution.
(iii) In case of imported technology (imported during the last three years reckonedfrom the beginning of the financial year): Not Applicable
(iv) the expenditure incurred on Research and Development: Nil
C. Foreign exchange earnings and outgo:
The particulars of foreign exchange earned and used during the year is given below:
The Foreign Exchange earned ` 28455.78 Lakhs (previous period ` 26856.66Lakhs).
Foreign exchange used ` 20807.97 Lakhs (previous period
` 25687.00 Lakhs).
For and on behalf of the Board of Directors
Kewal handa Adnan Ahmad
Chairman Vice-Chairman & Managing Director DIN (00056826) DIN (00046742)
Mumbai June 17 2020