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Dalmia Refractories Ltd.

BSE: 500481 Sector: Engineering
NSE: DALMIAREF ISIN Code: INE200F01017
BSE 05:30 | 01 Jan Dalmia Refractories Ltd
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Dalmia Refractories Ltd. (DALMIAREF) - Director Report

Company director report

Dear Members

Your Directors hereby present the Forty Seventh Annual Report together with AuditedFinancial Statements and the highlights of the performance of Subsidiary Companies for theyear ended 31st March 2020.

(RS in Lakhs)

Financial Results Standalone Consolidated
FY 2019-20 FY 2018-19 FY 2019-20 FY 2018-19
REVENUE 29058 19786 45010 24142
Profit before Interest Depreciation and Tax 3279 1760 4970 1979
Less: Interest and financial charges 264 164 842 314
Profit before Depreciation and Tax 3015 1596 4128 1665
Less: Depreciation 817 789 1778 1078
Profit Before Tax 2198 807 2350 588
Provision for current tax 690 405 1062 615
Provision for deferred tax (245) (302) (325) (422)
Prior Year tax charge - - - -
Profit/(loss) after tax before share of profit in associates 1753 704 1614 395
Less: Share of minority interest - - (167) (170)
Profit/(loss) After Tax 1753 704 1780 565
Other Comprehensive Income (3506) (3141) (3792) (3037)
Total Comprehensive Income (1752) (2438) (2178) (2642)
Add: Surplus brought forward 18696 21106 18636 20823
Corporate Dividend and Tax Thereon 95 19 95 19
Profit available for appropriation 16950 18696 16269 18636
Surplus carried forward after appropriations 16950 18696 16269 18636

Note: Previous year figures have been regrouped/re-arranged wherever considerednecessary.

State of the Company's Affairs

Fire within the zeal and commitment to achieve highest levels of success and eagernessto rise beyond all expectations - these are characteristics that have helped DalmiaRefractories Limited maintain its leadership position for well over 40 years now. DalmiaRefractories is a pioneer in Alumino-Silicate refractories with a market share of over 50%in Alumina bricks used in manufacturing of cement.

In the Financial Year ended 31st March 2020 your Company had a stronggrowth and delivered outstanding financial performance. Our revenue grew 47% over theprior year to RS 290 Cr Our EBITDA margin expanded to RS 33 Cr and Net profit stood at RS17 Cr as compared to Rs 7 Cr during the previous year on a standalone basis. The growthwas primarily led by revenue from new Projects orders and Exports.

The Company commissioned a state-of-the-art manufacturing facility in Katni as part ofits Joint Venture (JV) with Seven Refractories of Europe. The JV called Dalmia Sevenoffers advanced monolithic refractory solutions to customers in India.

Acquisition of GSB Group of Germany a German - specialty refractory maker and a globalleader in lance production in early 2019 is now rechristened as Dalmia-GSB as theintegration became complete in FY2019-2020. With this your company has access to theheart of steel and refractory making belt in Europe and state-of-the-art technology tomake cleaner steel.

The company remains committed to its stakeholders and will continue to leverage itstechnology and manufacturing capabilities expand its reach in international marketspursue innovative technologies invest in enhancing local high-quality refractoryproduction and actively continue to pursue M&A opportunities both inside and outsideof India.

Management Discussion and Analysis for the year under review as stipulated in theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 giving detailed analysis of the performance of the Company is presentedin a separate section forming part of this Annual Report.

The Company continues to be engaged in the business of manufacturing distribution andservice of refractory products and services during the financial year 2019-20.

Dividend

Your Directors had distributed an Interim Dividend of 15% per share amounting to Rs1.50 per equity share of face value of RS 10/- each in March 2020 to those Shareholdersholding shares on the record date of 20th March 2020. Your Directors havedecided not to recommend any final dividend and to treat the interim dividend paid as thefinal dividend for the financial year 2019-20.

Transfer to Reserves

The Company proposes to retain its entire earnings in the profit and loss account andproposes not to transfer any amount to the General Reserve.

Subsidiaries Associates and Joint Venture Companies

During the year under the review pursuant to a Scheme of Arrangement under German LawGSB Group GmbEl step down subsidiary of the Company have merged into its parent CompanyDalmia Refractories Germany GmbEl wholly owned subsidiary of the Company on 5thDecember 2019 and the name of the new merged entity has been changed to "Dalmia GSBRefractories GmbH" (Dalmia GSB). DRL continues to hold 100% shareholding of DalmiaGSB.

Accordingly the position of Subsidiaries of the Company as on 31stMarch2020 is as follows:

S. No. Name of the Subsidiary Status % age Holding
1. Dalmia Seven Refractories Limited Joint Venture/ Subsidiary 51%
2. Dalmia GSB Refractories GmbH Wholly Owned Subsidiary 100%
3. GSB Refractories India Private Limited Step down Subsidiary 100%

The report on the financial position of the Company's Subsidiaries Dalmia SevenRefractories Limited Dalmia GSB Refractories GmbH and GSB Refractories India PrivateLimited for the year ended March 31 2020 is attached in Form AOC-1 and forms part of thisreport as Annexure -1.

During the said financial year no Company ceased to be a subsidiary of the Company andapart from those mentioned above the Company does not have any other associate or jointventure Company.

The Financial Statements of the Subsidiaries are not being published and any memberdesirous of obtaining a copy of the same may write to the registered office of the Companyor download the same from the Company's website www.dalmiarefractories.com. Any memberdesirous to inspect the same may conduct inspection at the Registered Office of theCompany during business hours.

Dalmia GSB Refractories GmbH registered under German laws as Limited Liability Companyis the material unlisted subsidiary of the Company in terms of Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 asamended from time to time and the Company's Policy for determining material subsidiary.The policy for determining material subsidiaries may be accessed on the Company's websiteat https://www.dalmiare- fractories.com/pdf/Material-Subsidiary-Policy.pdf.

Scheme of Arrangement and Amalgamation

The Board of Directors of Company in their meeting held on 14th November2019 has approved a Scheme of Amalgamation and Arrangement amongst Dalmia RefractoriesLimited ('DRL') and its subsidiary GSB Refractories India Private Limited ('GSB India)Dalmia Bharat Refractories Limited (DBRL) (formerly known as Sri Dhandauthapani Mines andMinerals Limited) and Dalmia OCL Limited (DOCL) (formerly known as Dalima OCL PrivateLimited/ Ascension Commercio Private Limited) and their respective shareholders andcreditors in terms of Sections 230 to 232 and all other applicable provisions of theCompanies Act 2013 ('Scheme 2).

Pursuant to this Scheme DRL and GSB India will stand dissolved. The appointed date ofthe said Scheme will be 1st April 2020.

Pending necessary regulatory approvals and other compliances no effect of the abovementioned schemes has been considered in the financial statements.

Consolidated Financial Statements

In accordance with the provisions of the Companies Act 2013 read with the IndianAccounting Standards (Ind AS) the Consolidated Financial Statements of the Company and ofall the subsidiaries for the financial year 2019-20 have been prepared in accordance withapplicable accounting standards and form part of the Integrated Annual Report.

Corporate Governance

Your Directors believe that corporate governance is an ethically driven businessprocess that is committed to values aimed at enhancing the growth for the Company. YourCompany's corporate governance practices are driven by effective and strong Boardoversight timely disclosures transparent accounting policies and high levels ofintegrity in decision making. The Company's Corporate Governance Report has been detailedin a separate Chapter and is attached separately to this Report. The Auditors' Certificateconfirming compliance of Corporate Governance Code is also attached as annexure and formspart of this report.

Corporate Social Responsibility Initiatives

The Company is fully aware of its social responsibilities and is providing time to timeassistance through the local institutions to benefit the local residents of the nearbyareas where the Company's plants are located.

The Company has adopted a Corporate Social Responsibility Policy during the year whichmay be accessed at the Company's website www.dalmiarefractories.com.

The prime objective of the Corporate Social Responsibility policy of the Company is tohasten social economic and environmental progress. We remain focused on generatingsystematic and sustainable improvement for local communities surrounding our plants andproject sites.

Pursuant to the said Policy the Company has spent Rs 6.96 Lakhs towards corporatesocialresponsibility activities during the financial year 2019-20. The said amount spentwas equal to 2% of average net profits of the Company made during three immediatelypreceding financial years. The annual report on corporate social responsibility activitiesis attached and marked as Annexure - 2 and forms part of this Report.

Annual Return

In terms of the provisions of Section 92(3) of the Companies Act 2013 read with theCompanies (Management and Administration) Rules 2014 the extract of annual return ofyour Company for the financial year ended March 31 2020 has been uploaded at theCompany's website www.dalmiarefractories.com.

Directors and Key Managerial Personnel

During the year the Shareholders in the Annual General Meeting of the Company held onSeptember 12 2019 have approved the appointment of Mr. C. Nagaratnam as the IndependentDirector of the Company with immediate effect for a term a two years.

Ms. Leena Rawal retires by rotation at the ensuing Annual General Meeting and beingeligible offers herself for re-appointment. She has given a declaration in terms ofSection 164(2) of the Companies Act 2013 to the effect that she is not disqualified frombeing re-appointed as a Director of the Company.

All the Independent Directors of the Company namely Mr. M.K. Doogar Mr. DeepakThombre and Mr. C. Nagaratnam have given their declaration of independence in terms ofcriteria laid down in the Companies Act 2013 and the Listing Regulations.

During the year Mr. C.N. Maheshwari has ceased to be the Chief Executive Officer ofthe Company w.e.f. 24May 2019. The other Key Managerial Persons continue to hold theirrespective offices during the year under review.

The requisite certificate(s) from the Secretarial Auditor of the Company confirmingthat none of the Directors of the Company have been debarred or disqualified from beingappointed or continuing as Directors of the Company by Securities and Exchange Board ofIndia/ Ministry of Corporate Affairs or any such authority is attached to the CorporateGovernance Report.

Board of Directors Committees And Meetings

The Board of Directors of the Company met four times during the financial year 2019-20i.e. on 24th May 2019 13th August 2019 14th November2019 and 10!h February 2020. The time gap between two consecutive meetings ofthe Board did not exceed one hundred and twenty days. The Board meetings are conducted indue compliance with and following the procedures prescribed in the Companies Act 2013Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI LODR Regulations") and applicable SecretarialStandards.

In terms of the provisions of Rule 8 of Schedule IV to the Companies Act 2013 aseparate meeting of the Independent Directors excluding all other Directors and Officialsof the Company was also held. Reference is invited to the attached Corporate GovernanceReport for the details thereof.

As on 31.03.2020 there are four Board level committees. The composition terms ofreference and other details of all Board level Committees have been elaborated in theCorporate Governance Report annexed to this Report.

Nomination and Remuneration Policy

The Nomination and Remuneration Policy lays down the constitution and role of theNomination and Remuneration Committee. The policy has been framed with the objective -

(a) to ensure that appointment of directors key managerial personnel and seniormanagerial personnel and their removals are in compliance with the applicable provisionsof the Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015;

(b) to set out criteria for the evaluation of performance and remuneration ofdirectors key managerial personnel and senior managerial personnel;

(c) to adopt best practices to attract and retain talent by the Company; and

(d) to ensure diversity of the Board of the Company.

The policy specifies the manner of effective evaluation of performance of Board itsCommittees and individual Directors to be carried out either by the Board by theNomination and Remuneration Committee or by an independent external agency and review itsimplementation and compliance. The Nomination and Remuneration policy of the Company canbe accessed at the website of the Company at www.dalmiarefractories.com

Performance Evaluation

The annual evaluation of the performance of the Board its committees and individualDirectors was carried by the Independent Directors the Nomination and RemunerationCommittee and the Board of Directors in compliance with the Companies Act 2013 and SEBILODR Regulations during financial year 2019-20.

An indicative criteria of evaluation was circulated to the Directors to facilitate suchevaluation. Based on the feedback of the Directors and on due deliberations of the viewsand counter views the evaluation was carried out in terms of the Nomination andRemuneration Policy and such indicative criterion.

Whistle Blower Policy and Vigil Mechanism

The Company has in place the Whistle Blower Policy and Vigil Mechanism for Directorsemployees and other stakeholders which provides a platform to them for raising their voiceabout any breach of code of conduct financial irregularities health safetyenvironmental issues. Adequate safeguards are provided against victimization ofstakeholders who use such mechanism and direct access to the Chairman of the AuditCommittee in appropriate cases is provided.

The policy can be accessed at the website of the Company athttps://www.dalmiarefractories.com/pdf/ Whistleblower-Policy_and_Vigil-Mechanism.pdf

Adequacy of Internal Financial Controls

The Company has adequate internal financial controls commensurate with the size of theCompany and nature of its business which are reviewed periodically.

The internal auditors of the Company conduct regular internal audits as per approvedplan and the Audit Committee reviews periodically the adequacy and effectiveness ofinternal control systems and takes steps for corrective measures whenever required.

The roles and responsibilities of all talents and functions have been clearly laid outthrough a number of detailed standard operating procedure and delegation of authority. Therisks identified in the audits are immediately accounted for in the processes and getsaddressed through the Standard Operating Procedures.

Particulars of Loans Guarantees and Investments

Your Company has given guarantees provided security and made investments within thelimits with the necessary approvals and in terms and accordance with the provisions ofSection 186 of the Companies Act 2013.

The particulars of such guarantees given securities provided and investments made areprovided in the Standalone Financial Statements at Note No. 5.

Related Party Policy and Transactions

The Company has formulated a Related Party Transactions Policy and the same can beaccessed at the website of the Company at https://www.dalmiarefracto-ries.com/pdf/Related-Party-Transactions-Policy.pdf. Prior omnibus approval is obtained forrelated party transactions which are of repetitive nature and entered in the ordinarycourse of business and at an arms' length basis. All related party transactions are placedbefore the Audit Committee for review and approval.

All related party transactions entered during the financial year 2019-20 were in theordinary course of the business and on an arms' length basis. The Company has not enteredinto any arrangement/ transaction with related parties which could be considered materialin accordance with the Company's Policy on Related Party Transactions. Hence nodisclosure is required to be made in Form AOC-2.

Risk Management

Your Company has formulated the Risk Management Policy that defines the adequate riskmanagement process which are based upon business environment operational controls andcompliance procedures. The major risks are assessed through a systematic procedure of riskidentification and classification. Risks are prioritized according to significance andlikelihood. The purpose of risk management is to proactively address risks. The AuditCommittee oversees the risk management plan and ensures its effectiveness.

There are no elements of risk which in the opinion of the Board may threaten theexistence of the Company.

Auditors & Auditors' Report

Secretarial Auditors

In terms of section 204 of the Companies Act 2013 Mr. N.C. Khanna Practicing CompanySecretary was appointed as the Secretarial Auditor to conduct the Secretarial Audit forthe financial year 2019-20. The Secretarial Audit Report in Form MR-3 for the financialyear ended March 31 2020 is annexed as Annexure 3' of this Report.

There is no qualification reservation or adverse remark in the Secretarial AuditReport.

Statutory A uditors

M/s. Chaturvedi & Shah Chartered Accountants were appointed as the StatutoryAuditors of the Company at the Annual General Meeting held on 24th August 2017to hold office as such till the conclusion of Annual General Meeting of the Company to beheld in 2021-22.

The Company has received a certificate from them to the effect that they are eligibleto continue as the Statutory Auditors of the Company and that they comply with the limitsprescribed under the Companies Act 2013 read with relevant rules. They have alsoconfirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.

The Reports submitted by the Statutory Auditor on the Standalone and Consolidatedfinancial statements of the Company are self-explanatory and do not contain anyqualification reservation adverse remark or disclaimer.

The Auditor has not reported any matter under Section 143(12) of the Act during theyear under review.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo.

The Statement reflecting the particulars relating to conservation of energy technologyabsorption and foreign exchange earning and outgo is attached to the Report as Annexure-4.

Particulars of Remuneration of Directors' Key Managerial Personnel and Employees'

The particulars of remuneration of Directors and Key Managerial Personnel and otherparticulars in terms of Section 197(12) of the Act read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure-5of the Report.

A statement sharing the names and other particulars of the employees in terms of theprovisions of Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in Annexure-5A.

Employees' Stock Option Scheme

During the year 16500 stock options were vested into eligible employees in terms ofthe Dalmia Refractories Limited - Employee Stock Option Plan 2018 (DRL ESOP Plan 2018). Nostock option has been exercised during the year.

There is no change in the ESOP plan during the financial year under review. The ESOPplan is in compliance with the SEBI Regulations.

As required under the Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 the applicable disclosures as on 31st March 2020 areavailable on the Company's website at www.dalmia- refractories.com.

A certificate from the Statutory Auditor on the implementation of your Company'sEmployees Stock Option Scheme will be placed at the ensuing Annual General Meeting forinspection by the Members.

Public Deposits

The Company has not accepted any deposits from the public till date.

Industrial Relations

The industrial relations during the year under review remained harmonious and cordial.

Disclosures

No significant or material orders were passed by the Regulators or Courts or Tribunalsimpacting the going concern status and Company's operations in future.

The Company has complied with all the applicable Secretarial Standards (SS) issued bythe Institute of Company Secretaries of India from time to time and approved by theCentral Government.

In line with the requirements of the Sexual Harassment of Women at the Workplace(Prevention Prohibition & Redressal) Act 2013 an Anti-Sexual Harassment Policy hasbeen put in place and Internal Committee has been set up to redress complaints receivedregarding sexual harassment. During the financial year no complaint has been received byInternal Committee.

The Company is required to maintain cost records as specified by the Central Governmentunder sub-section (1) of section 148 of the Companies Act 2013 and such records are dulybeing maintained.

Material Changes and Commitments

Apart from disclosures made in the report no other material changes and commitmentshave occurred after the close of the year till the date of this report which affect thefinancial position of the Company.

Directors Responsibility Statement:

In terms of the provisions of Section 134(5) of the Companies Act 2013 your Directorsdeclare that:

i) in the preparation of the Annual Accounts the applicable Accounting Standards havebeen followed along with proper explanation relating to material departures;

ii) the Directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

iii) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;

iv) the Directors had prepared the annual accounts on a going concern basis.

v) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

vi) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Acknowledgment

The Directors also take this opportunity to place on record their sincere thanks andappreciation for assistance and continued support to the Company from its Bankers Stateand Central Government agencies employees and other stakeholders of the Company.

For and on behalf of Board
Deepak Thombre
Place: Pune Chairman
Dated: 16th June 2020 DIN: 02421599

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