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Deepak Nitrite Ltd.

BSE: 506401 Sector: Industrials
BSE 00:00 | 02 Dec 840.35 -23.60






NSE 00:00 | 02 Dec 840.25 -24.00






OPEN 869.40
VOLUME 38969
52-Week high 895.00
52-Week low 310.00
P/E 27.70
Mkt Cap.(Rs cr) 11,462
Buy Price 840.00
Buy Qty 9.00
Sell Price 840.35
Sell Qty 25.00
OPEN 869.40
CLOSE 863.95
VOLUME 38969
52-Week high 895.00
52-Week low 310.00
P/E 27.70
Mkt Cap.(Rs cr) 11,462
Buy Price 840.00
Buy Qty 9.00
Sell Price 840.35
Sell Qty 25.00

Deepak Nitrite Ltd. (DEEPAKNTR) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the Forty Ninth Annual Report together withthe Audited Statement of Accounts (Standalone and Consolidated) for the Financial Year("FY") ended March 31 2020.


Your Company's financial performance for the year ended March 31 2020 is summarizedbelow:

(Rs. in Crores)

Particulars Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
TOTAL Revenue (Gross) 2237.24 1794.52 4264.91 2715.04
Operating Profit Before Depreciation Finance Cost Exceptional 804.28 308.23 1061.00 429.02
Item and Tax (EBITDA)
Less: Depreciation and Amortization expenses 77.93 52.88 139.73 77.79
Less: Finance Costs 20.32 42.85 114.87 83.25
Profit before Tax 706.03 212.50 806.40 267.98
Less: Tax expenses 161.99 74.46 195.37 94.32
Net Profit for the Year 544.04 138.04 611.03 173.66
Other Comprehensive Income (3.66) (2.67) (3.80) (2.84)
TOTAL Comprehensive income for the Year 540.38 135.37 607.23 170.82
Surplus brought forward from previous year 511.26 402.32 525.01 380.61
Balance available for Appropriation 1051.62 537.64 1184.97 548.16


Your Company delivered a solid all-round performance during the year under reviewsteered by positive growth across its Strategic Business Units ("SBUs"). In FY2019-20 TOTAL Revenue including Other Income stood at Rs. 2237.24 Crores as against Rs.1794.52 Crores in FY 2018-19.

EBITDA was Rs. 804.28 Crores in FY 2019-20 higher by 160.94% as compared to Rs. 308.23Crores in FY 2018-19. Higher margins were a result of favorable product mix improvedrealizations as well as cost efficiency initiatives carried out. Raw material costs stoodat Rs. 887.98 Crores as against Rs. 976.18 Crores in FY 2018-19 lower by 9.04%.

Profit Before Tax ("PBT") was Rs. 706.03 Crores as compared to Rs. 212.50Crores in FY 2018-19. The Profit After Tax ("PAT") stood at Rs. 544.04 Crores ascompared to Rs. 138.04 Crores in FY 2018-19. The robust performance during the year wasdriven by growth initiatives which were implemented in prior years to elevate yourCompany's market position in India and overseas. The integrated nature of operations whichinvolve production processes starting from key building blocks going up to niche andcomplex chemical intermediates have allowed your Company to take advantage ofopportunities that arose amidst rising volatility in product prices and disruption inglobal supply chains. Specialisation in certain niche products combined with strong demandhas allowed your Company to benefit from improved realisations further strengthening itsleadership position in the market. The Depreciation and Finance Costs during the yearstood at Rs. 77.93 Crores and Rs. 20.32 Crores respectively.

Domestic Revenues stood at Rs. 1292.94 Crores from Rs. 1211.53 Crores in FY2018-19 representing a growth of 7% on account of positive and sustained demand scenariofrom key end-user industries. The Revenue from exports stood at Rs. 936.72 Crores comparedto Rs. 580.39 Crores last year. Increased demand along with higher realisation gains inkey export geographies expanded Export Revenues by 61%. This was also supported bystrategic initiatives undertaken by the management team with respect to widening thecustomer base and re-calibrating the product-mix. The Indian chemical industry is wellpoised to capitalize on the growing opportunities arising out of uncertainties and supplydisruptions created by other geographies globally. This is expectedly a tailwind for theIndian chemical manufacturers including your Company which has demonstrated scalabilityand evolved to serve a diverse spectrum of end-user industries. Even as the global economyremains impacted by the COVID-19 pandemic and its fallout the Indian chemical industry isexpected to continue this positive momentum over the medium to long term and improve itsmarket share providing some of the leading companies like your Company a platform todemonstrate capabilities on a global scale.


During the FY 2019-20 your Company and its subsidiaries i.e. Deepak Phenolics Limitedand Deepak Nitrite Corporation Inc. (‘the Group') has created new benchmark inrevenues and profitability marking this as a milestone year for the Group.

The Group managed to achieve its targets in the backdrop of volatility in prices of rawmaterials and finished goods thereby demonstrating resilience. The Group reported elevatedgrowth in revenues and profitability combined with opening up of new avenues of growthprospects. TOTAL Revenue including Other Income on a consolidated basis stood at Rs.4264.91 Crores in FY 2019-20 as against Rs. 2715.04 Crores in FY 2018-19. EBITDA was Rs.1061.00 Crores in FY 2019-20 higher by 147.31% as compared to Rs. 429.02 Crores in FY2018-19. Raw material costs stood at Rs. 2373.50 Crores as against Rs. 1646.70Crores in FY 2018-19 higher by 44.14%.

Demonstrating its agility the Group has witnessed shift in revenue mix between variousproducts and also capitalised on favourable trends in global markets to increase exports.As a result Profit Before Tax ("PBT") stood at Rs. 806.40 Crores as compared toRs. 267.98 Crores in FY 2018-19. The Profit After Tax (PAT) came in at Rs. 611.03 Croresas compared to Rs. 173.66 Crores in FY 2018-19. In addition to the above-mentioned reasonsfor improved performance the integrated Phenol- Acetone manufacturing facility deliveredadequately and added significantly to the overall growth of the business.

The Depreciation and Finance costs during the year stood at Rs. 139.73 Croresand Rs. 114.87 Crores respectively.The Domestic Revenues stood at Rs. 3157.88 Crores fromRs. 2106.54 Crores in FY 2018-19 representing a growth of 50%. During the year underreview the Group was successful in substituting a large proportion of Phenol-Acetoneimports through roll out of its product with well-established pan India distributionnetwork. More importantly operating a global scale plant at above 90% utilisation levelin the first complete

Financial Year is testament of the scale of effort preparedness and efficientmanagement of complex material logistics. The Revenue from Exports stood at Rs. 1071.83Crores compared to Rs. 593.38 Crores last year.


A consistent Dividend is a healthy sign of a growing company. Based on your Company'sperformance the Board of Directors at their meeting held on March 4 2020 declared anInterim Dividend of Rs. 4.50 (Rupees Four and Paise Fifty only) per Equity Share of Rs.2.00 (Rupees Two only) each which represents 225% Dividend on Equity Share Capital of yourCompany as against the Final Dividend of Rs. 2.00 (Rupees Two only) per Equity Share inthe previous year. The payment of Interim Dividend was made through electronic mode onMarch 21 2020 to all the Equity Shareholders whose Bank Account details were availablewith your Company. However your Company was not able to complete dispatch of InterimDividend Warrants within the prescribed time limit on account of situation emerged due tooutbreak of COVID-19 and the orders of Central / State Government for lockdown effectivefrom March 23 2020. Your Company shall endeavor to complete the dispatch of InterimDividend Warrants upon resumption of services by PostaI Authorities.

The TOTAL amount of Interim Dividend including Dividend Tax declared for FY 2019-20was Rs. 73.99 Crores.

Your Directors have not recommended any Final Dividend for the Financial Year endedMarch 31 2020.


The issued subscribed and paid-up Equity Share Capital of your Company as on March 312020 was Rs. 27.28 Crores comprising of 136393041 Equity Shares of Rs. 2/- each. YourCompany has not issued any Equity shares during the Financial Year 2019-20. There was nochange in Share Capital during the year under review.


During the year under review your Company has transferred an amount of Rs. 10 Croresto the General Reserves out of the amount available for appropriation. (Previous Year Rs.5 Crores).


FY 2019-20 was the first full year of operations of your Company's wholly ownedsubsidiary Deepak Phenolics Limited ("DPL"). DPL performed remarkably well onvolumes as it recorded capacity utilization of above 90% on a sustained basis. While therewas cyclicality in prices DPL has significantly enhanced its volumes and market presenceduring the fiscal.

Even as DPL stabilizes its large scale Phenol and Acetone plant it is investingthrough forward integration to expand the scope of value-added variants. In-line with thisobjective DPL commissioned 30000 MTPA plant to manufacture Isopropyl

Alcohol ("IPA") from Acetone in April 2020 thus significantly reducing thecountry's dependence on imports. IPA is an important input in production of essentialpharmaceuticals and sanitizers. DPL further aims to introduce such value-added products tofulfill its goal of a diverse downstream derivative portfolio. This is expected to resultin captive consumption of 25% of Acetone output.

Your Company through DPL has successfully tackled the opportunity of serving thedomestic demand of Phenol and Acetone which was otherwise met by imports. It will continueto maintain its leadership position through cost competitiveness and substitute imports.


Your Company tries to strike a balance in its capital structure on a consolidated levelwhile following strict guidelines to efficiently manage its working capital therebymaintaining debt at a reasonable level. During the year under review the TOTAL debt ofyour Company decreased due to repayments and improved working capital management. Interestcosts sharply decreased during the year due to repayment of debt efficient management ofworking capital as well as borrowing basket and marginally due to decrease in the Libor inoffshore borrowing and decrease in market rate in rupee borrowing. Depreciation increasedowing to change in estimate of useful life of certain Property Plant and Equipment. YourCompany has a dynamic team to manage its foreign exchange exposures to minimize riskarising out of imports and exports. Due to prudent management your

Company has been able to effectively manage its cash flows.

There is always an effort to reduce the overall interest costs. Debt: Equity as onMarch 31 2020 reduced to 0.14 compared to 0.31 as on March 31 2019.

Your Company is well placed in the industry delivering quality guided by a robustproduct mix. Thus on the back of steady performance over the years ICRA has upgradedlong term credit rating from "ICRA A+/Positive" to "ICRA AA-/Stable"while retaining short term credit rating at highest notch i.e. at " ICRA A1+";while CRISIL assigns with a long term credit rating of ‘CRISIL AA-/Stable and shortterm rating of "CRISIL A1+"which is the highest rating in short term category.ICRA has also re-affirmed the rating at ICRA A1+ assigned to the Commercial Paperprogramme. In case of DPL ICRA has upgraded the long term credit rating from "ICRABBB" to "ICRA A-" and also upgraded the short term credit rating from"ICRA A3+" to "ICRA A2+". This is primarily owing to your Company'ssustainable business performance commercial viability across most segments of itsproducts diversified product portfolio constant innovation and efficient operations.


During the year under review following are the changes in the composition of Board ofDirectors: Shri Sudhir Mankad Shri Sandesh Kumar Anand Dr. Swaminathan Sivaramand Dr. Richard H. Rupp were re-appointed at the 48th Annual GeneralMeeting held on June 28 2019 as Independent Directors of your Company for a second termof three (3) consecutive years commencing from August 8 2019 to August 7 2022.

Shri Sanjay Asher and Smt. Purvi Sheth were appointed as Independent Directors of yourCompany for a term of three (3) consecutive years commencing from June 28 2019 till June27 2022.

Pursuant to expiry of first term Shri Nimesh Kampani and Prof. Indira Parikh did notseek re-appointment for a second term. Hence both Directors ceased to be IndependentDirectors of your Company with effect from August 8 2019 and August 9 2019respectively. Your Directors place on record their sincere appreciation of the invaluablecontribution by Shri Nimesh Kampani and Prof. Indira Parikh during their association withyour Company. Shri Sudhin Choksey resigned as an Independent Director of your Companyw.e.f. October 11 2019 as he was proposed to be appointed as an Executive Director ofBandhan Bank Limited upon amalgamation of GRUH Finance Limited with Bandhan Bank Limited.Consequently he also ceased to be the Chairman of Audit Committee and Member of theNomination and Remuneration Committee. The Board of Directors places on record itsappreciation for the invaluable contribution and expert advices given by him during histenure as an Indepedent Director and Member of Committees of the Directors of yourCompany.

Pursuant to the recommendation of the Nomination and Remuneration Committee the Boardof Directors of your Company appointed Shri Dileep Choksi and as an Additional Director attheir meeting held on February 3 2020. As per provisions of the Companies Act 2013(‘the Act') Shri Dileep Choksi holds office as an Additional Director upto theensuing

Annual General Meeting. Your Company has received notice from a Member proposing hiscandidature for the appointment as an Independent Director for a period of three (3)consecutive years. The resolution for the appointment of Shri Dileep Choksi as anIndependent Director is given in the Notice for approval by the Members.

Pursuant to the provisions of Section 152 of the Act Shri Ajay C. Mehta Non-Executive& Non-Independent Director retires by rotation at the 49th Annual GeneralMeeting and being eligible has offered himself for re-appointment. The Board recommendshis re-appointment. Shri Umesh Asaikar completes his term of appointment as ExecutiveDirector & CEO of the Company on May 31 2020. Accordingly Shri Umesh Asaikar shallretire as Executive Director & CEO of the Company from close of business hours on May31 2020. The Board of Directors places on record its appreciation of the invaluablecontributions made by Shri Umesh Asaikar during his tenure as Executive Director & CEOof the Company.

Pursuant to recommendations of the Nomination and Remuneration Committee the Board ofDirectors of your Company has elevated Shri Maulik D. Mehta Whole-time Director as theExecutive Director & CEO of the Company effective from June 1 2020.


As required under Section 2(51) and Section 203 of the Act read with Rule 8 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 followingpersons are the Key Managerial Personnel of your Company:

1. Shri Deepak C. Mehta Chairman & Managing Director

2. Shri Umesh Asaikar Executive Director & CEO

3. Shri Sanjay Upadhyay Director-Finance & CFO

4. Shri Maulik Mehta Whole-time Director

5. Shri Arvind Bajpai Company Secretary

There has been no change in the Key Managerial Personnel of the Company during theyear ended March 31 2020.


During FY 2019-20 six (6) Board Meetings were held. The details of the Board Meetingswith regard to their dates and attendance of each of the Directors thereat have been setout in the Report on Corporate Governance which forms part of this Report.


The Independent Directors of your Company have furnished the declaration that they meetthe criteria of independence as provided in Section 149 (6) of the Act and the ListingRegulations as amended from time to time.

Based on the declarations received from the Independent Directors the Board ofDirectors of your Company confirm the independence integrity expertise and experience(including proficiency) the of the Independent Directors of your Company.


Pursuant to the provisions of the Act and the Listing Regulations the Board ofDirectors have carried out annual performance evaluation of its own performance BoardCommittees and individual Directors.

As required under Regulation 25 of the Listing Regulations a separate meeting of theIndependent Directors of the Company was also held on March 20 2020 to evaluate theperformance of the Chairman Non-Independent Directors and the Board as a whole and alsoto assess the quality quantity and timeliness of flow of information between themanagement of your Company and the Board.

The performance of the Board / Committee was evaluated after seeking inputs from allthe Directors / Committee Members on the basis of the defined criteria includingcomposition and structure effectiveness of meetings information and functioning.

Performance evaluation of Independent Directors was done by the entire Board excludingthe Independent Director being evaluated on the basis of following evaluation criteria:

Relevant Knowledge Expertise and Experience.

Devotion of time and attention to the Company's long term strategic issues.

Addressing the most relevant issues for the Company.

Discussing and endorsing the Company's strategy

Professional Conduct Ethics and Integrity.

Understanding of Duties Roles and Function as Independent Director.

Your Directors have expressed their satisfaction to the evaluation process.


The Audit Committee consists of all Independent Directors with Shri Sudhir Mankad asthe Chairman of the Committee. The other members of the Audit Committee are Shri SandeshKumar Anand Shri Sanjay Asher and Shri Dileep Choksi. The terms of reference of the AuditCommittee details of meetings held during the year and attendance of Members are set outin the Report on Corporate Governance which forms part of this Report.

During the year under review all the recommendations of the Audit Committee wereaccepted by the Board.


The observations made in the Auditors' Report of M/s. Deloitte Haskins & Sells LLPChartered Accountants for the year ended March 31 2020 read together with relevant notesthereon are self-explanatory and hence do not call for any comments. There is noqualification reservation adverse remark or disclaimer by the Statutory Auditors intheir Report.


During the year under review the Statutory Auditors Cost Auditors and SecretarialAuditor have not reported any instances of frauds committed in your Company by itsOfficers or Employees to the Audit Committee under Section 143(12) of the Act details ofwhich needs to be mentioned in this Report.


The Secretarial Audit Report of M/s. KANJ & Co. LLP Company Secretaries Pune forthe year ended March 31 2020 in Form MR-3 is annexed as Annexure - A which formspart of this Report.

The observations made in the Secretarial Audit Report of M/s. KANJ & Co. LLPCompany Secretaries Pune for the year ended March 31 2020 are self- explanatory andhence do not call for any comments.


(A) Statutory Auditors:

The Statutory Auditor of your Company M/s. Deloitte Haskins & Sells LLP CharteredAccountants (Firm Registration No.: 117366W/W-100018) were appointed for a period offive (5) years at the 46th Annual General Meeting held on June 26 2017 untilthe conclusion of the 51st Annual General Meeting of your Company.

(B) Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Secretarial Auditfor the year ended March 31 2020 was carried out by the Secretarial Auditors M/s. KANJ& Co. LLP Company Secretaries Pune. The Board of Directors of your Company hasappointed M/s. KANJ & Co. LLP Company Secretaries Pune to carry out SecretarialAudit of your Company for FY 2020-21.

(C) Cost Auditors:

Your Company is required to maintain cost records under Companies (Cost Records andAudit) Rules 2014. Accordingly cost records have been maintained by your Company.

The Board of Directors on the recommendation of the Audit Committee appointed M/s. B.M. Sharma & Company Cost Accountants to conduct audit of your Company's cost recordsfor FY 2020-21 at a remuneration of Rs. 750000/- (Rupees Seven Lakhs FiftyThousand only) plus applicable taxes and out of pocket expenses. As required under theprovisions of the Act the remuneration of Cost Auditors as approved by the Board ofDirectors is ratification subject to by the shareholders at the ensuing Annual GeneralMeeting. Aratification Resolution for the of remuneration of Cost Auditors for FY 2020-21is provided in the Notice. Your Directors recommend the same for approval by the Members.

The Cost Audit Report will be filed within the prescribed period of 180 days from theclose of the Financial Year.

(D) Internal Auditors:

The Board of Directors has appointed M/s. Sharp & Tannan Associates CharteredAccountants as Internal Auditors of your Company to conduct the Internal Audit for FY2020-21.


During FY 2019-20 your Company has not accepted or renewed any Fixed Deposits. As onMarch 31 2020 thirty five (35) warrants aggregating to Rs. 723507 issued by yourCompany to the respective deposit holders towards compulsory repayment of deposits andinterest thereon in accordance with the provisions of Section 74 of the Act remaineduncleared. There has been no default in repayment of deposits or interest thereon duringthe year and there are no deposits outstanding as on March 31 2020.


As per provisions of Section 177 (9) of the Act read with Regulation 22(1) of theListing Regulations your Company has adopted a Whistle Blower Policy to provide a formalvigil mechanism to the Directors and employees to report their concerns about unethicalbehaviour including actual or suspected leak of unpublished price sensitive informationactual or suspected fraud or violation of your Company's Code of Conduct or ethics policy.The Policy provides for adequate safeguards against victimisation of employees who availof the mechanism and also provides for direct access to the Chairman of the AuditCommittee in certain cases. It is affirmed that no personnel of your Company has beendenied access to the Audit Committee. The Whistle Blower Policy is available on the yourCompany's website at Whistle_Blower_Policy.pdf


All Related Party Transactions that were entered into during the Financial Year were onan arm's length basis in the ordinary course of business and were in compliance with theapplicable provisions of the Act and the Listing Regulations.

There were no Material Significant Related Party Transactions entered into by yourCompany during the year that would have required Shareholders' approval under the ListingRegulations.

All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained for the transactions which arerepetitive in nature. A statement of all Related Party Transactions is placed before theAudit Committee for its review on a quarterly basis specifying the name of the RelatedParty nature and value of the transactions.

In line with the requirements of the Act and the Listing Regulations your Company hasadopted a Policy on Materiality of Related Party Transactions which is also available onyour Company's website at Disclosure of Related PartyTransactions with the Promoter(s) and Promoter(s) group which individually hold 10% ormore shareholding of your Company as per Indian Accounting Standards are set out in NoteNo. 34 of the Standalone Financial Statements of your Company. Details of transactionswith Related Parties are provided in the accompanying Financial Statements. There were notransactions with Related Parties during the year which are required to be reported inForm AOC-2.


As required under Rule 8(1) of the Companies (Accounts) Rules 2014 the Board's Reporthas been prepared on a Standalone basis.

The Consolidated Financial Statements of your Company and its subsidiaries prepared inaccordance with Indian Accounting Standards notified under the Companies (IndianAccounting Standards) Rules 2015 (‘Ind AS') forms part of the Annual Report and arereflected in the Consolidated Financial Statements of your Company.

The Annual Financial Statements of the subsidiaries and related detailed informationwill be kept at the Registered Office of your Company as also at the Registered Officesof the respective Subsidiary Companies and will be available to investors seekinginformation at any time. They are also available on the website of your Company. TheConsolidated Financial Statements reflect the operations of following subsidiaries: DeepakPhenolics Limited; and Deepak Nitrite Corporation Inc. There is no other Company which hasbecome or ceased Subsidiary or Associate of your Company during the year ended March 312020.

Your Company has adopted a Policy for determining Material Subsidiaries in terms ofRegulation 16(1)(c) of the Listing Regulations. The Policy as approved by the Board isuploaded on your Company's website.


(a) Deepak Phenolics Limited

Your Company's wholly owned subsidiary Deepak Phenolics Limited ("DPL") isin the manufacturing of Phenol and Acetone. During FY 2019-20 the Revenue from Operationsof DPL was Rs. 2009.76 Crores and Profit After Tax for the period was Rs. 66.65 Crores.

(b) Deepak Nitrite Corporation Inc. (USA)

Deepak Nitrite Corporation Inc. ("DNC") is a wholly owned subsidiaryincorporated in the United States of America to cater to the marketing requirements ofyour Company in North and South American region. During FY 2019-20 the TOTAL revenue ofDNC was USD 20134 and the Net Income for the period was USD 270. In accordance with theprovisions of the Act Regulation 33 of the Listing Regulations and applicable AccountingStandards the Audited Consolidated Financial Statements of your Company for FY 2019-20together with the Auditors' Report forms part of this Annual Report. A statementcontaining the salient features of your Company's subsidiaries associate and jointventure company in the prescribed Form AOC-1 is attached to the Financial Statements.


The Particulars of Loans granted and Investments made by your Company have beendisclosed in the Financial Statements forming part of Annual Report.


There have been no material changes and commitments affecting the financial position ofyour Company since the close of Financial Year i.e. since March 31 2020 and the date ofthis Report. Further it is hereby confirmed that there has been no change in the natureof business of your Company.


Pursuant to the requirement of Section 134(5) of the Act the Board of Directors ofyour Company to the best of their knowledge and ability confirm that:

(a) in the preparation of the Annual Accounts for the Financial Year ended March 312020 the applicable accounting standards have been followed and there are no materialdepartures;

(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of your Company at the end of the Financial Year ended March 312020 and of the profit of your Company for the year ended on that date;

(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of your Company and for preventing and detecting fraud and other irregularities;

(d) they have prepared the Annual Accounts on a going concern basis;

(e) they have laid down Internal Financial Controls to be followed by your Company andthat such Internal Financial Controls are adequate and are operating effectively; and

(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.


A separate report on Corporate Governance is provided together with a Certificate froma Practicing Company Secretary M/s. KANJ & Co. LLP Company Secretaries Puneregarding compliance of conditions of Corporate Governance as stipulated under the ListingRegulations.


As stipulated under Regulation 34 of the Listing Regulations the BusinessResponsibility Report covering initiatives on environmental social and governanceaspects forming part of this Report is annexed as Annexure - B.


The Corporate Social Responsibility ("CSR") activities of your Company arebeing implemented through Deepak Foundation the group's charitable trust encompassingsocial interventions in various developmental domains such as Health EducationLivelihood etc.

During the year under review your Company has spent Rs. 3.48 Crores on CSRactivities against the requirement of Rs. 3.03 Crores being 2% of average of the NetProfits for the preceding three years. Your Company has a policy on Corporate SocialResponsibility and the same has been posted on the website of your Company at The Report on CSR activities in termsof the requirements of Companies (Corporate Social Responsibility Policy) Rules 2014 isannexed herewith as Annexure - C which forms part of this Report.


Your Company has adopted a Nomination and Remuneration Policy for the Directors KeyManagerial Personnel and other employees pursuant to the requirement of Section 178 of theAct and the Listing Regulations.

The Nomination and Remuneration Policy of your Company is annexed as Annexure - D.


Pursuant to Section 134(3)(a) and 92(3) of the Act read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 the extract of the Annual Return ason March 31 2020 in the prescribed Form No. MGT-9 is annexed herewith as Annexure –E which forms part of this Report. The Annual Return has been placed on the website ofyour Company and can be accessed at MGT-7%2031-Mar-2019.pdf


Disclosures with respect to the remuneration of Directors Key Managerial Personnel andemployees as required under Section 197 of the Act and Rule 5(1) of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 as amended forms part of thisReport as Annexure - F.


The information pertaining to Conservation of Energy Technology Absorption ForeignExchange Earnings and Outgo as required under Section 134(3)(m) of the Act read with Rule8(3) of the Companies (Accounts) Rules 2014 is attached as Annexure - G to this Report.


The state of your Company's affairs is given under the heading ‘PerformanceReview' and various other headings in this Report and in the Management Discussion andAnalysis which forms part of the Annual Report.


Pursuant to the requirement of Section 134(3)(q) of the Act read with Rule 8 (5)(vii)of the Companies (Accounts) Rules 2014 it is confirmed that during FY 2019-20 there wereno significant and material orders passed by the Regulators or Courts or Tribunalsimpacting the going concern status and your Company's operations in future.


During the year under review your Company is in compliance with the SecretarialStandards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issuedby the Institute of Company Secretaries of India as approved by the Central Government.


Your Company has sufficient Internal Control mechanisms in place including InternalFinancial Controls. The Internal Control Framework is implemented by written policiesrules and protocols to maintain adherence with laws and regulations processes andlegislation and that all resources are secured and protected against loss from unlawfuluse or disposal and that such transactions are appropriately permitted registered anddocumented. During the year the Internal Auditor performed comprehensive assessments atall locations and across all functional departments. The Audit Committee regularly reviewsthe audit findings and corrective measures taken thereon to ensure the efficacy of theInternal Control process. The system of Internal Control is structured to verify thatfinancial and other documents are accurate in compiling financial reports and other dataand in maintaining transparency for individuals. Statutory Auditors' Report on InternalFinancial Controls as required under Clause (i) of Sub-section 3 of Section 143 of theAct is annexed with the Independent Auditors' Report.


Your Company has a system for Risk Management to define assess and track businessthreats and obstacles throughout your Company. Based on this system the Risk ManagementPolicy was embraced pursuant to Section 134 of the Act. The framework on Risk Managementaccounts for the development of a Risk Register Risk assessment and the formulation ofcontingency plans. The organization uncertainties for your Company are detected andreported to the Board for scrutiny by the respective Risk Managers. Your Company hasaccordingly formed a Risk Management Committee in compliance with Regulation 21 of theListing Regulations. The Committee evaluates the performance of your Company againstperceived risks develops approaches to classify potential and evolving challenges thatmay adversely impact the overall risk exposure of your Company and determines thestrategic plan and framework of Risk Management. The details about the Risk ManagementCommittee have been provided in the Corporate Governance section of the Annual Report.

The Board of Directors periodically evaluates the processes for Risk Identification andRisk Mitigation. The Risk Register is regularly assessed to make sure that the relevantrisks are suitably identified and mitigation mechanisms are effective.

This provides a constructive and value-added analysis mechanism that helps to maintainan appropriate level of risk profile in a rapidly evolving ecosystem.


Your Company has a Research and Development ("R&D") facility atNandesari Gujarat with pilot plants at Roha Maharashtra and Nandesari Gujarat. TheDepartment of Scientific and Industrial Research ("DSIR") New Delhi on behalfof Government of India vide letter August 10 2017 has recognized your Company's in-houseR&D facilities for further period of extension up to June 30 2020. Your Companycontinues to invest in a comprehensive R&D programme leveraging its world-classinfrastructure benchmarked processes state-of-the-art technology and a business-focusedR&D strategy.

Your Company's R&D center at Nandesari focuses on innovation of new compounds inorder to substitute imports of pharmaceutical and agrochemical intermediates innovationand development of speciality chemicals and personal care intermediates and value addedproducts from by-products. Your Company continues to focus its R&D efforts on processimprovement of its existing products recovery of products from effluents. The R&Ddepartments also helps in troubleshooting in manufacturing departments.

Your Company is a knowledge led entity and has spruced up its R&D facility forinnovation and to collaborate with its customers to understand consumer preference anddevelop new product applications to cater to the needs of its customers. Your Companyfocuses its R&D efforts to develop cost effective cleaner technologies to improveprofitability. Through its R&D capabilities your Company has been successful indeveloping and enhancing its portfolio of cutting-edge products. Your Company believesthat its ability to develop new product applications and ability to customize products tosuit customer needs have helped in expanding its customer base thereby enabling it toestablish leadership position.


Health and safety remained a core area of importance for your Company with an aim toachieve accident free workplace. Your Company believes that all injuries occupationalillnesses as well as safety and environmental incidents are preventable. This ensures thatall employees strive for excellence in their own personal safety and the safety of othersincluding employees contractors customers and the communities within which your Companyoperates. Workplace safety and Process Safety Management through employee engagementinitiatives are continuously being strengthened. Your Company has a system of Internal andexternal Safety Audits and actions based on audit findings. All Manufacturing Unitsincluding Corporate Office are certified with the latest standard of ISO 9001 ISO 14001and ISO 45001. Your Company follows a strict incident reporting system with even no injuryincidents and unusual occurrence are also logged into the Safety MIS. Each incident isanalysed for their root-causes and required precautions are taken to prevent recurrences.Each management of change and projects undertaken by your Company are made to undergoHAZOP studies before commencement. All plant-setting changes are first approved by theHAZOP team before implementation.

The safety team regularly conducts safety awareness programs across plants to achievecontinuous improvement in terms of process safety workplace safety and behavioraltransformation.

Your Company has policy and system in place to deploy internationally recognizedguidelines such as the principles of the United Nations' Global Compact theInternational Labour Organization ("ILO") conventions and the topic areas of theResponsible Care Initiative. The Code of Conduct inter alia covers compliance withhuman rights labor & social standards anti-discrimination conflict of interest andanti corruption policies in addition to protecting the environment health and safety.This is being audited by third party and customers as a part of Together forSustainability ("TfS") system.

Logistic Safety Management System:

Your Company has along with its peers founded Nicer Globe an independent platformwhich provides real-time monitoring of the movement of dangerous goods across the lengthand breadth of India. This helps in monitoring any deviations in speed or route or drivingtime restrictions which results in minimizing transport related incidents. Almost all rawmaterials and products within supply chain framework of your Company are transported in asecure manner with GPS for real-time monitoring for the safety of its customerscarriers suppliers distributors and contractors.


Your Company is committed to the chemical industry's Responsible Care initiative andhave set out the basic principles fully aligned with UN Sustainable Development Goals.Commitment to environmental protection extends beyond the scope of legal requirements. Ithas focused on recycle and reuse and reduction of pollution load and constantly working onto reduce environmental footprint and find innovative solutions that benefit theenvironment.


Your Company considers its employees as most valuable resource and ensures strategicalignment of Human Resource practices to business priorities and objectives. Its constantendeavor is to invest in people and processes to improve capabilities and potentials ofhuman capital of the organization to cope with challenging business environment varyingneeds of the customers and bring about customers delight by focusing on the Customers'needs. Attracting developing and retaining the right talent and keeping them motivatedwill continue to be a key strategic initiative and the organisation continues to befocused on building up the capabilities of its people to cater to the business needs.Given growth plans of your Company an important strategic focus is to continue to notonly nurture its human capital but also proactively focus on preparing all employees forthe challenges of the future. Your Company strives to provide a healthy conducive andcompetitive work environment to enable the employees excel and create new benchmarks ofquality productivity efficiency and customer delight. Your Company always believes inmaintaining mutually beneficial healthy and smooth industrial relations with theemployees and the Unions which is an essential foundation for the success of anyorganisation and the proactive initiatives taken have ensured that there is no friction inthe Industrial Relations resulting into smooth cordial and trusting Industrial Relations.


All the insurable interests of your Company including inventories buildings plant andmachinery are adequately insured against risk of fire and other risks.


Your Company has in place a policy on prevention of Sexual Harassment of women atWorkplace in line with the requirements of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. An Internal Complaints Committee hasbeen set up to redress the complaints received regarding sexual harassment at workplace.All employees (both permanent and contractual) are covered under this Policy. No complaintwas received from any employee during FY 2019-20 and hence no complaint is outstanding ason March 31 2020 for redressal.


Your Directors wish to place on record their deep appreciation to employees at alllevels for their hard work dedication and commitment. The Board also places on record itsappreciation for the continued cooperation and support received by your

Company during the year from investors bankers financial institutions customersbusiness partners all regulatory and government authorities and other stakeholders.