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Excel Crop Care Ltd.

BSE: 532511 Sector: Agri and agri inputs
NSE: EXCELCROP ISIN Code: INE223G01017
BSE 00:00 | 28 Aug Excel Crop Care Ltd
NSE 05:30 | 01 Jan Excel Crop Care Ltd
OPEN 3298.00
PREVIOUS CLOSE 3188.25
VOLUME 3953
52-Week high 3824.85
52-Week low 2491.45
P/E 48.33
Mkt Cap.(Rs cr) 3,507
Buy Price 3188.25
Buy Qty 3.00
Sell Price 3188.25
Sell Qty 46.00
OPEN 3298.00
CLOSE 3188.25
VOLUME 3953
52-Week high 3824.85
52-Week low 2491.45
P/E 48.33
Mkt Cap.(Rs cr) 3,507
Buy Price 3188.25
Buy Qty 3.00
Sell Price 3188.25
Sell Qty 46.00

Excel Crop Care Ltd. (EXCELCROP) - Director Report

Company director report

TO THE MEMBERS

Your Directors have pleasure in presenting the Fifty-Fourth Annual Report and theAudited Financial Statements of the Company for the year ended 31st March 2018.

1. FINANCIAL RESULTS

The salient features of the Company's working are:

(Rs. in Lacs)
2017-18 2016-17
Gross Profit for the year 13846.08 10127.40
Less: Depreciation and amortization expense 1683.69 1710.11
Profit before exceptional items and tax 12162.39 8417.29
Add: Exceptional Items 1054.45
Profit before tax 12162.39 9471.74
Less: Tax expense (Current and Deferred Tax) 4031.37 2427.75
8131.02 7043.99
Add: Balance brought forward from the previous year 3162.22 7926.88
Profit after tax 11293.24 14970.87
Appropriations:
Dividend paid for F.Y. 2015-16 1375.70
Interim Dividend paid for F.Y. 2016-17 1265.65
Proposed Dividend for F.Y. 2017-18 962.99
Tax on Dividends 197.95 532.43
Other Comprehensive income (net of tax) (added to)/reduced from retained earnings (346.86) 134.87
Transfer to General Reserve 7000.00 8500.00
7814.08 11808.65
Carried forward to next year 3479.16 3162.22

2. DIVIDEND

Your Directors have recommended a dividend of 175% amounting to Rs. 8.75 per equityshare of Rs. 5.00 each. The Directors consider this appropriate having regard to therequirements for funds for future growth of the Company. Last year the Company paidinterim dividend of Rs. 11.50 per equity share.

3. ACCOUNTING STANDARDS AND GST

For and up to F.Y. 2016-17 financial statements were prepared in accordance with thethen applicable accounting standards (‘Indian GAAP'). From 1st April 2017 IndianAccounting Standards (‘Ind AS') are applicable to the Company. Accordingly theCompany has adopted Ind AS and prepared financial statements for F.Y. 2017-18 inaccordance with the principles laid down in Ind AS. The comparative data for the previousfinancial year 2016-17 have also been presented in accordance with Ind AS. In preparingthese financial statements the Company's opening balance sheet as at 1st April 2016 theCompany's date of transition to Ind AS has also been prepared accordingly. The Companyhas therefore made principal adjustments to restate its Indian GAAP financial statementsas at and for the year ended 31st March 2017.

Goods and Service Tax (GST) was introduced with effect from 1st July 2017. GSTsubsumed Excise Duty Service Tax Value Added Tax Octroi Duty and Entry Tax amongstothers. GST did not have material cost and pricing impact on the industry and the Company.However higher amount is locked-up in working capital by way of GST input credit . TheCompany's transition to GST regime was fairly smooth.

4. OPERATIONS

During the year under review the sales increased from Rs. 1024.24 crore in theprevious year to Rs. 1162.28 crore. Domestic sales turnover increased to Rs. 841.29 crorefrom Rs. 758.55 crore in the previous year. Export turnover also increased from Rs.265.69crore in the previous year to Rs. 320.99 crore in the year under review. The Company'sprofit before exceptional items and tax in 2017-18 is Rs. 121.62 crore as against Rs.84.17 crores in the previous year.

The overall performance of monsoon in 2017 was satisfactory which helped the Company inimproving sales in the domestic market. However several parts of the country witnessedpoor rainfall. In the export market the Company was able to increase its salesturnover significantly in spite of stiff competition and adverse forex conditions andcurrency volatility in some importing countries.

5. NEW PRODUCTS/IMPROVEMENTS/EXPANSIONS

In the year under review your Company continued to pursue initiatives to optimiseutilization of its manufacturing facilities by undertaking in-house manufacturing of newproducts. Your Company commercialised production of four technical grade products and sixnew formulation products (including combination products in insecticides herbicidesfungicides and plant nutrient segments). It also expanded manufacturing capacity for fourmajor products during the year under review.

Your Company continues its efforts in the area of product and process improvement forenhancing yields reducing manufacturing costs reducing effluent load and effluenttreatment cost and also for staying innovative and competitive in the market. YourCompany also continues to focus on energy conservation and energy cost reduction.

The Company continues to maintain ISO:9001-2008 Quality Management System for all itsthree manufacturing sites at Bhavnagar Gajod and Silvassa. The quality of the products ismaintained and upgraded to the applicable national and international standards throughrigorous pursuit of Six Sigma initiative. The Company continues to enjoy the reputation ofa consistent and reliable quality supplier.

During the year the Company expanded the capacity of its solar power plant in GajodKutch by 125 KW. This initiative towards green energy would also help in reducingdependence on outsourced power as well as in energy cost reduction.

6. OUTLOOK

The importance of agrochemicals has been increasing over the last few decades driven bythe need to improve overall agricultural productivity and to ensure adequate foodavailability for the growing population. Preceding three years have been challenging forcrop protection chemicals industry in India as well as the world. 2017 however turnedout to be a normal monsoon year. As per the Economic Survey of India agriculture sectorhas grown by 4.1% in 2017.

In 2016 the Prime Minister unveiled a strategy to double farmers' income by 2022. TheMinistry of Agriculture and the Indian Council of Agricultural Research stressed that toachieve this it is necessary to improve farmers' awareness about pesticide use to reducecrop losses and to help them learn modern farming techniques.

Prices of agrochemicals like insecticides and herbicides are likely to go up with shutdown of many factories in China the world's largest producer of agrochemicals due totightening of pollution control norms. Indian players who have manufacturing strengthespecially with backward integration will have opportunity to emerge as global players.This will be a boost for the ‘Make in India' initiative of the government.

As per predictions of both Indian Meteorological Department and Skymet 2018 southwestmonsoon is expected to be ‘normal'. The Central Government's announcement of coveringmore crops under minimum support price ("MSP") regime and promise of cost linkedMSP should put more purchasing power in farmers' hands which in turn will improvechances of the farm sector recovery which has seen fluctuating growth in the recent past.

The Company expects to continue to perform well in export of branded products due tofavourable climatic conditions in its major export geographies. Performance in export oftechnical grade products will however depend upon the developments in the Chineseindustry. The Company expects to enter certain developed markets which can drive futuregrowth .

7. SAFETY HEALTH AND ENVIRONMENT

The Company continues to play the role of a responsible corporate citizen in thefulfilment of its aims of protecting and enriching the environment and human health andsafety. The Company continues to hold and maintain ISO-9000 ISO-14000 and ISO-18001certifications which offer benefits in terms of consistent product quality and healthyworking environment at manufacturing sites. The Company also continues to sustain its SA8000 – Certification for Social Accountability for all its sites. Safety audittraining programmes and other safety management processes and programmes are carriedout/conducted at regular intervals. All the manufacturing and warehousing sites of theCompany are covered by safety audit.

8. EDUCATION LEARNING AND HUMAN RESOURCES

Your Company continues to invest in the development and growth of the employees throughtraining and development programmes which help in growth of the organisation and alsoenhance job-satisfaction and employee morale. Your Company endeavours to ensure that ithas requisite competency to meet the new challenges in the changing business environment.This is done by focusing on capability skill and competence building and throughspecially devised developmental programmes to identify potential candidates and developthem for higher responsibilities.

The relations between the employees and the management continue to be cordial. YourDirectors wish to place on record their appreciation of the sincere and devoted efforts ofthe employees and the management staff at all levels.

Your Company continues to educate farmers on various aspects of farming includinglatest technology and new products.

9. INSURANCE

The Company continues to carry adequate insurance cover for all its assets againstforeseeable perils like fire flood earthquake etc. and continues to maintainConsequential Loss (Fire) Policy and the Liability Policy as per the provisions of thePublic Liability Insurance Act.

10. SUBSIDIARIES

Highlights of the financial performance of Excel Crop Care (Africa) Limited Tanzaniaand Excel Crop Care (Europe) NV Belgium subsidiary companies during FY 2017-18 are asfollows:

Excel Crop Care (Africa) Limited Tanzania

(Tanzania Schillings in millions)
2017-18 2016-17
Sales Turnover 5087 13865
Profit before Tax 385 108
Profit after Tax 269 76

Excel Crop Care (Europe) NV Belgium

(Euros in thousands)
2017-18 2016-17
Sales Turnover 2544 3031
Loss 41 33

During the year 2017-18 Excel Crop Care (Africa) Limited Tanzania changed itsbusiness model from ‘Trading' to ‘Commission Agency' business for somebusinesses. The reduced sales turnover reflects the change in the business model. Howeverits profits have increased as compared to the previous year.

During the year under review Excel Crop Care (Africa) Limited declared and paid adividend for FY 2016-17 at the rate of Tanzania Schillings 15000 per share i.e. 15%. TheCompany received Rs. 7.25 Lac by way of dividend from the subsidiary.

Excel Crop Care (Australia) Pty Limited Australia did not have commercial activitiesduring FY 2017-18 as in the past several years. The Board has decided to wind up ExcelCrop Care (Australia) Pty Limited and steps are being taken for the same.

Excel Brazil Agronegocious Ltda the Company's subsidiary in Brazil was incorporatedin 2011 but had no commercial operations. The subsidiary was also not funded for sharecapital. Excel Brazil Agronegocious Ltda has been wound up effective 31st March 2017.

The Financial Statements and the Reports of the Board of Directors and the Auditors ofthe Company's subsidiaries shall be made available to the Members on requisition. Theseare also available for inspection at the Registered Office and Corporate Office of theCompany and are also being posted on the Company's website: www.excelcropcare.com

11. DISCLOSURE UNDER THE COMPANIES ACT 2013

Information is given below pursuant to various disclosure requirements prescribed underthe Companies Act 2013 and rules thereunder to the extent applicable to the Company.Some of the disclosures have been included in appropriate places in the CorporateGovernance Report which is part of the Board's Report.

a) Energy Conservation Technology Absorption and Foreign Exchange earnings and outgo:

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is given in Annexure I.

b) Extract of Annual Return:

The details forming part of the extract of the annual return in form MGT-9 are given inAnnexure II.

c) Policy on Directors' appointment Remuneration Policy and information regardingremuneration:

Particulars of the Company's Policy on Directors' appointment Remuneration Policy andinformation pursuant to Rule 5(1) of the Companies (Appointment & Remuneration) Rules2014 are given in Annexure III.

d) Particulars of Loans Guarantees and Investments:

The details of Loans Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the FinancialStatements.

e) Related Party Transactions:

All contracts/arrangements/transactions entered by the Company during the financialyear with related parties were on an arm's length basis.

All related party transactions are placed before the Audit Committee for theirapproval. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are of a repetitive nature. The transactions entered into pursuant to the omnibusand specific approvals are reviewed periodically by the Audit Committee.

Sumitomo Chemical India Private Limited (SCIPL) is a subsidiary of Sumitomo ChemicalCompany Limited Japan (SCC) the Company's Holding Company and therefore SCIPL is theCompany's related party. Both the Company and SCIPL are engaged in agro-chemicalsbusiness. As a part of its regular business the Company has business transactions withSCIPL which comprise purchase sale and supply of goods (including raw materialsintermediates finished product capital goods and other items) providing and availingservices (including job work services) payment of dividend on shares and othertransactions in the ordinary course of business. All the transactions with SCIPL are atarm's length.

Pursuant to the provisions of Regulation 23 of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 ("the saidRegulations") all material related party transactions require approval of the membersthrough a resolution. The said Regulations define the term ‘material' to mean atransaction with a related party which individually or taken together with previoustransactions during a financial year exceeds ten percent of the annual consolidatedturnover of the Company as per the last audited financial statement of the Company.

During the year the Company entered into transactions with SCIPL which are considered‘material transactions' in terms of the said Regulations.

The Shareholders have given approval for the transactions of the Company with SCIPLduring the year by an Ordinary Resolution passed through Postal Ballot Process. By anotherOrdinary Resolution passed through Postal Ballot Process the Shareholders have accordedapproval for the transactions up to an amount not exceeding Rs. 200 crore to be enteredinto by the Company with SCIPL during F.Y. 2018-19 .

The Policy on related party transactions as approved by the Board may be accessed onthe Company's website www.excelcropcare.com

Particulars of contracts entered during the financial year 2017-18 as per Form AOC-2are given in Annexure-IV.

f) Business Risk Management:

Over the years the Company has evolved and implemented its Enterprise Risk ManagementPolicy.

As a part of its risk management process the Company has identified and compiled alist of risks which need to be addressed managed and mitigated. The mitigation measuresfor such risks are also identified and implemented. The major risk areas relate toforex fluctuation credit risks mainly relating to exports regulatory risks businesscompetition risks and insurance adequacy risks.

g) Evaluation of the performance of the Board Committees of Directors and IndividualDirectors:

The Board has adopted a formal mechanism for evaluating its performance as well as thatof its Committees and individual Directors including the Chairman of the Board. As a partof this mechanism a structured questionnaire which has been approved by the Company'sNomination and Remuneration Committee is used to carry out evaluation of performance ofthe Board Committees of Directors and individual Directors. The questionnairestake into consideration various criteria and factors.

h) Material orders passed by the regulatory authorities or courts/material changes orcommitments:

There are no material orders passed by the regulators/courts which can impact the goingconcern status of the Company and its future operations. There are no material changes orcommitments occurring after 31st March 2018 which may affect the financial position ofthe Company.

i) Internal Financial Controls and their adequacy:

The Company has adequate system of internal controls to safeguard and protect fromloss unauthorised use or disposition of its assets. All the transactions are properlyauthorised recorded and reported to the Management. The Company is following all theapplicable Accounting Standards for proper maintenance of books of accounts and forfinancial reporting.

j) Performance of Subsidiaries:

Details of performance and financial position of each of the Subsidiaries are given inForm AOC-1 in Annexure V. The Company has no associate company.

k) Corporate Social Responsibility (CSR) initiatives:

The Company has formulated its Corporate Social Responsibility Policy which has beenposted on its website www.excelcropcare.com

A brief outline of the Policy and the Annual Report on CSR Activities is given in AnnexureVI.

l) Particulars of Employees:

The information required under Section 197 of the Companies Act 2013 read with Rule5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is given in Annexure VII.

m) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rules madethereunder Mr. Prashant Diwan Practicing Company Secretary (FCS:1403; CP NO.1979)Mumbai was appointed Secretarial Auditor to conduct secretarial audit for the year ended31st March 2018. The Report of the Secretarial Auditor is attached as Annexure VIII.

n) Secretarial Standards:

The Company has complied with the applicable ‘Secretarial Standards on Meetings ofthe Board of Directors - SS 1' and ‘Secretarial Standards on General Meetings - SS2'.

12. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Seiji Ota Non-Executive Director resigned from the Board with effect from 8thAugust 2017 . The Board places on record its appreciation of Mr. Ota'scontribution to the Board and Committee deleberations .

Mr. Tadashi Katayama Non-Executive Director retires by rotation at the ensuing annualgeneral meeting of the Company and is eligible for re-appointment. The Board commends hisre-appointment.

The Board has appointed Mr. Kiyoshi Takayama as Executive Director for a period of 3years with effect from 1st April 2018 subject to the approval of the members of theCompany. A Special Resolution is included in the Notice convening the annual generalmeeting seeking approval of the members to the appointment of Mr. Kiyoshi Takayama asExecutive Director.The Board commends his appointment. Mr. Kiyoshi Takayama is a KeyManagerial Personnel under the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

13. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act 2013 the Directors confirm that:

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and that no material departures have been made from the same;

(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 the Company at the end of the financial year and of the profitof the Company for that period;

(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(d) they have prepared the annual accounts on a going concern basis;

(e) they have laid down internal financial controls to be followed by the 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 are adequate and are operating effectively.

14. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report prepared pursuant to Regulation 24 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 in relation to initiativestaken from environmental social and governance perspective in the prescribed form formspart of the Annual Report and is given in Annexure IX.

15. CORPORATE GOVERNANCE

Your Company is committed to the principles of good Corporate Governance and the Boardof Directors lays strong emphasis on transparency accountability and integrity. YourCompany has complied with all the requirements of the Code of Corporate Governancecontained in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 andpursuant thereto Management Discussion and Analysis Corporate Governance Report and theAuditors' Certificate regarding compliance of the same are annexed and form part of theAnnual Report.

16. AUDITORS

Statutory Auditors:

At the 53rd annual general meeting of the Company held on 24th July 2017 the membersof the Company had approved the appointment of Messrs BSR & Associates LLP CharteredAccountants Mumbai as the Auditors of the Company for a term from the conclusion of the53rd annual general meeting until the conclusion of the 58th annual general meetingsubject to ratification of such appointment by the members at every annual generalmeeting in pursuance of the provisions of Section 139 of the Companies Act 2013 and theCompanies (Audit and Auditors) Rules 2014.

However vide the Companies (Amendment) Act 2017 and the Companies (Audit andAuditors) Amendment Rules 2018 the requirement for ‘seeking ratification ofappointment of the auditors (appointed for five year term) at every annual generalmeeting' has been omitted. This amendment has come into effect on 7th May 2018. In viewof the aforesaid amendment the ratification of the appointment of the auditors will notbe necessary going forward. However in view of the resolution passed at the 53rd annualgeneral meeting it is proposed to ratify the appointment of the Auditors and confirm theirappointment upto the conclusion of the 58th annual general meeting of the Company withoutthe requirement of any further ratifications by the members.

Cost Auditor:

The Board of Directors has re-appointed Mr. Kishore Ajitshi Bhatia as the Cost Auditorfor the financial year 2018-19 to carry out audit of the Company's cost records asprescribed under Section 148 of the Companies Act 2013. The Cost Audit Report for thefinancial year 2016-17 which was required to be filed with the Ministry of CorporateAffairs on or before 27th August 2017 was filed on 21st August 2017 vide SRN:G50918572.

17. ACKNOWLEDGEMENTS

Your Directors wish to place on record their sincere appreciation of the wholeheartedco-operation received from the Company's Shareholders Bankers various authorities of theGovernments and business associates.

For and on behalf of the Board of Directors
DR. MUKUL G. ASHER
Chairman
DIN: 00047673
Mumbai 25th May 2018.