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Fairchem Organics Ltd.

BSE: 543252 Sector: Industrials
NSE: FAIRCHEMOR ISIN Code: INE0DNW01011
BSE 00:00 | 21 Jan 2080.30 -3.55
(-0.17%)
OPEN

2068.35

HIGH

2139.15

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2063.90

NSE 00:00 | 21 Jan 2081.50 -1.10
(-0.05%)
OPEN

2052.00

HIGH

2139.00

LOW

2052.00

OPEN 2068.35
PREVIOUS CLOSE 2083.85
VOLUME 4033
52-Week high 2290.00
52-Week low 511.00
P/E 35.90
Mkt Cap.(Rs cr) 2,709
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2068.35
CLOSE 2083.85
VOLUME 4033
52-Week high 2290.00
52-Week low 511.00
P/E 35.90
Mkt Cap.(Rs cr) 2,709
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Fairchem Organics Ltd. (FAIRCHEMOR) - Director Report

Company director report

To

The Members

Your Directors are indeed pleased to present the Second Annual Report along withAudited financial statements of the Company for the financial year ended March 31 2021.These financial statements have been prepared in accordance with Indian AccountingStandards (Ind-AS) as required under the Companies Act 2013.

FINANCIAL RESULTS:

(Rupees in Lakhs unless otherwise stated)

For the year ended on 31-03-2021 For the Period March 27 2019 to March 31 2020
(Restated)
(1) Total Income 39685.16 31308.12
(2) Profit before Interest Depreciation and Tax 6895.44 5495.62
(3) Less : Interest 682.03 657.90
(4) Profit before Depreciation and Tax 6213.41 4837.72
(5) Less : Depreciation 657.33 595.95
(6) Profit before Tax for the year 5556.08 4241.77
(7) Less : Provision for Taxation
(a) Current Tax 1437.73 816.85
(b) (Excess) / Short Provision for tax of earlier year(s) (Net) (118.15) 4.11
(c) Deferred tax (11.97) (49.59)
Sub-total 1307.61 771.37
(8) Profit after Tax for the year 4248.47 3470.40
(9) Add : Other comprehensive income for the year / period net of tax (47.09) (9.65)
(10) Total Comprehensive Income for the year / period 4201.38 3460.75
(11) Earnings per share (EPS) of Rs. 10/- each Rs. 32.63 Rs. 26.65

OPERATIONS AND THE STATE OF COMPANY’S AFFAIRS :

During the year under review the revenue from operations were Rs 39657 lakhs showinga rise of more than 29%. The Profit before tax stood at Rs. 5556.08 lakhs. Thisperformance needs to be evaluated considering the fact that during the first 50 days ofthe financial year (April 1 2020 to May 20 2020) the manufacturing operations remainedsuspended due to national lockdown resultant lack of demand and further fueled bynon-availability of certain category of manpower. The operations re-started from May 212020 and since then the Company has not looked back during the remainder period of theyear.

There is no change in the nature of business of the Company.

DIVIDEND:

Your Directors are pleased to recommend a dividend of Rs. 3.50 (i.e. 35%) per equityshare for the financial year ended March 31 2021 subject to the approval of theshareholders at the ensuing Annual General Meeting of the Company.

TRANSFER TO RESERVE:

Your Directors have decided not to transfer any amount to the Reserve for the yearunder review.

MATERIAL CHANGES AND COMMITMENTS:

There have been no material changes and commitments which have occurred between the endof the financial year to which the financial statements relate and the date of thisReport affecting the financial position of the company.

CAPITAL STRUCTURE:

During the year the Company issued 13020902 Equity Shares of Rs. 10/- each fullypaid up to those shareholders of Fairchem Speciality Limited (now known as PriviSpeciality Chemicals Limited) (FSL) whose names appeared on the Register of Members of FSLon August 24 2020 the record date. These equity shares were issued pursuant to the orderdated June 30 2020 of Hon’ble N.C.L.T. Mumbai Bench inter alia sanctioning theComposite Scheme of Arrangement and Amalgamation between our Company FSL and PriviOrganics India Limited. Further pursuant to the said scheme the then existing paid upequity share capital of Rs. 100000/- held entirely by FSL and its nominees wascancelled. The Company is having only one class of shares.

DIVESTMENT OF SHAREHOLDING BY PRIVI PROMOTERS:

Subsequent to the year end and as per agreements entered in to at the time of approvalof the Composite Scheme of Arrangement and Amalgamation Privi promoters have divestedtheir entire shareholding representing 22.67 % in favour of Fairfax group Foreign Promoterand Adi group Indian Promoters. Resultantly the shareholding pattern of promoters groupas per latest BENPOS of June 4 2021 is as under:

Name of Promoter Shareholder No. of Equity Shares of Rs. 10/- each held Per cent to total capital
1 FIH Mauritius Investments Limited 8678656 66.65 %
2 FIH Private Investments Limited 1083 0.01 %
3 Nahoosh Tradelink LLP 633293 4.86 %
4 Jariwala Tradelink LLP 321874 2.47 %
5 Shri Utkarsh Shah 8333 0.06 %
Total 9643239 74.05 %

Impact of COVID-19 Pandemic

COVID-19 Pandemic has created health scare and resulted in economic disruption inIndia. The manufacturing operations at the Oleo Chemicals plant of the Company at Chekhalawere stopped to comply with the directions of Central Govt. vide notification dated March24 2020. The Company continued to monitor the business situation and decided to deferrestarting of the said plant till May 21 2020. Since the beginning of June 2020 thebusiness visibility has improved. The Company however remains cautious considering thefact that covid-19 cases continued to rise and partial lockdown is continuing inMaharashtra State which is commercially quite important. To ensure adequate liquidity andtimely availability of funds the Company has already availed the benefit of moratorium of3 EMIs on term loans and has applied for availment of further 3 EMIs announced by RBIsubsequently.

MEETINGS OF THE BOARD:

During the Financial Year 2020-21 10 (Ten) meetings of the Board of Directors tookplace. In respect of these meetings proper notices were given and the proceedings wereproperly recorded and signed in the Minutes Book maintained for the purpose. For furtherdetails please refer Report on Corporate Governance.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS:

The Company has not given any loan made investment given any guarantee or providedany security covered u/s. 186 of the Companies Act 2013.

CORPORATE GOVERNANCE/MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A Report on the Corporate Governance Code along with a certificate from a practicingCompany Secretary regarding the compliance of conditions of Corporate Governance asstipulated in Regulation 34 of SEBI (LODR) Regulations 2015 and the Management Discussionand Analysis Report are annexed to this Report.

Pursuant to Regulation 34(2)(f) of the Listing Regulations the Business ResponsibilityReport initiatives taken from an environmental social and governance perspective in theprescribed format is attached as a separate section of this Annual Report.

AUDIT COMMITTEE:

During the year the Board of Directors re-constituted the Audit Committee to complywith the requirements of Regulation 18 of SEBI (LODR) Regulations. Details regarding thesame are given in the Corporate Governance Report forming part of this report

DEPOSITS:

The Company has not accepted nor renewed any deposits falling within the ambit ofSection 73 of the Companies Act 2013 and The Companies (Acceptance of Deposits) Rules2014.

CREDIT RATING:

CARE Ratings Limited carried out annual review of credit facilities of HDFC Bank andvide its letter dated September 15 2020 has assigned its rating as under: 1. ForLong-term Bank facilities: CARE A; (Single A; Outlook: Stable) 2. For Long-term / Shortterm Bank facilities: CARE A; Stable / CARE A1 (Single A; Outlook : stable / A one)

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In accordance with the applicable provisions of Companies Act 2013 read with InvestorEducation and Protection Fund (Accounting Audit Transfer and Refund) Rules 2016(“IEPF Rules”) all unclaimed dividends are required to be transferred by theCompany to the IEPF after completion of seven (7) years. Further according to IEPFRules the shares on which dividend has not been claimed by the shareholders for seven (7)consecutive years or more shall be transferred to the demat account of the IEPF Authority.This is only the second financial year of the Company. So these provisions are notapplicable to the Company.

TECHNICAL ACHIEVEMENT:

The Company keeps on exploring the possibility of technical improvement and processoptimization for better yields / product mix / energy efficiency.

DIRECTORS:

In accordance with the provisions of Section 152 of the Act and the Articles ofAssociation of the Company Shri Utkarsh Shah (DIN 00101663) shall retire at theforthcoming Annual General Meeting of the Company and being eligible offers himself forre-appointment.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS:

In terms of Section 149 of the Act and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 (Listing Regulations) the Shareholders of the Companyappointed Mr. Venkatraman Srinivasan Mr. Darius Pandole and Ms. Sonal Ambani asIndependent Director for a period of 5 years. The Company has received declarations fromall the 3 Independent Directors of the Company inter alia confirming that they meet thecriteria of Independence as prescribed under Section 149(6) of the Companies Act 2013 andRegulation 16(1)(b) of SEBI (LODR) Regulations 2015 as amended from Independent Directorconfirming that they are not disqualified for continuing as an Independent Director.

COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION INCLUDINGCRITERIA FOR DETERMINING QUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF A DIRECTORETC.:

Pursuant to the provisions of Section 178 and other applicable provisions if any ofthe Companies Act 2013 read with the Rules made thereunder and Clause 49 of the ListingAgreement now regulation 19 of SEBI (LODR) Regulation 2015 the Board of Directors attheir Meeting held on 12.08.2020 approved the Remuneration and Nomination Policy asrecommended by the Nomination and Remuneration Committee. The salient features of the saidpolicy covering the policy on appointment and remuneration and other matters have beenexplained in the Corporate Governance Report.

BOARD EVALUATION:

Based on the criteria for evaluation of Independent Directors and the Board asrecommended by the Nomination and Remuneration Committee and as adopted by the BoardBoard carried out evaluation of its own performance the individual Directors and theCommittees. The Independent Direcotrs also carried out evaluation of Chairman andnon-Independent Directors in the separate meeting. It was derived that overall the Boardwas functioning very well in a cohesive and interactive manner.

DIRECTORS’ RESPONSIBILITY STATEMENT:

Pursuant to the requirement of Section 134(3)(c) of the Companies Act 2013 and to thebest of their knowledge and belief and according to the information and explanationsprovided to them your Directors hereby make the following statements:

(i) that in the preparation of the financial statements for the year ended March 312021 the applicable accounting standards read with requirements set out under ScheduleIII of the Companies Act have been followed and there are no material departures from thesame;

(ii) that the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year viz. March 31 2021 and of the profit of the Company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a ‘GoingConcern’ basis;

(v) that 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) that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

PARTICULARS OF EMPLOYEES:

Details pertaining to remuneration as required under section 197[12] of the CompaniesAct 2013 read with Rule 5[1] of the Companies [Appointment and Remuneration of ManagerialPersonnel] Rules 2014 are annexed to this report.

LISTING:

The Company’s securities were listed with BSE Limited and National Stock Exchangesof India Limited with effect from December 24 2020. SEBI (LODR) Regulations 2015 becameapplicable to the company from the said date. The Company has paid the listing fees forF.Y. 2021-22 on the paid up equity share capital.

BUSINESS RESPONSIBILITY REPORT:

The Business Responsibility Reporting as prescribed under Regulation 34 of SEBI (LODR)Regulations 2015 is annexed to this Report as separate Annexure - I.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:

All contracts / arrangements / transactions with related parties entered into by theCompany during the financial year with related parties were in the ordinary course ofbusiness and on an arm’s length basis. During the year the Company had not enteredinto any contract / arrangement / transaction with related parties which could beconsidered material in accordance with related party transactions.

The policy on Related Party Transactions as approved by the Board is uploaded on theCompany’s website.

INTERNAL CONTROL AND ITS ADEQUACY :

The Company has commensurate with its size single operational location and resultantrequirement Internal Control system. A well-known firm of Chartered Accountants carriedout internal audit of the said system. Based on the recommendation / report of the saidInternal Auditors which are presented to the Audit Committee required corrective actionswere initiated / taken by the Company.

INTERNAL FINANCIAL CONTROLS :

The Directors have laid down policies and procedures which are adopted by the companyfor ensuring the orderly and efficient conduct of its business including adherence tocompany‘s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information;

FRAUD :

During the year no fraud was reported by the statutory auditors under section 143(12)of the Act.

CORPORATE SOCIAL RESPONSIBILITY:

The Corporate Social Responsibility Committee had formulated and recommended to theBoard a Corporate Social Responsibility Policy which has been approved by the Boardcomprising of the following Directors:

1. Shri Nahoosh Jariwala

2. Shri Sumit Maheshwari

3. Ms. Sonal Ambani

The other details of the CSR activities as required U/s. 135 of The Companies Act 2013are given in the CSR Report as Annexure to Directors’ Report.

RISK MANAGEMENT POLICY:

The Company has put in place Risk Management Plan. The Company has identified followingelements of risk which in the opinion of the Board may threaten the existence of theCompany:

(1) Severe simultaneous drought in those Soya producing countries of the world on whichIndian Crude Soya Oil refining is partly dependent.

(2) Development of new and substantially cheaper manufacturing technologies usingaltogether new inputs for making various kinds of resins which are required for makingpaints printing ink hardeners.

The Company has identified other hard vegetable oils such as Palm to which it canswitch over to in the extreme event of non-availability of soya based raw materialsthroughout or major part of the year.

AUDITORS:

The auditors M/s. B S R & Co. LLP Chartered Accountants LLP were appointed at the1st Annual General Meeting held on December 31 2020 for a term of five years from theconclusion of first AGM till the conclusion of sixth AGM to be held in the year 2025. TheAuditors’ report during the year under review does not contain any qualification/remarks nor any instance of fraud committed against the Company by its officers oremployees the details of which would need to be mentioned in the Board’s report.

SECRETARIAL AUDIT REPORT:

As required by Section 204 of the Companies Act 2013 read with The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hasappointed M/s. Parikh Dave & Associates Company Secretaries Ahmedabad a firm ofCompany Secretaries in Practice to conduct Secretarial Audit for the Financial Year2020-21. The Report of the Secretarial Audit for the financial year ended on March 312021 is enclosed as Annexure to this Report. Their report not contain any qualification/remarks.

CONFIRMATION OF COMPLIANCE OF SECRETARIAL STANDARDS:

During the year under review the Company has complied with the applicable SecretarialStandards i.e. SS-1 and SS-2 relating to “Meetings of the Board of Directors”and “General Meetings” respectively issued by The Institute of CompanySecretaries of India (ICSI) the company confirms compliances of applicable secretarialstandards.

MAINTENANCE OF COST RECORDS:

As per the Companies (Cost Records and Audit) Rules 2014 as amended by Companies (CostRecords and Audit) Amendment Rules 2014 issued by the Central Government the Company isrequired to get its cost records maintained by it for the products covered under Chapters2917 and 3823 of Sr. No. 18 of table mentioned under Rule 3 (B) Non-regulated Sectorsaudited by a Cost Auditor.

As specified by the Central Government under sub-section (1) of section 148 of theCompanies Act 2013 the Company has maintained cost accounts and records.

COST AUDITOR:

The Company has appointed M/s. Rajendra Patel and Associates as Cost Auditors forfinancial year 2021-22. The necessary resolution for ratification of their remuneration bymembers has been put in the notice of the ensuing Annual General Meeting. Board recommendspassing the resolution.

VIGIL MECHANISM :

As required under Companies Act and SEBI (LODR) Regulations the Company has put inplace Vigil Mechanism / Whistle Blower Policy for Directors and Employees so that theemployees/Directors can report concerns about unethical behaviour actual or suspectedfraud or violation of the Company’s Code of Conduct Policy and SEBI Insider TradingRegulations. Whistle Blower Policy is disclosed on the website:http://fairchem.in/investor-relations/Policies/Whistle-Blower-Policy.pdf

Disclosure as per the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013:

The Company has adopted a policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules made thereunderand has complied with the provision relating to the constitution of Internal ComplaintsCommittee. During the year no complaint of sexual harassment was received by the Company.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: A. Conservation of Energy

(a) Steps taken or impact on conservation of energy :

The Company has decide3d to purchase on trail basis 'Dry Vacuum System' from EdwardsU.K. which will be used in place of steam ejector based vacuum system. This will result inreduction of steam and water consumption and solid fuel i.e. coal.

If the trials are successful on different equipment’s the Company will be able tochange all vacuum systems which will be having a huge impact in water steam and fuelconsumption.

(b) Steps taken by the Company for utilizing alternate source of energy : None.

(c) Capital Investment on energy conservation equipments : NIL

B. Technology Absorption

(i) the efforts made towards technology absorption; None

(ii) the benefits derived like product improvement cost reduction product developmentor import substitution;

(iii) in case of imported technology (imported during the last three years reckonedfrom the beginning of the year under reference)

a) details of the technology imported; NIL

b) the year of import; Not Applicable

c) whether the technology has been fully absorbed Not Applicable and if not areaswhere absorption has not taken place and the reasons thereof; Not Applicable

(iv) the expenditure incurred on Research and Development. Rs. 15.39 Lakhs

C. Foreign exchange earnings and Outgo

Foreign Exchange Earnings : Rs. 1399.51 Lakhs
Foreign Exchange Outgo : Rs. 1079.41 Lakhs

Annual Return:

As per the provisions of section 92[3] read with section 134(3)(a) of the Act theAnnual Return as on March 31 2021 in the prescribed form no. MGT-7 is available on thewebsite of the Company and weblink of the same is https://www.fairchem.in/investor-relations/Annual-Reports/Annual-Return-MGT-7.pdf

ACKNOWLEDGMENTS:

Your Board of Directors wishes to place on record its appreciation to the contributionmade by the employees of the company. The company has achieved impressive growth throughthe competence hard work solidarity cooperation and support of employees at all levels.The Directors also wish to thank the Company’s vendors vendors Stock ExchangesGovernment authorities bank and shareholders for their cooperation and assistanceextended to the company.

For and on behalf of the Board of Directors
Place : Village Chekhala Sanand-Kadi Highway Utkarsh Shah
Taluka Sanand District Ahmedabad - 382115 Chairman
CIN: U24200MH2019PLC323176 DIN 00101663
Date : June 07 2021

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