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Omkar Speciality Chemicals Ltd.

BSE: 533317 Sector: Industrials
NSE: OMKARCHEM ISIN Code: INE474L01016
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VOLUME 4507
52-Week high 29.90
52-Week low 5.13
P/E
Mkt Cap.(Rs cr) 11
Buy Price 5.13
Buy Qty 7.00
Sell Price 5.13
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OPEN 5.14
CLOSE 5.40
VOLUME 4507
52-Week high 29.90
52-Week low 5.13
P/E
Mkt Cap.(Rs cr) 11
Buy Price 5.13
Buy Qty 7.00
Sell Price 5.13
Sell Qty 63.00

Omkar Speciality Chemicals Ltd. (OMKARCHEM) - Director Report

Company director report

TO THE MEMBERS OF OMKAR SPECIALITY CHEMICALS LIMITED

Your Directors are pleased to present their Thirteenth AnnualReport on business and operations of your Company together with Audited FinancialStatements for the Financial Year ended on March 31 2018.

• FINANCIAL HIGHLIGHTS:

(Rs. in Lakhs)

Particulars 2017-18 2016-17
Total Revenue 20132.43 34726.48
Total Expenditure 27528.71 32043.09
Profit Before Tax & Exceptional Items (7396.28) 2683.39
Profit Before Tax (12654.82) (13678.81)
Tax Expenses (2258.02) (2742.93)
Profit After Tax (10396.80) (10935.88)
Balance in Profit & Loss Account brought forward from Previous Year - -
Appropriations: - -
a) Proposed Dividend - -
b) Tax on Dividend - -
Transfer to General Reserve - -
Surplus carried to the next year's account - -

• PERFORMANCE REVIEW:

o Income

Your Company's performance in the current Financial Year interms of Total Income stood at Rs. 20132.43 Lakhs as compared to Rs. 34726.48 Lakhs inthe previous year.

o Profit / Loss Before Tax

Your Company's Profit before Tax for the current year was Rs.(12654.82) Lakhs as against Rs. (13678.81) Lakhs in the previous year.

o Profit / Loss After Tax

o Your Company's Profit after Tax for the current year was Rs.(10396.80) Lakhs as against Rs. (10935.88) Lakhs in the previous year.

A detailed discussion of operations for the year ended March 312018 is provided in the Management Discussion and Analysis Report which is presented in aseparate section forming part of this Annual Report.

> RIGHT ISSUE:

The Board of Directors of the company in the meeting held on June16 2017 has proposed to raise up to Rs. 135 Crores by way of offer and issue of equityshares to the existing shareholders of the company on Right basis.

The company has filed Draft Letter of Offer at the office ofSEBI Mumbai on dated May 28 2018 for their consent on the same. The company has alsofield application for proposed Right issue to the Exchange(s) for their in principalapproval.

• SHARE CAPITAL:

The movement of Equity Capital is as under:

Particulars No. of Equity Shares
Equity Capital as on April 1 2017 20578004
Increase/ Decrease during the year NIL
Equity Capital as on March 31 2018 20578004

Your Company has only one class of Equity Shares and it hasneither issued shares with differential rights as to dividend voting or otherwise norissued shares (including sweat equity shares) to the employees or Directors of theCompany under any Scheme.

Ordinary Resolution passed by the Voting through Postal BallotProcess conducted by the Company passed on July 02 2018 to increase the Authorized ShareCapital to facilitate issuance of Rights Shares and for future requirements if any.Hence the Authorized Share Capital increased to Rs. 650000000 (Rupees Sixty FiveCrore) divided into 65000000 (Six Crore Fifty Lakhs) Equity Shares of Rs. 10/- each bycreation of additional 20300000 (Two Crore Three Lakhs) Equity Shares of Rs. 10/- eachranking pari passu in all respect with the existing Equity Shares of the Company.

No disclosure is required under Section 67(3) (c) of theCompanies Act 2013 ("Act") in respect of voting rights not exercised directlyby the employees or Key Managerial Personnel of the Company as the provisions of theSection are not applicable.

• DIVIDEND:

In view of losses incurred by your Company no dividend has beenproposed to be declared in the Financial Year 2017-18.

• FINANCIAL LIQUIDITY:

As at March 31 2018 your Company had liquid assets of Rs. 145.79Lakhs as against Rs. 1057.74 Lakhs at the previous year end on consolidated basis. Yourcompany maintains sufficient cash reserves to meet its operations and strategic objectives

• DEPOSITS:

Your Company has not accepted any deposits from public within thepurview of Section 73 & 74 of the Act read with Companies (Acceptance of Deposits)Rules 2014 during this Financial Year and as such no amount of principal or interestwas outstanding as of the Balance Sheet date. The Company has no deposit which is not incompliance with the provisions of Chapter V of the Act and as the Companies (Acceptance ofDeposit) Rules 2014.

• PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS U/S 186:

Details of Loans Guarantees and Investments covered under theprovisions of Section 186 of the Act and Schedule V of the SEBI (Listing Obligation andDisclosure Requirements) Regulations 2015 (hereinafter referred to as "SEBI ListingRegulations 2015") are given in the notes to the Financial Statements.

• RATING:

The rating of long term and short term credit facilities of ourCompany have been downgraded to CRISIL D on March 14 2018

• MATERIAL CHANGES AND COMMITMENT:

Except as disclosed elsewhere in the Report there have been nomaterial changes in commitment between the end of Financial Year to which this financialstatements relates on the date of this Report.

• SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORSOR COURTS OR TRIBUNALS:

There have been no material changes and commitments affecting thefinancial position of the Company between the end of the financial year and date of thisreport. There has been no change in the nature of business of the Company.

An application under Rule 6 of the Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules 2016 has been filed by Ela Enterprises asan Operational Creditor through Rohini Hemant Paraskar Proprietor against the Company(Corporate Debtor) before National Company Law Tribunal Mumbai Bench at Mumbai. As persaid application the Company as on November 11 2017 owes Ela Enterprises a sum of Rs.107.63 Lakhs on account for payment of wages to contractors workers as supplied by thePetitioner. As per the application filed by the Petitioner there is no security created infavour of the Operational Creditor on account of amount owed by the Company. The matter iscurrently pending before the Tribunal for disposal.

> INTERNAL FINANCIAL CONTROLS:

The details in respect of internal financial controls and theiradequacy are included in the Management Discussion & Analysis which forms part ofthis Report.

> SUBSIDIARY COMPANIES:

The Company does not have any Subsidiary Company. There are noassociate companies or joint venture companies within the meaning of Section 2(6) of theAct.

> CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO:

The particulars as prescribed under Section 134(3)(m) of the Actread with Rule 8(3) of the Companies (Accounts) Rules 2014 relating to Conservation ofEnergy Technology absorption Foreign Exchange earnings and outgo is provided in AnnexureA which forms part of this Report.

> EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return inForm MGT-9 as required under Sub-section (3) of Section 92 of the Act read with Sub-rule(1) of Rule 12 of the Companies (Management and Administration) Rules 2014 is includedin this report as Annexure B and forms an integral part of the Directors' Report.

> DIRECTORS AND KEY MANAGERIAL PERSONNEL:

As on March 31 2018 the Board comprised of 8 (Eight) Directorsout of which 5 (Five) were Non-Executive Directors of which 4 (Four) Directors wereIndependent Directors.

o Re-appointments

In accordance with the provisions of Section 152 of the Act andthe Articles of Association of the Company CA Laxmikant R. Kabra (DIN: 00061346) and Mr.Rishikesh P. Herlekar (DIN: 05240009) are liable to retire by rotation at the ensuingAnnual General Meeting and being eligible have offered themselves for re-appointment. Mr.Rishikesh P Herlekar and Mr. Prakash H. Rao have confirmed their respective eligibilityand willingness to accept the office of the Directors of your Company if confirmed by themembers at the ensuing Annual General Meeting. Items seeking your approval on the abovere-appointments are included in the Notice convening Annual General Meeting.

In the opinion of your Directors CA Laxmikant R. Kabra and Mr.Rishikesh P Herlekar have requisite qualifications and experience and therefore yourDirectors recommend that the proposed resolutions relating to their re-appointment bepassed.

> DECLARATION BY INDEPENDENT DIRECTORS:

All Independent Directors of the Company have given declarationsthat they meet the criteria of Independence as laid down under Section 149(6) of the Actand Regulation 16(1)(b) of the SEBI Listing Regulations 2015. In the opinion of theBoard they fulfill the conditions of independence as specified in the Act and the Rulesmade there under and are independent of the management.

> ANNUAL EVALUATION:

The Act states that formal annual evaluation needs to be carriedout by the Board of its own performance and that of its committees and individualdirectors. Schedule IV (Code for Independent Directors) of the Act states that theperformance evaluation of Independent Directors shall be done by the entire Board ofDirectors excluding the Director being evaluated.

Your Company had carried out an annual evaluation of performanceof its Board and its Committees and individual Directors. The evaluation process has beenexplained in detail in the Corporate Governance Report which forms a part of this Report.

> BOARD MEETINGS HELD DURING THE YEAR:

During the year under review 8 (Eight) meetings of the Board ofDirectors were held as required under the Act and SEBI Listing Regulations 2015. Thedetails pertaining to the composition terms of reference etc. of the Board of Directorsof your Company and the meetings thereof held during the Financial Year are given in theReport on Corporate Governance section forming part of this Annual Report.

> DIRECTORS' RESPONSIBILITY STATEMENT:

In terms of provisions of Section 134(3)(c) and Section 134(5) ofthe Act the Board of Directors of Omkar Speciality

Chemicals Limited to the best of their knowledge and ability inrespect of the financial year ended March 31 2018 confirm

that:

1. In the preparation of the annual accounts the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures;

2. They had 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 and of the Loss of the Company for that period;

3. They had taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

4. They had prepared the annual accounts on a going concernbasis;

5. They had laid-down internal financial controls to be followedby the Company and that such internal financial controls are adequate and were operatingeffectively; and

6. They had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

> BOARD COMMITTEES:

The Board of Directors has the following Committees:

1. Audit Committee

2. Stakeholders' Relationship Committee

3. Nomination and Remuneration Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

The details of the Committees along with their compositionnumber of meetings and attendance at the meetings are provided in the Corporate GovernanceReport.

> POLICIES OF THE COMPANY:

Your Company has posted the following documents on its website www.omkarchemicals.com :

1. Nomination & Remuneration Policy 8. Anti-Sexual Harassment Policy
2. Corporate Social Responsibility Policy 9. Board Diversity Policy
3. Environment Health & Safety Policy 10. Policy on Materiality
4. Risk Management Policy 11. Preservation of Documents Policy
5. Whistle Blower Policy 12. Records & Archives Management Policy
6. Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information 13. Code of Internal Procedures And Conduct For Regulating Monitoring And Reporting Of Trading By Insiders
7. Policy governing transactions with Related Parties & Material Non-listed Subsidiaries 14. Materiality Policy pursuant to the SEBI ICDR Regulations

> NOMINATION & REMUNERATION POLICY OF THE COMPANY:

The Board of Directors has framed a policy which lays down aframework in relation to remuneration of Directors Key Managerial Personnel and SeniorManagement of the Company. This policy also lays down criteria for selection andappointment of Board Members. The details of this policy are explained in the CorporateGovernance Report.

> RISK MANAGEMENT POLICY:

The Company has laid down procedures to inform the members of theBoard about the risk assessment and minimization procedures. These procedures have beenperiodically reviewed to ensure that the executive management controls the risk throughproperly defined framework.

> WHISTLE BLOWER POLICY:

The Company has devised an effective Vigil Mechanism forstakeholders including Directors shareholders employees to report concerns aboutunethical behavior actual or suspected fraud or violation of the company's code ofconduct or ethics policy to freely communicate their concerns about illegal or unethicalpractices. The policy has been explained in detail in the Corporate Governance Reportwhich forms a part of this Report.

> FAMILIARISATION PROGRAMMES FOR BOARD MEMBERS:

The details in respect of familiarization programmes for Boardmembers are included in the Corporate Governance which forms part of this Report.

> CORPORATE SOCIAL RESPONSIBILITY(CSR):

In terms of Section 135 of the Act every company having NetWorth of Rupees Five Hundred Crore or more or Turnover of Rupees One Thousand Crore ormore or a Net Profit of Rupees Five Crore or more during any Financial Year shallconstitute a Corporate Social Responsibility Committee of the Board consisting of three(3) or more Directors out of which at least one Director shall be an IndependentDirector. All such companies are required to spend at least 2% of the average Net Profitsof their three (3) immediately preceding Financial Years on CSR related activities.Accordingly your Company was required to spend Rs. 16.07 Lakhs toward CSR activities. TheBoard of Directors of the Company has constituted a Corporate Social Responsibility("CSR") Committee. The Company also has in place a CSR policy and the same isavailable on the website of the Company and can be accessed through we blink: http://wwwomkarchemicals.com/Policies/CSR-Policy_OSCL.pdf . The details on CSR have been briefly discussed in Annexure C formingpart of the Directors' Report.

> TRANSACTIONS WITH RELATED PARTIES:

Related Party Transactions that were entered into during theFinancial Year were on an arm's length basis in the ordinary course of business and werein compliance with the applicable provisions of the Act and the SEBI Listing Regulations2015. There were no materially significant Related Party Transactions made by the Companyduring the year. The details of transactions with related parties are given forinformation under notes to the accounts of the Balance Sheet as at March 31 2018.

The Company has adopted a Related Party Transactions Policy. ThePolicy as approved by the Board is uploaded on the Company's website and can be accessedthrough web link: http://www.omkarchemicals.com/Policies/RPT%20%20&%20Material%20Non-listed%20Subsidiaries.pdf. Details of the transactions with Related Partiesare provided in the accompanying financial statements. There were no transactions duringthe year which would require to be reported in Form AOC-2.

> POLICY ON SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

The Company has zero tolerance towards sexual harassment at theworkplace and towards this end has adopted Anti Sexual Harassment Policy in line withthe provisions of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and the Rules thereunder. The Policy aims to provide protection toemployees at the workplace and prevent and redress complaints of sexual harassment and formatters connected or incidental thereto. All employees (permanent contractual temporarytrainees) are covered under the said policy. An Internal Complaints Committee has alsobeen set up to redress complaints received on sexual harassment.

The Company has not received any complaint of sexual harassmentduring the Financial Year 2017-18.

> GRANT OF PATENT:

The Company's claim for process patent namely "PROCESS FORPREPARATION OF ALKALI METAL IODIDE" having special applications in pharmaceuticalindustry has been accepted by the Patents Office Govt of India vide Patent RegistrationNo. 292064 dated January 24 2018.

Further The Company's claim for process patent namely"PROCESS FOR TERMINAL DIHALOALKANE" having special

applications in pharmaceutical industry has been accepted by thePatents Office Govt of India vide Patent Registration No. 287455 dated September 182017.

At present we have registered six patents for our products andhave made an application towards the registration of seven of our patents namely formanufacture of various processes of our intermediate products which is currently pending.

> HUMAN RESOURCE MANAGEMENT AND INDUSTRIAL RELATIONS:

Your Company recognizes its human resources as one of its prime& critical resources. The relations between the Management and the Staff Membersremained very cordial throughout the year under review. As on March 31 2018 the Companyhad 98 permanent employees at its manufacturing plants and administrative office. Therewas no employee who was in receipt of remuneration in the year which was in excess of theremuneration of the Managing Director or Whole Time Director. Disclosure pertaining to theremuneration and other details as required under Section 197(12) of the Act and the Rulesframed thereunder is enclosed as Annexure D to the Board's Report.

> MANAGEMENT DISCUSSION AND ANALYSIS:

Pursuant to Regulation 34 read with Schedule V of the SEBIListing Regulations 2015 detailed review of operations performance and future outlookof the Company is covered under a separate Annexure to this report as Management'sDiscussion & Analysis.

> REPORT ON CORPORATE GOVERNANCE:

A detailed Report on Corporate Governance pursuant to therequirements of SEBI Listing Regulations forms part of the Annual Report. A Certificatefrom the Auditors of the Company M/s Nilesh A. Pradhan & Co. Practising CompanySecretaries confirming compliance with the conditions of Corporate Governance asstipulated under the aforesaid Schedule V (E) of SEBI Listing Regulations also forms partof the Annual Report.

The Business Responsibility Reporting as required by Regulation34(2) of the SEBI Listing Regulations 2015 is not applicable to your Company for theFinancial Year ending March 31 2018.

> REGULATORY APPROVALS:

The relevant regulations and policies as prescribed by theGovernment of India and other regulatory bodies have been duly complied with by yourCompany.

Our manufacturing facilities are monitored and approved byvarious regulatory authorities. Periodically the FDA MPCB Department of Explosives etc.conducts routine audits of all approved facilities.

> AUDITORS AND AUDITOR'S REPORT:

1. Statutory Auditors:

At the Annual General Meeting held on September 27 2017 M/sDesai Saksena & Associates Chartered Accountants Mumbai (Firm Regn. No.: 102358W)were appointed as Statutory Auditors of the Company to hold office till the conclusion ofthe 17th Annual General Meeting to be held in the calendar year 2022. They have confirmedthat they are not disqualified from continuing as Auditors of the Company.

Further in terms of the Regulation 33(1)(d) of the SEBI ListingRegulations 2015 the Statutory Auditors of your Company are subjected to the Peer ReviewProcess of the Institute of Chartered Accountants of India (ICAI). M/s Desai Saksena &Associates have confirmed that they hold a valid certificate issued by ‘Peer ReviewBoard' of ICAI.

Management's Response to the Auditor's Qualified Opinion:

(i) The Company is a going concern. The company also hassufficient orders on hand on regular basis. Moreover the company is in the process ofraising additional finance through equity and discussions are on with the Banks forre-structuring of the existing debt.

(ii) The inventory records are maintained in Udyog softwarewhile the accounting records are being maintained in Tally package. The financial figuresfrom these two softwares are identical and similar. However to maintain both accountingrecords as well as inventory records on the same platform the company has initiated stepsto bring all the records on tally package. Hence the discrepancies if any in thisregard will be addressed in near future.

(iii) The company had sent out requests for confirmations to allthe parties for trade payable and trade receivables. The necessary documentary evidencesare available with the company. The confirmation request carries a note said that"wherever the confirmation or reply is not received back within 7 days then thebalance will be deemed to be confirmed". Hence the qualification regardingconfirmations not being furnished is grossly incorrect.

(iv) The auditors have qualified about inadequacies in IFCRpolicies and procedures and over all Internal Controls. This is a very general statementthey have not pointed out any specific weaknesses in the control system. Wherever theweaknesses in the system are being pointed out by the Internal Auditors the same areregularly and promptly being taken care of. The management has always been receptivekeen eager and willing to strengthen the Internal Control Systems if any lacuna/shortfalls are brought to our notice.

In connection with the Auditor observation in the Auditor Reportit is clarified that your company will take adequate measures to do the needful in futureappropriately

2. Cost Auditors:

As per the requirement of Central Government and pursuant toSection 148 of the Act read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time your Company has been carrying out audit of cost records everyyear.

The Board of Directors on the recommendation of Audit Committeehas appointed M/s N. Ritesh & Associates Cost Accountants Mumbai (Firm Regn. No.:100675) as the Cost Auditor to audit the cost records of the Company for Financial Year2018-19.

The Company is seeking the ratification of the Shareholders forthe appointment of M/s N. Ritesh & Associates Cost Auditors Mumbai (Firm Regn. No.:100675) as the Cost Accountant of the Company for the Financial Year ending March 31 2019vide Item no. 4 of the Notice of AGM.

3. Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Act and TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board ofDirectors of the Company had appointed M/s Nilesh A. Pradhan & Co. Practicing CompanySecretary (C.P. No.: 3659) to undertake the Secretarial Audit of the Company for the yearended March 31 2018. The Secretarial Audit Report for the Financial Year ended March 312018 has been annexed to this Report as Annexure E and forms an integral part of thisReport.

In connection with the auditors observations in the SecretarialAudit Report it is clarified that:

Observation 1-4: We have never levied a penalty by the StockExchange(s) except during disclosure of quarterly results for the period ended September30 2017 which was on account of change in the statutory auditors and finalization offinancial results as per Ind- AS. Further consequent to applicability of Ind- AS allassets were revalued and accordingly effect was given in the financial statements whichdelayed the finalization and adoption of quarterly results. BSE Limited and National StockExchange Limited had levied penalty which was duly paid by us. We have represented oursubmissions to Stock Exchanges and requested them for waiver/adjustment of penalty paid byus vide our letter April 09 2018. We have not received any reply from them on thismatter.

Observation 5: Your Company is in the process of finding asuitable candidate for the position of CFO.

> ACKNOWLEDGEMENTS:

Your Directors place on record their appreciation to Company'sesteemed clients vendors investors business associates and bankers for their continuoussupport to the Company.

The Directors also thank the Central & State GovernmentsGovernments of various countries Customs & Excise Departments Ministry of CommerceMinistry of Finance Ministry of External Affairs Ministry of Corporate AffairsMaharashtra Industrial Development Corporation and other Government Agencies for theirpositive support and look forward to their continued support in the future.

Your Directors also place on record their appreciation for thecontribution made by the employees at all levels but for whose hard work and supportyour Company's achievements would not have been possible.

For and On behalf of the Board For Omkar Speciality ChemicalsLimited

Date: May 30 2018 Sd/-

Place: Badlapur Pravin S. Herlekar

Chairman & Managing Director

(DIN: 00525610)