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Rain Industries Ltd.

BSE: 500339 Sector: Others
NSE: RAIN ISIN Code: INE855B01025
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VOLUME 272340
52-Week high 175.35
52-Week low 44.90
P/E 202.65
Mkt Cap.(Rs cr) 5,521
Buy Price 163.55
Buy Qty 80.00
Sell Price 164.15
Sell Qty 1056.00
OPEN 171.00
CLOSE 165.45
VOLUME 272340
52-Week high 175.35
52-Week low 44.90
P/E 202.65
Mkt Cap.(Rs cr) 5,521
Buy Price 163.55
Buy Qty 80.00
Sell Price 164.15
Sell Qty 1056.00

Rain Industries Ltd. (RAIN) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting the 45th Annual Report and theAudited Financial Statements (standalone and consolidated) for the Financial Year endedDecember 31 2019.

FINANCIAL RESULTS

A) Standalone

The Standalone performance for the Financial Year ended December 31 2019 is as under:

The financial summary

(In Rs. Million)
Particulars December 31 2019 December 31 2018
1 Revenue from operations 637.91 1053.53
2 Profit before finance cost depreciation and tax expense 579.73 974.62
3 Finance Cost 186.70 196.08
4 Profit before depreciation and tax expense 393.03 778.54
5 Depreciation 5.86 5.20
6 Profit before Tax Expense 387.17 773.34
7 Tax Expense 32.78 168.68
8 Profit After Tax Expense 354.39 604.66
9 Add: Surplus at the beginning of the year 617.15 745.65
10 Total Available for appropriation 971.54 1350.31
Appropriations:
11 Dividend including taxes 336.35 672.69
12 Transfer to general reserve 35.44 60.47
13 Surplus carried to Balance Sheet 599.75 617.15

B) Consolidated

The Consolidated performance for the Financial Year ended December 31 2019 is asunder: The financial summary

(In Rs. Million)
S. No. Particulars December 31 2019 December 31 2018
1 Revenue from operations 123607.97 140489.93
2 Profit before finance cost depreciation share of (loss)/profit of associates and tax expense 16371.47 20063.72
3 Finance cost 4524.01 4565.13
4 Profit before depreciation share of (loss)/profit of associates and tax expense 11847.46 15498.59
5 Depreciation 5940.15 5550.86
6 Profit before share of (loss)/profit of associates and tax expenses 5907.31 9947.73
7 Share of (loss)/profit of associates (net of income tax) (0.21) 8.80
8 Profit before tax expense 5907.10 9956.53
9 Tax expense 1282.76 3643.22
10 Profit after tax expense 4624.34 6313.31
11 Non-controlling interests 710.50 497.05
12 Profit after tax expense after non-controlling interests 3913.84 5816.26
13 Add: Surplus at the beginning of the year 43103.64 38020.54
14 Total Available for appropriation 47017.48 43836.80
Appropriations:
15 Dividend including taxes 382.30 672.69
16 Transfer to general reserve 121.28 60.47
17 Surplus carried to the Balance Sheet 46513.90 43103.64

State of the Company's Affairs

During the year under review the Company achieved revenue of Rs. 637.91 million andnet profit of Rs. 354.39 million on a standalone basis. During the same period theconsolidated revenue was Rs. 123607.97 million and net profit after non-controllinginterests was Rs. 3913.84 million.

The Company continues with its rigorous cost-optimisation initiatives and efficiencyimprovements which have resulted in significant savings through continued focus on costcontrols process efficiencies and product innovations that exceed customer expectationsin all areas enabling the Company to maintain profitable growth in the a healthy economicscenario.

However since the closure of the financial year ended December 31 2019 the globalcoronavirus (COVID-19) pandemic has caused significant economic and social disruptionworldwide. In Europe and North America our production facilities continue to operate inareas where "stay-at-home" orders have been issued as they are considered"essential" businesses that serve other critical industries such as aluminiumand steel. As of this date we anticipate that coronavirus could have a material impact onthe Company's performance at least through the first half of financial year 2020.

BUSINESS OUTLOOK

Cautionary Statement

RAIN Industries Limited along with its subsidiary companies in India and abroad aretogether referred to as "RAIN Group". Statements in this business outlookdescribing RAIN Group's estimates and expectations may be forward-looking statements.Actual results may differ materially from those expressed or implied. Important factorsthat could impact RAIN Group's operations include economic conditions affecting demand andsupply for the products manufactured by RAIN Group; price conditions in the domestic andoverseas markets in which RAIN Group operates; changes in government regulations tax lawsand statutes; and other incidental factors.

Overview

RAIN Group is one of the world's largest producers of calcined petroleum coke coal tarpitch other carbon products and advanced materials. RAIN Group operates in three keybusiness verticals: Carbon Advanced Materials and Cement. RAIN Group has eighteenmanufacturing facilities in eight countries across three continents and continues to growthrough capacity expansions and mergers and acquisitions throughout the world.

Our Carbon business segment converts the by-products of oil refining (i.e. greenpetroleum coke or "GPC") and a by-product of metallurgical coke production(i.e. coal tar) into high-value carbon-based products [i.e. calcined petroleum coke (or"CPC") coal tar pitch (or "CTP") and other carbon products (or"OCP")] that are critical raw materials for the aluminium graphite carbonblack wood preservation titanium dioxide refractory and other global industries.

Our Advanced Materials business segment carries out the innovative downstreamtransformation of a portion of our carbon output petrochemicals and other raw materialsinto high-value materials that are critical to the specialty chemicals coatingsconstruction automotive petroleum energy storage and other global industries.

Our Cement business segment produces and markets high- quality ordinary portland cement(or "OPC") and portland pozzolana cement (or "PPC") consumed largelyby the civil construction and infrastructure industries within South India.

Our scale and process sophistication provide us the flexibility to capitalise on marketopportunities by selecting raw materials from a wide range of sources across variousgeographies adjusting the composition of our product mix and producing products that meetstringent customer specifications including several specialty products.

Our global manufacturing footprint and our integrated worldwide logistics network havestrategically positioned us to capitalise on market opportunities by addressing rawmaterial supply and product demand on a global basis in both established (mainly NorthAmerica and Europe) and emerging markets (mainly Asia and the Middle East).

Revenue and operating profit contributions from our three business segments for theyear 2019 are as follows:

1. Carbon

Carbon consists of calcined petroleum coke ("CPC") coal tar pitch("CTP") and derivatives of coal tar distillation including carbon black oilcreosote oil naphthalene oil other aromatic oils and co-generated energy from waste-heatrecovery. This segment contributed approximately 66% of the consolidated revenue of RAINGroup for CY 2019.

The Carbon business converts the by-products of oil refining and a by-product ofmetallurgical coke production into high-value carbon-based products that are crucial forthe manufacturing of aluminium graphite carbon black wood preservation titaniumdioxide refractory and other global industries.

Environment-friendly and energy-efficient practices have made RAIN Group's Carbonbusiness highly efficient and sustainable. The Carbon business co-generates energy at fourcalcined petroleum coke plants with a combined power generation capacity of approximately125 MW. The Company has made substantial investments in flue-gas desulphurisation("FGD") to reduce emissions at its plants in India and in the United States.These strategic investments give the Carbon business a competitive advantage in the CPCindustry.

1.1. Calcined Petroleum Coke ("CPC")

RAIN Group carries on the business of manufacturing and selling of CPC through itswholly owned subsidiaries in India and the USA. RAIN Group has six CPC manufacturingplants in the United States and one CPC plant in India with an aggregate productioncapacity of approximately 2.1 million tonnes per annum. In addition RAIN Group is settingup a greenfield CPC plant with a capacity of 0.37 million tonnes per annum usingvertical-shaft technology in the Andhra Pradesh Special Economic Zone VisakhapatnamIndia. We expect the vertical-shaft CPC plant to commence operations during the first halfof CY 2020. Adding this vertical-shaft technology to the portfolio will allow the CPCbusiness to offer its customers a wider range of quality options to meet their CPCrequirements.

CPC is produced from GPC a porous black solid that is a by-product of the crude-oilrefining process through a process known as "calcining". This process removesmoisture and volatile matter from the GPC at a very high temperature. CPC is produced intwo primary qualities: (i) anode-grade CPC (for use in the aluminium smelting process)and (ii) industrial- grade CPC (for use in the manufacturing of titanium dioxide and otherindustrial applications). Anode- grade CPC represents approximately 78% of global CPCproduction and industrial-grade CPC represents the remaining 22%. For every tonne ofprimary aluminium produced approximately 0.4 tonnes of CPC is consumed.

Worldwide CPC production for CY 2019 was about 28.5 million tonnes 75% of which wasproduced in China and North America comprising 75% of global demand. China continues toplay a dominant role in the CPC industry and its share of the world's CPC production isestimated to remain at 56 - 59% in the near term. China and North America will maintain apositive surplus. Due to a large gap between production and demand in the Middle EastAsian calciners are expected to increase their focus on the region for the surpluscapacity.

As per recent industry estimates worldwide demand for CPC aggregated to approximately28.4 million tonnes in Cy 2019. The demand is expected to grow to approximately 31.9million tonnes by CY 2024 representing a CAGR of +2.3%. Worldwide production of CPCaggregated to approximately 28.5 million tonnes in CY 2019 and is expected to grow toapproximately 31.9 million tonnes by CY 2024 representing a CAGR of +2.3%.

RAIN Group estimates that more than 280 oil refineries worldwide produce and sell GPCin varying forms and qualities. Generally the sale of GPC does not constitute a materialportion of oil refineries' revenues. The quality of GPC is largely a function of the crudeoil being refined. Manufacturers of CPC blend various grades of GPC (and CPC) to meet thestringent quality specifications of their customers.

The price of GPC varies depending on the quality and the market in which it isutilised. The price of GPC is largely driven by prevailing demand and supply conditions. Arefinery typically realises higher prices for GPC that is used in production ofanode-grade CPC and industrial-grade CPC as compared to GPC used as a fuel.

In general it is advantageous for oil refineries to process more sour crude ascompared to sweet crude to improve their profitability. The price spread between sweetcrude and sour crude has increased. This economic incentive for refineries to process sourcrudes has the effect of reducing the production of anode-grade GPC. In fact asignificant volume of existing anode-grade GPC quality has deteriorated due to increaseduse of sour crude by refineries. Nonetheless it should be noted that many coking unitswill continue to produce anode-grade GPC because these refineries are unable to processsour crudes due to limitations of their refinery configuration. However a few refineriesprocess sweet crudes based on logistical advantages to those locations.

In general CPC and GPC prices move in parallel. Hence CPC producers are converterswith an ability to pass on the increase/decrease in GPC cost to their customers. Howeverthere may be a time lag of one or two quarters for CPC prices to reflect changes in GPCcosts. During this time lag CPC producers will realise lower or higher convertor margin.

The availability of low-sulphur GPC is expected to be negatively affected due toregulations implemented by the International Convention for the Prevention of Pollutionfrom Ships ("MARPOL") which went into effect at the beginning of 2020 and isexpected to cause oil-refining companies to shift to heavier or high-sulphur crudes. Theregulation aims to reduce the amount of sulphurous gasses emitted at sea by reducing theallowable level of sulphur in marine fuel used for operating ships from 3% to 0.5%. It isexpected that larger vessels will use scrubbers to meet this requirement. The freight costis estimated to increase in all perspectives. Refineries may also find it reasonable toprocess the high-sulphur feedstock in their cokers to get a premium rather than sellinghigh-sulphur fuel oil (HSFO) at a discount. Hence there is a limited possibility of apetroleum coke shortage due to the implementation of new regulations by MARPOL.

Threats & Challenges - CPC

The main threat for the CPC industry is the availability of suitable-quality GPC. GPCis a byproduct of the oil refining process and is not produced to meet the supply orquality needs of CPC or aluminium producers. Changes in the economics of processing sourcrudes over the past 15 - 20 years have resulted in a trend towards refining more sourcrudes. While petroleum refineries continue to build refining capacity (and thereforeindirectly increase GPC production) the global supply of traditional anode-grade GPC isexpected to grow at a slower pace as refineries are processing more sour crude whichresults in the production of lower-quality (fuel-grade) GPC. Thus global CPC producershave experienced and may continue to experience a decline in the availability ofhigh-quality anode-grade GPC.

CPC quality directly influences anode quality in the performance of aluminium smelters.To meet the aluminium industry's demand for consistent quality of anode-grade CPC RAINGroup works closely with smelters to expand existing quality specifications allowing useof more non-traditional anode coke ("NTAC") in blends for the production ofanode-grade CPC without compromising on quality. RAIN Group's patented Isotropic CokeExperiment ("ICE") technology is one method of utilising grades of GPCpreviously not considered acceptable to produce anode-grade CPC. Additionally strategicinvestments in flue-gas desulphurisation at the Chalmette Lake Charles and Norco plantsin Louisiana USA as well as the existing Vizag calciner and the new vertical-shaftcalciner in India have enabled RAIN Group to unlock an unmatched advantage of utilisinghigh-sulphur GPC more efficiently to serve the growing demand from aluminium smelterswithout compromising on quality.

During CY 2019 RAIN Group announced plans to produce anhydrous carbon pellets("ACP") a proprietary product developed through years of research anddevelopment to mitigate the risk of reduced anode-grade GPC supply. ACP would be producedby using carbon fines and other non-anode grade GPC which are abundantly available tomeet the ever-increasing demand for anode-grade GPC from calciners.

It is expected that India will continue to lead CPC demand growth in the world(ex-China) as a result of capacity expansions by major aluminium producers in the countryover next few years.

With the restrictions on the import of GPC by calciners and the import of CPC byaluminium smelters capped at 1.40 million tonnes per annum and 0.50 million tonnes perannum respectively by the Hon'ble Supreme Court of India the additional requirement ofboth calciners and smelters will have to be met from domestic supplies within India.Further the Hon'ble Supreme Court of India has also directed the Ministry of Environmentto finalise the standards of emissions from calciners by March 2020. RAIN Group with itsFGD scrubbing facilities at its existing calciner in Visakhapatnam and the newvertical-shaft calciner nearing completion is well prepared to meet the emissionstandards to be announced by the Ministry of Environment.

1.2. Coal Tar Pitch ("CTP") and Other Carbon Products

RAIN Group operates four coal tar distillation facilities in Belgium Canada Germanyand Russia with an aggregate primary coal tar distillation capacity of approximately 1.3million tonnes per annum. Coal tar distillation is carried out in Belgium Canada andGermany through wholly owned subsidiaries and coal tar distillation is carried out inRussia through a joint venture with PAO Severstal Russia.

Coal tar is a liquid by-product derived from the conversion of coal into metallurgicalcoke. During this conversion approximately 80% of the coal volume is processed intometallurgical coke. Metallurgical coke is an important reducing agent and energy source inblast furnaces that produce pig iron and steel. Consequently the supply of coal tar iscorrelated to pig iron production which in turn is driven by steel production. Asia(including 54% from China) contributes approximately 76% of total global pig ironproduction and Europe (including 4% from Russia) contributes about 13%.

Every tonne of metallurgical coke produced yields on average 0.04 tonnes of coal tar.Coal tar is the main raw material in the coal tar distillation process. The coal tardistillation process can be categorised into two stages: (i) primary coal tar distillation("primary distillation") and (ii) downstream processing of selected products ofprimary distillation into co-generated refined products ("downstream"). With adistillation yield of approximately 48% CTP is the main end-product in the coal tardistillation business and therefore crucial for its growth. Coal tar distillation alsoyields naphthalene oil (approximately 12%) and aromatic oils (approximately 40%).

As per recent industry estimates global demand for CTP aggregated to approximately 7.3million tonnes in CY 2019. This is expected to grow to approximately 8.3 million tonnes byCY 2024 representing a CAGR of +2.6%. Global production of CTP aggregated toapproximately 7.4 million tonnes in CY 2019 and is expected to grow to approximately 8.3million tonnes by CY 2024 representing a CAGR of +2.4%.

Geographically CTP production is led by China followed by Europe and Asia with thesethree markets having an aggregate share of 90% in CY 2019. China Europe and Asia(excluding China) currently have surplus production. While China will maintain thissurplus through CY 2024 with a CAGR of 2.9% the levels of surplus production over demandfor CTP in Europe should decline through CY 2024. The levels of surplus production overdemand for CTP in other regions are expected to remain negative in future years.

Seventy-eight percent of the world's CTP production is used to produce carbon anodesfor aluminium smelting. For every tonne of primary aluminium produced approximately 0.1tonne of CTP is consumed. Therefore production of primary aluminium is an importantdeterminant of demand for CTP. The second-largest CTP end-users consuming approximately10% of global production are graphite electrode producers. Graphite electrodes are usedin the manufacturing of steel using electric arc furnaces. Elsewhere demand for CTP isincreasing as a key component in the production of solar panels LED lights and inmaterials such as carbon fiber.

The aluminium industry is the largest consumer of calcined petroleum coke and coal tarpitch. Global demand for primary aluminium aggregated to approximately 63.4 million tonnesin CY 2019 and is expected to grow to approximately 70.0 million tonnes by CY 2024representing a CAGR of +2.0%. Global production of primary aluminium aggregated to 63.6million tonnes in CY 2019 and is expected to grow to approximately to 71.2 million tonnesby CY 2024. Of the total production in CY 2019 56% was from China 11.9% from Europe(including Russia) and 6% from North America. Production of primary aluminium is growingin Asia (excluding China) and the Middle East and these two markets contributed 6.9% and8.9% of global primary aluminium production during CY 2019. The expected demand will bedriven by electrical conductors increased usage in automobiles and significant growth inthe packaging industry. India is expected to see an increase in aluminium consumptionwhich mainly will be driven by the construction automobile and packaging industries.

Aluminium continues to chip away steel's previously unassailable position as the metalof choice for the automotive industry. Due to more stringent regulations and societalpressure to improve fuel economy automobile manufacturers are increasing their use oflighter materials such as aluminium for the structural shell of vehicles as well asclosing panels such as the hood trunk and doors. Aluminium producers will continue toinnovate with new alloys and production processes to meet the automotive industry'sdemand.

By 2024 more than 6.0 million tonnes of aluminum smelting capacity additions areexpected through various greenfield and brownfield projects announced across the world.Approximately 62% of the additional capacity will take place in China and 38% in Asia(excluding China) Europe and the Middle East.

Other Carbon Products from Tar Distillation

Naphthalene as a chemical intermediate is used mainly as a precursor to otherchemicals or as a solvent for chemical reaction. Naphthalene is used both in theproduction of dispersants and by the construction industry and as superplasticizers toproduce concrete and gypsum. Therefore demand for naphthalene is correlated to theconstruction industry.

Naphthalene is also used in the production of phthalic anhydride as a substitute forortho-xylene as it is more cost-effective. Phthalic anhydride is used in the manufacturingof plastics polyester resins and alkyd resins. Additionally phthalate esters made fromphthalic anhydride are used as plasticisers in the production of several PVC products.RAIN's Advanced Materials segment produces phthalic anhydride and a majority of the rawmaterial (naphthalene) is supplied internally.

Aromatic oils such as creosote oil and carbon back oil are sold to a variety ofindustries. Creosote oil is used by the wood-treatment industry for the impregnation ofwood. The majority of this production is sold to the North American market as the Europeanmarket has seen decreased demand due to environmental restrictions.

Carbon black oil is primarily sold to the carbon black industry which produces carbonblack for the tyre and rubber industries. Therefore demand for our carbon black oil isdependent on these end industries.

After industrial processing the downstream products made from naphthalene and aromaticoils such as phthalic anhydride and toluene form indispensable constituents of manyarticles of daily life. For example they are used as key raw materials in the leatherconstruction car tyres and pharmaceutical industries.

Threats & Challenges - CTP and Other Carbon Products

The main threat to the supply of CTP is the availability of reliable quantities of coaltar from the steel industry. With approximately 10% of global coal tar production comingfrom the EU's 27 countries the region's supply of coal tar meets most of the coal tarrequirements for RAIN Group's distillation operations which are located predominantly inEurope. Steel production using electric arc furnaces is becoming more prevalent due tovarious factors including its superior technology and lower emissions compared totraditional blast furnaces. As a result coal tar production is limited to the existingcapacities of metallurgical coke ovens. RAIN Group strengthened its coal tar sourcingthrough its Russian joint venture. With approximately 5% of global coal tar productionRussia contributes significantly to coal tar supply in the region.

Although the aluminium industry has experienced production and consumption growth on along-term basis there may be cyclical periods of weak demand that could result indecreased primary aluminium production. RAIN Group's sales have historically declinedduring such cyclical periods of weak global demand for aluminium.

Research and development is being conducted by certain smelters to produce carbon-freealuminium for reducing emission of greenhouse gases through the use of inert anodes whichwould replace traditional carbon anodes. However the ability to retrofit such technologyby existing aluminium smelters and the cost of producing aluminium using inert anodes areyet to be established. The energy consumption for an inert anode cell will increase by15-20% compared to a carbon anode cell for example. Given that substantial quantities ofgreenhouse gases are released in the generation of electricity consumed in aluminiumsmelting anything that increases energy consumption has the potential to significantlyincrease greenhouse gas emissions. More than 60% of aluminium smelters across the worldtoday use electricity generated from coal-fired power plants and such smelters do not aimto produce carbon-free aluminium as it would be difficult for them to find alternativesources of carbon-free electricity.

The curtailment of coal tar distillation by certain manufacturers in North America andEurope has minimised the demand for coal tar and benefited RAIN Group with improvedavailability of raw material for its distillation plants.

Increasing demand from traditional end customers as well as demand from more recentapplications such as lithium-ion batteries solar panels and LED light bulbs are graduallytightening the global balance for supply of CTP. In the event of future coal tar and CTPshortages petroleum pitch would be the most reliable alternative for the aluminiumindustry as it can be blended with coal tar pitch for preparing the carbon anodes.

Naphthalene and aromatic oils (other by-products in primary distillation) are subjectto the demand and supply forces of the construction and automotive industries and changesin prices of correlated commodities. Any decrease in prices of fuel oil and ortho-xylenecould reduce margins and competitiveness of naphthalene and aromatic oils.

1.3. Co-Generated Energy

RAIN Group is committed to environmental compliance at all of its facilities. As partof this commitment RAIN Group has made significant investments in waste-heat recovery("WHR") systems to generate steam or electricity in all three business verticalsof Carbon Advanced Materials and Cement. Currently RAIN Group has co-generation powerplants at five plants with an aggregate capacity of 116 MW. Further RAIN Group hasco-generation steam plants at four plants with an aggregate capacity of 59 MW.

The operation of these waste-heat recovery units reduces greenhouse gas emissions byoffsetting the use of fossil fuels that would be otherwise required to produce anequivalent amount of energy. This significantly reduces RAIN Group's carbon footprint.

As further evidence of RAIN Group's commitment to the environment it has madesubstantial investments in flue-gas desulfurisation at its CPC plants in India and USA tosubstantially reduce the emission of sulphur-dioxide to meet all regulatory requirementsfor air-quality standards.

Threats & Challenges - Energy

Energy production is proportional to the waste heat produced during calcinationprocess. The output is subject to the volume and quality of raw material being processedin calcination. Any decrease in capacity utilisations in calcination or change in rawmaterial quality will directly influence the generation of energy. A substantial part ofthe energy produced is sold to external customers for industrial use. Availability ofalternate economical sources of energy such as solar energy to these industries in thefuture could cause a reduction in sales of energy by RAIN Group.

A trend of declining tariffs in India continues to impact revenues from the sale ofenergy. Part of the energy generated at our CPC plants as well as our cement operationsis captively used to power those operations mitigating the risk of declining energytariffs. Energy revenues in the United States are less subject to fluctuations as much ofthese sales are under long-term agreements with fixed prices.

2. Advanced Materials

RAIN Group is a global leader in the production of advanced materials through theinnovative downstream transformation of a portion of our carbon output petrochemicals andother raw materials into high-value materials that are critical to the specialtychemicals coatings construction automotive petroleum and other global industries. RAINGroup operates advanced materials production facilities in Belgium Canada Germany andthe Netherlands.

RAIN Group produces 0.65 million tonnes of advanced materials product per annum. Itsproducts have applications ranging from rubber tyres to printing inks and from energystorage to pharmaceutical products. To expand and diversify the segment RAIN Group issetting up a hydrogenated hydrocarbon resins ("HHCR") plant at its integratedcoal and petrochemical site in Castrop- Rauxel Germany with an initial capacity of 30000tonnes. This plant will produce various HHCR products with full flexibility of operationsusing special proprietary and patented technology of RAIN Group.

RAIN Group produces advanced materials in two parallel production processes:

• Downstream processing and refining of aromatic distillates

• Petroleum derivatives such as C9 and C10 which serve as raw materials for theproduction of a range of advanced material products

About 26% of RAIN Group's consolidated revenue for CY 2019 is from this segment. TheAdvanced Materials business can be classified broadly into four sub-product categories:engineered products petrochemical intermediates naphthalene derivates and resins.

2.1. Engineered Products

RAIN Group's innovative CARBORES binder an engineered pitch product combines theadvantages of coal tar pitch products and phenolic resins. Coal tar pitch containspolycyclic aromatic hydrocarbons (PAHs) that require special safety precautions during itsuse. CARBORES is a substitute binder used in carbon-containing refractory products andgraphite products created with reduced concentration of PAHs. While designed forrefractory products the property profile of CARBORES also allows it to be substitutedfor standard coal tar pitch in other applications.

The Company's portfolio of engineered products also includes PETRORES which is usedin specialty applications such as lithium-ion batteries and energy storage. PETRORES isproduced by further processing petroleum tar which we procure from refineries.

2.2. Petrochemical Intermediates

RAIN Group produces benzene toluene and xylene from the secondary distillation ofcrude benzene a liquid by-product derived from conversion of coal into metallurgical cokeused for pig iron and steel production. Benzene toluene and xylene are critical inputsfor several chemicals-based substances. Applications of toluene and xylene include use assolvents for inks and paints.

2.3. Naphthalene Derivatives

RAIN Group produces phthalic anhydride polynaphthalene sulfonates and modifiers fromthe downstream refining of naphthalene and from other inputs procured externally.

The Company also produces specialty polymers called superplasticisers from thedownstream refining polymerisation and purification of naphthalene oil and naphthalene.Superplasticisers are used as in-process aids in the manufacture of concrete and gypsumwallboard and have widespread use for a variety of industrial and agriculturalapplications.

In addition RAIN Group produces a wide range of differentiated naphthalene andmelamine superplasticisers in liquid and powder form as well as carboxylate dispersantsin liquid form.

2.4. Resins

RAIN Group manufactures hydrocarbon resins based on coal tar distillates producedduring the downstream refining of carboindene and from C9 and C10 which are liquidby-products derived from the steam cracking of petroleum substances. Coal tar-based resinsare used primarily for applications in coatings and rubber tyres while petrochemical-basedresins are used primarily for applications in adhesives and printing inks. The Companyrecently introduced a family of colourless resins used in colour-sensitive applicationssuch as tape and book bindings.

The Company also produces phenolics which are used for applications in leathertreatment electric wire enamels and pharmaceuticals.

Outlook

Based on slowing GDP growth in key markets mainly Europe political uncertainties likethe USA-China trade dispute and the return of volatility of raw- material markets weexpect more challenging and uncertain business conditions in the near future.

Europe is the main market for our resins modifiers and petrochemicals. Lower demand bythe coatings and adhesive industries will be offset by improving demand from tyre industryresulting in an overall stable volume in resins and modifiers business. This segment willbenefit from our new product NOVARES pure hydrogenated hydrocarbon resins("HHCR") produced at our new HHCR plant in Germany. Carbonless copy paper andcoatings are some of our end customers for products manufactured by our modifiers group.The majority of these customers are from Asia. Demand for these products shall remainmoderate due to intense competition from China.

Our 3.5 DMP product although a small contributor is used in disinfectants and has astrong market in Asia with an expected increase in demand.

Among petrochemicals phthalic anhydride ("PA") is highly competitive sincethe primary raw material naphthalene is available in-house from our distillation business.Further the naphthalene- based process is cost advantaged compared to ortho xylene-basedproduction. In coming years the overall outlook of petrochemicals is stable due to thepartial offset of benzene toluene xylene performance with PA.

North America is our main market for polymers superplasticisers and naphthalene. Theproducts are mainly used in producing gypsum as well as in concrete mixture forconstruction. Delays in infrastructure projects have affected the performance of thisbusiness. Investment in infrastructure industrial and residential projects shall maintainthe overall outlook stable in coming years. Oversupply will continue to impact naphthalenebusiness.

Our engineered products business shall benefit from the sealer market in North Americawith our new sealer ULTRASEAL and growing demand in Asia for PETRORES in lithium-ionanode applications. With stable demand from refractories in Asia the performance of ourCARBORES products shall be moderate. Overall the outlook for this business is positive.

Due to falling demand for certain advanced materials we announced the shutdown of ourUithoorn production facility in the Netherlands by March 2020. The products from thatplant that were profitable have been transitioned to our existing plant in DuisburgGermany. With higher capacity utilisation of the Duisburg plant and the elimination ofcosts related to the operation of the Uithoorn facility the performance of this part ofour business is expected to improve from CY 2020.

To meet growing demand for white-water resins we are constructing the HHCR productionfacility in Castrop-Rauxel Germany which is expected to commence commercial operationsin the first- half of CY 2020.

Threats & Challenges - Advanced Materials

Key threats to RAIN Group's Advanced Materials business are volatility in commodityprices and Chinese competition. The price of benzene C9 and C10 fractions largely dependon the price of crude and fuel oil. Tariffs implemented by the United States have causedChinese products to compete in the European market. We expect this to continue until acomprehensive trade agreement between the two countries is finalised.

RAIN Group tries to mitigate its pricing and procurement risks through an integratedglobal management of sales and procurement optimised processes and long-term agreementswith suppliers to ensure reliable sourcing of raw material.

The quarterly operating results fluctuate due to a variety of factors that are outsideour control including inclement weather conditions which in the past have affectedoperating results. Historically our operating results have been lower in the first andfourth quarters as compared to the second and third quarters.

3. Cement

RAIN Group has two integrated cement plants one each in the states of Telangana andAndhra Pradesh India with an aggregate installed capacity of 4 million tonnes per annum.RAIN Group also has a fly-ash handling and cement-packaging unit in the state ofKarnataka India. About 8% of the consolidated revenue of RAIN Group for CY 2019 is fromthe Cement business segment.

RAIN Group's cement plants manufacture two grades of cement: ordinary portland cement("OPC") and portland pozzolana cement ("PPC"). The plants arestrategically located near the primary raw material source of limestone. The fly-ashhandling unit in the state of Karnataka has a cement-packaging unit that converts the bulkcement into packed cement bags and supplies neighboring areas. Of the total cementproduced PPC grade accounts for about 75% and OPC grade about 25%.

RAIN Group has been constantly reducing the output cost by introducing efficient energymeasures such as waste- heat recovery power plants and the use of fuel-grade greenpetroleum coke to heat its furnaces. Stringent standards stipulated by Bureau of IndianStandards (BIS) are applied in cement production to attain consistency in quality.

The major costs in the production of cement are (a) freight and transportation and (b)power and fuel each constituting 25 - 30% of the total cost of manufacturing. RAIN Groupconstantly works to improve efficiencies in logistics such as entering into long-termcontracts with transport agencies for transportation of cement to all dealers spreadacross various states. The downside risk is that any increase in fuel prices couldadversely affect freight costs.

The Cement business segment consumes up to 29MW of electricity. RAIN Group supplementsthis segment's power requirements with electricity generated at its CPC plant inVisakhapatnam and from two waste-heat recovery power plants with an aggregate capacity of11MW in the Kurnool and Suryapet cement plants.

Cement Industry Growth in India

The Indian cement industry is estimated to have a total production capacity of 485million tonnes during CY 2019 with an additional capacity of 23 million tonnes underconstruction. Total capacity is expected to increase to approximately 550 million tonnesby CY 2024. Cement is a cyclical commodity with a high correlation to GDP.

The Indian housing sector is the most critical demand driver of cement accounting forabout 65% of total consumption. The other major consumers of cement include infrastructure(15%) and commercial and industrial construction (20%). During the last few years lowcapacity utilisation coupled with weak prices and increasing input costs have impactedthe performance of the cement industry in India. Subdued operating profits and highdebt-service obligations have led some Indian cement producers to defer expansion plans.

With increased demand by the infrastructure and housing sectors coupled with limitedcapacity additions cement capacity utilisation on a pan-India basis is expected toimprove steadily over next few years. In particular demand is expected to be boosted byinfrastructure development in tier-2 and tier-3 cities growth in the real estate sectorand initiatives to build 100 Smart Cities by the Government of India.

Cement being a bulk commodity is freight-intensive and transporting it over longdistances can be uneconomical. This has resulted in cement being largely a regional playwith the industry divided into five main regions in India: North South West East andCentral. The southern region of India has the highest installed capacity accounting forabout 34% of the country's total installed capacity.

Current Position

With increased in infrastructure spending and improved construction of housingprojects Indian cement industry witnessed a double-digit growth during CY 2019. A lack ofavailable sand and uncertainty regarding the capital for the state of Andhra Pradesh hasresulted in weaker demand in Andhra Pradesh. There is an increase in demand for cement inother southern states.

Near Future

As stated elsewhere cement demand is closely linked to the overall economic growthparticularly in the housing and infrastructure sectors. With the Government of Indiaintroducing new plans for housing and infrastructure development cement demand isexpected to increase.

Historically positive incremental demand over supply as well as high levels ofcapacity utilisation have led to increases in cement prices. A rebound in demand growthfrom CY 2020 is expected to support prices in the southern region. Cement demand acrossIndia is expected to increase at a CAGR of 8%.

Due to limited capacity additions and a revival in demand the cement sector isexpected to enter a multiyear earnings growth cycle where it gains pricing and operatingleverage.

The real estate sector is a crucial contributor to demand growth in the southernregion. Major cities like Bengaluru Chennai and Hyderabad have emerged as promisingcommercial destinations which boosts demand for commercial and office space within thesecities. In addition these cities are some of the biggest hospitality markets in southernIndia with Hyderabad reporting year- over-year growth of 7.6% followed by 4.3% inBengaluru and 1.4% in Chennai.

Further the 2020 Union Budget of India highlighted a stimulus package of Rs. 103trillion for developing the infrastructure sector over the next five years consisting ofmore than 6500 projects across a range of sectors. The government's spending push in theinfrastructure sector should help to expand aggregate demand and the level of economicactivity thereby cushioning a weakening in cement consumption.

Threats & Challenges - Cement

The Indian cement industry has witnessed a massive capacity addition of more than 250million tonnes during the last decade. This capacity addition is disproportionately highwhen compared to the growth in demand and concentrated in southern India with more than80 million tonnes of new capacity during this period. This has resulted in significantpressure on capacity utilisation and price realisation among the region's producers.

The Indian cement industry's average utilisation has increased to approximately 70% inCy 2019 led by improvement in demand and lower capacity additions during CY 2019.Pan-India utilisation is expected to reach 75% in CY 2020 while the utilisation levels inthe southern region are expected to remain stable at 60% in CY 2020. Cement demand andcapacity utilisation are expected to improve as a result of a slower pace in capacityadditions and better demand prospects.

Coronavirus Update

RAIN Group is closely monitoring the global outbreak of coronavirus (COVID-19) and theCompany has implemented a number of measures to protect our employees communities andoperations so the supply and movement of materials as well as the services that customersand society depend on from the Company are not impacted.

Beyond basic actions like encouraging employees to intensify their personal hygienepractices and instituting significant travel restrictions here is a sample of the stepswe are taking to ensure business continuity during this challenging and unpredictableperiod:

• Permitting some non-critical operations employees to work from home offices andto conduct meetings electronically to avoid the spread of germs during face-to-faceinteraction

• Implementing a social-distancing program at our sites in which people areencouraged to maintain a distance of 2 meters from co-workers contractors and others suchas truck drivers transporting materials to and from our sites

• Limiting the number of outside contractors vendors and visitors at our sitesas well as face-to-face interactions between RAIN Group employees and outsiders

• Maintaining safety inventories that would allow us to continue production inthe event of a supply-chain interruption

• Working closely with our suppliers vendors and customers - and identifyingalternative raw material and logistics sources and routes - to minimise the risk ofsupply-chain disruptions

• Relocating finished goods closer to our customers where feasible including toother RAIN Group facilities with rail and water access and infrastructure to reduce ourexposure to truck transportation - particularly in Europe where the closing of highwayborder-crossings is a possibility

• Utilising our chemical know-how to produce cleaning agents with disinfectingproperties to wipe down handrails door handles and other surfaces at our facilities andto reduce our consumption of commercial disinfectants so there is ample supply for others

Growing fears and uncertainty surrounding the pandemic are expected to cause atemporary slowdown in economic activity.

In our Carbon and Advanced Materials business segments our current expectation is thatcoronavirus will be a factor for at least the first half of 2020. We also anticipate thatour Cement business segment will be similarly impacted by a near-term reduction inconstruction projects in India possibly resulting in muted demand for cement. With therapidly changing conditions the impact on volumes growth and financials cannot bereasonably estimated at this time as the duration and scope of disruptions to industryremain largely unclear.

Listing of Equity Shares

The Company's equity shares are listed on the following Stock Exchanges:

(i) BSE Limited Phiroze JeeJeebhoy Towers Dalal Street Mumbai-400 001 MaharashtraIndia; and

(ii) National Stock Exchange of India Limited Exchange Plaza Floor 5 Plot No. C/1 GBlock Bandra-Kurla Complex Bandra (East) Mumbai - 400051 Maharashtra India.

The Company has paid the Annual Listing Fees to the said Stock Exchanges for theFinancial Year 2019-20.

Subsidiary Companies

The Subsidiary Companies situated in India and Outside India continue to contribute tothe overall growth in revenues and overall performance of the Company.

As per the provisions of Section 129 of the Companies Act 2013 read with Rule 5 ofCompanies (Accounts) Rules 2014 a separate statement containing the salient features ofthe Financial Statements of the Subsidiary Companies/ Associate Companies/ Joint Venturesin Form AOC-1 is annexed to this Board's Report (Annexure- 1).

The detailed policy for determining material subsidiaries as approved by the Board isuploaded on the Company's website and can be accessed at the Web-link:https://rain-industries. com/investors/#policies

Performance and contribution of each of the Subsidiaries Associates and Joint Ventures

As per Rule 8 of Companies (Accounts) Rules 2014 a Report on the Financialperformance of Subsidiaries Associates and Joint Venture Companies along with theircontribution to the overall performance of the Company during the Financial Year endedDecember 31 2019 is annexed to this Board's report (Annexure - 2).

Consolidated Financial Statements

The Consolidated Financial Statements are prepared in accordance with Indian AccountingStandards (Ind AS) as per the Companies (Indian Accounting Standards) Rules 2015 notifiedunder Section 133 of the Companies Act 2013 and other relevant provisions of theCompanies Act 2013.

The Consolidated Financial Statements for the financial year ended December 31 2019forms part of the Annual Report.

As per the provisions of Section 136 of the Companies Act 2013 the Company has placedseparate Audited accounts of its Subsidiaries on its website www.rain-industries.com and acopy of separate Audited Financial Statements of its Subsidiaries will be provided toshareholders upon their request.

Share Capital

The Paid-up Share Capital of the Company as on December 31 2019 is Rs. 672691358divided into 336345679 Equity Shares of Rs. 2 each fully paid up.

Variations in Net worth

The Standalone Net worth of the Company for the Financial Year ended December 31 2019is Rs. 9176.74 Million as compared to Rs. 9158.61 Million for the previous Financialyear ended December 31 2018 and the Consolidated Net worth of the Company for theFinancial Year ended December 31 2019 is Rs. 49599.05 Million as compared to Rs.46227.41 Million for the previous Financial year ended December 31 2018.

Number of Meetings of the Board of Directors

During the year four Board meetings were held.

The dates on which the Board meetings were held are: February 27 2019 May 8 2019August 13 2019 and November 13 2019.

Details of the attendance of the Directors at the Board meetings held during the yearended December 31 2019 are as follows:

Name of the Director

Number of Board Meetings

Held Attended
Mr. N. Radhakrishna Reddy 4 4
Mr. Jagan Mohan Reddy Nellore 4 4
Mr. N. Sujith Kumar Reddy 4 4
Mr. H. L. Zutshi 4 4
Ms. Radhika Vijay Haribhakti 4 4
Ms. Nirmala Reddy 4 4
Mr. Varun Batra 4 4
Mr. Brian McNamara1 3 3
Mr. S. L. Rao2 1 1

 

1 Mr. Brian McNamara was appointed as an Independent Director of the Companyw.e.f. February 28 2019.

 

2 Mr. S. L. Rao resigned from the Directorship of the Company w.e.f. March 152019

Management Discussion and Analysis

The Management Discussion and Analysis forms an integral part of this Report andprovides details of the overall industry structure developments performance and state ofaffairs of the Company's various businesses viz. Carbon Advanced Materials Cement alongwith internal controls and their adequacy Risk Management Systems and other materialdevelopments during the Financial Year.

Directors' Responsibility Statement as required under Section 134 of the Companies Act2013

Pursuant to the requirement under Section 134 of the Companies Act 2013 with respectto the Directors' Responsibility Statement the Board of Directors of the Company herebyconfirms:

i) that in the preparation of the Annual Accounts the applicable accounting standardshave been followed;

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 as on December 31 2019and of Profit and Loss Account 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 for the Financial Year endedDecember 31 2019 on a going concern 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 were adequate and operatingeffectively.

Statement on Declaration given by Independent Directors under Section 149

The Independent Directors have submitted declaration of independence as requiredpursuant to sub-section (7) of Section 149 of the Companies Act 2013 stating that theymeet the criteria of independence as provided in sub-section (6) of Section 149.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee consists of the following IndependentDirectors:

Ms. Radhika Vijay Haribhakti Chairperson Mr. H. L. Zutshi

Ms. Nirmala Reddy Mr. Varun Batra and Mr. Brian McNamara.

• Brief description of the terms of reference:

- Identifying persons who are qualified to become Directors and who may be appointed inSenior Management in accordance with the criteria laid down and recommend to the Board fortheir appointment and removal;

- Formulation of criteria for evaluation of Independent Directors and the Board;

- Carry on the evaluation of every Director's performance;

- Formulation of the criteria for determining qualifications positive attributes andindependence of a Director; and

- Recommend to the Board a policy relating to the remuneration of the Directors KeyManagerial Personnel and other Employees

Nomination and Remuneration Committee meetings

During the period from January 1 2019 to December 31 2019 Nomination andRemuneration Committee Meetings were held on February 26 2019 and November 12 2019.

Attendance at the Nomination and Remuneration Committee Meetings

Name of the Director Designation

Number of Meetings

Held Attended
Ms. Radhika Vijay Haribhakti Chairperson 2 1
Mr. H. L. Zutshi Member 2 2
Ms. Nirmala Reddy Member 2 2
Mr. Varun Batra Member 2 2
Mr. Brian McNamara1 Member 1 1
Mr. S. L. Rao2 Member 1 1

 

1 Mr. Brian McNamara was appointed as member of the Nomination and RemunerationCommittee with effect from February 28 2019

 

2 Mr. S. L. Rao resigned from the Directorship of the Company w.e.f. March 152019.

Particulars of Loans Guarantees Securities or Investments under Section 186

There are no Loans Guarantees Investments and Security made during the Financial Yearended December 31 2019 as per the provisions of Section 186 of the Companies Act 2013read with Companies (Meetings of Board and its Powers) Rules 2014.

Particulars of Contracts or Arrangements with Related Parties

The particulars of contracts or arrangements with related parties referred to in subsection (1) of Section 188 entered by the Company during the Financial Year ended December31 2019 in prescribed Form AOC-2 is annexed to this Board's Report (Annexure - 4).

Transfer of Amount to Reserves

The Company has transferred Rs. 35.44 Million to the General Reserve for the FinancialYear ended December 31 2019.

Dividend

The Board of Directors at their meeting held on November 13 2019 declared an InterimDividend @ 50% on the paid-up Equity Share Capital i.e. Rs. 1.00 per equity share for theFinancial Year ended December 31 2019 and same was paid to the shareholders and nofurther dividend has been recommended for the Financial Year ended December 31 2019.

The dividend pay-out is in accordance with the Company's Dividend Distribution Policy.

Dividend Distribution Policy

The Dividend Distribution Policy containing the requirements mentioned in Regulation43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 formspart of this Annual Report. (Annexure 3) and the policy is also available on the Company'swebsite at: https://rain-industries.com/ investors/#policies.

Extract of Annual Return

The Extract of Annual Return as per the provisions of Section 92 of the Companies Act2013 and Rule 12 of Companies (Management and Administration) Rules 2014 in Form MGT-9 isannexed to this Board's Report (Annexure - 5).

The conservation of energy technology absorption foreign exchange earnings and outgopursuant to the provisions of Section 134(3)(m) of the Companies Act 2013 (Act) read withthe Companies (Accounts) Rules 2014

Information with respect to conservation of energy technology absorption foreignexchange earnings and outgo pursuant to Section 134(3) (m) of the Act read with Companies(Accounts) Rules 2014 is annexed to this Board's Report (Annexure - 6).

Risk Management Committee

The Risk Management Committee consists of the following Directors:

Mr. N. Radhakrishna Reddy Chairman Mr. Jagan Mohan Reddy Nellore Member and Mr. N.Sujith Kumar Reddy Member.

Mr. T. Srinivasa Rao is the Chief Risk Officer and Mr. S. Venkat Ramana Reddy acts asSecretary to the Committee.

The Committee had formulated a Risk Management Policy for dealing with different kindsof risks which it faces in day to day operations of the Company. Risk Management Policy ofthe Company outlines different kinds of risks and risk mitigating measures to be adoptedby the Board. The Company has adequate internal control systems and procedures to combatrisks. The Risk management procedures are reviewed by the Audit Committee and the Board ofDirectors on a quarterly basis at the time of review of the Quarterly Financial results ofthe Company.

During the Financial Year Risk Management Committee Meeting was held on November 122019.

Attendance at the Risk Management Committee Meeting:

Name of the Director Designation

Number of Meetings

Held Attended
Mr. N. Radhakrishna Reddy Chairman 1 1
Mr. Jagan Mohan Reddy Nellore Member 1 1
Mr. N. Sujith Kumar Reddy Member 1 1

Corporate Social Responsibility (CSR)

Corporate Social Responsibility reflects the strong commitment of the Company toimprove the quality of life of the workforce and their families and also the community andsociety at large. The Company believes in undertaking business in a way that will lead tooverall development of all stakeholders and society.

The Board of Directors of the Company have constituted a Corporate SocialResponsibility Committee comprising of the following Directors:

Mr. Jagan Mohan Reddy Nellore Chairman Mr. N. Sujith Kumar Reddy Member and Ms.Nirmala Reddy Member (Independent Director).

Corporate Social Responsibility policy was adopted by the Board of Directors on therecommendation of Corporate Social Responsibility Committee.

During the last three years the Company has spent Rs. 7 Million on CSR activities.

The Company along with its subsidiaries in India has spent an amount of Rs. 231.09Million towards CSR activities during last 3 years.

A report on Corporate Social Responsibility as Per Rule 8 of Companies (CorporateSocial Responsibility Policy) Rules 2014 is annexed to this Board's Report (Annexure -7).

During the Financial Year Corporate Social Responsibility Committee Meeting was heldon November 11 2019.

Attendance at the Corporate Social Responsibility Committee Meeting:

Name of the Director Designation

Number of Meetings

Held Attended
Mr. Jagan Mohan Reddy Nellore Chairman 1 1
Mr. N. Sujith Kumar Reddy Member 1 1
Ms. Nirmala Reddy Member 1 1

Stakeholders Relationship Committee

The Stakeholders Relationship Committee consists of following Directors:

Mr. N. Sujith Kumar Reddy Chairman Mr. N. Radhakrishna Reddy Member Mr. Jagan MohanReddy Nellore Member and Ms. Nirmala Reddy Member (Independent Director).

During the Financial Year Stakeholders Relationship Committee Meeting was held onFebruary 25 2019.

Attendance at Stakeholders Relationship Committee Meeting:

Name of the Director Designation

Number of Meetings

Held Attended
Mr. N. Sujith Kumar Reddy Chairman 1 1
Mr. N. Radhakrishna Reddy Member 1 1
Mr. Jagan Mohan Reddy Nellore Member 1 1
Ms. Nirmala Reddy Member 1 1

Terms of Reference

(i) Resolving the grievances of the security holders including complaints related totransfer/transmission of shares nonreceipt of annual report non-receipt of declareddividends non-receipt of new/duplicate certificates etc.

(ii) Review of measures taken for effective exercise of voting rights by shareholders.

(iii) Review of adherence to the service standards adopted by the Company in respect ofvarious services being rendered by the Registrar & Share Transfer Agent.

(iv) Review of the various measures and initiatives taken by the Company for reducingthe quantum of unclaimed dividends and ensuring timely receipt of dividend warrants/annualreports/statutory notices by the shareholders of the Company.

Share Transfer Committee

The Share Transfer Committee consists of following Directors:

Mr. N. Sujith Kumar Reddy Chairman Mr. N. Radhakrishna Reddy Member and Mr. JaganMohan Reddy Nellore Member.

The Committee meets every week/15 days to oversee and review all matters connected withthe securities transfers and review the performance of the Registrar and Transfer agentsand recommends measures for overall improvement in the quality of investor services.

Mechanism for Evaluation of the Board

Pursuant to the provisions of the Companies Act 2013 and the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board has carried out anannual evaluation of its own performance and that of its Committees as well as performanceof the Directors individually. Feedback was sought by way of a structured questionnairecovering various aspects of the Board's functioning such as adequacy of the composition ofthe Board and its Committees Board culture execution and performance of specific dutiesobligations and governance and the evaluation was carried out based on responses receivedfrom the Directors.

The evaluation is performed by the Board Nomination and Remuneration Committee andIndependent Directors with specific focus on the performance and effective functioning ofthe Board and Individual Directors.

In line with SEBI Circular No. SEBI/HO/CFD/CMD/ CIR/P/2017/004 dated January 5 2017the Company adopted the criteria recommended by the SEBI.

The Directors were given six Forms for evaluation of the following:

(i) Evaluation of Board;

(ii) Evaluation of Committees of the Board;

(iii) Evaluation of Independent Directors;

(iv) Evaluation of Chairperson;

(v) Evaluation of Non-Executive and NonIndependent Directors; and

(vi) Evaluation of Managing Director.

The Directors were requested to give following ratings for each criteria:

1. Could do more to meet expectations;

2. Meets expectations; and

3. Exceeds expectations.

The Board of Directors has appointed Mr. DVM Gopal

Practicing Company Secretary as scrutinizer for Board evaluation process.

The Directors have sent the duly filled forms to Mr. DVM Gopal after Evaluation.

Mr. DVM Gopal based on the evaluation done by the Directors has prepared a report andsubmitted the Evaluation Report.

The Chairperson based on the report of the scrutinizer has informed the rankings toeach Director and also informed that based on the Evaluation done by the Directors andalso report issued by Mr. DVM Gopal the performance of Directors is satisfactory and theyare recommended for continuation as Directors of the Company.

Familiarization programmes imparted to Independent Directors

The Members of the Board of the Company have provided many opportunities to familiarizethemselves with the Company its Management and its operations. The Directors are providedwith all the documents to enable them to have a better understanding of the Company itsvarious operations and the industry in which it operates.

All the Independent Directors of the Company are made aware of their roles andresponsibilities at the time of their appointment through a formal letter of appointmentwhich also stipulates various terms and conditions of their engagement.

Executive Directors and Senior Management provide an overview of the operations andfamiliarize the new NonExecutive Directors on matters related to the Company's values andcommitments. They are also introduced to the organization structure constitution ofvarious committees board procedures risk management strategies etc.

Strategic Presentations are made to the Board where Directors get an opportunity tointeract with Senior Management. Directors are also informed of the various developmentsin the Company through Press Releases emails etc.

Senior management personnel of the Company make presentations to the Board Members on aperiodical basis briefing them on the operations of the Company plans strategy risksinvolved new initiatives etc. and seek their opinions and suggestions on the same. Inaddition the Directors are briefed on their specific responsibilities and duties that mayarise from time to time.

The Statutory Auditors and Internal Auditors of the Company make presentations to theBoard of Directors with regard to regulatory changes from time to time.

The Independent Directors have attended the Master class for Directors organized byInstitute of Directors New Delhi.

The details of the familiarisation programme is available on the website: http://www.rain-industries.com

Directors

Mr. Jagan Mohan Reddy Nellore Vice Chairman of the Company also serves as the ChiefExecutive Officer of Rain Carbon Inc. a step-down wholly owned Subsidiary of the Company.

To ensure that the Company's Carbon business receives the attention necessary tonavigate changing raw material trends tax laws and other issues; manage organicexpansions; and ensure the ongoing success of this crucial business segment Mr. Nellorehas decided to dedicate more time to Rain Carbon Inc.

As per the provisions of the Companies Act 2013 the Whole Time Director/ChiefExecutive Officer/Managing Director of the Companies incorporated under the Companies Act1956 or Companies Act 2013 shall be a Resident in India. With Mr. Nellore also being theChief Executive Officer of Rain Carbon Inc. it is difficult for him to be in India for adefined period of time every year.

In view of the above Mr. Nellore has submitted his resignation from the position ofManaging Director with effect from March 31 2019 but continues to be the Director &Vice Chairman of the Company.

Consequent to the resignation of Mr. Jagan Mohan Reddy Nellore from the position ofManaging Director Mr. N. Radhakrishna Reddy has been appointed as Managing Director ofthe Company for a period of three years (i.e. from March 31 2019 to March 30 2022).

During the year under review Mr. S. L. Rao resigned from the Directorship of theCompany w.e.f. March 15 2019 due to advancing age and falling health and Mr. BrianMcNamara was appointed as an Independent Director of the Company w.e.f. February 28 2019.

Justification for Appointing Mr. Brian McNamara as an Independent Director.

Mr. Brian McNamara is a former banker with 31 years of experience in project financecorporate finance and investment management. He worked in investment operations atInternational Finance Corporation (IFC) in Washington D.C. from 1991 to 2015 withresponsibility for investment strategy business development and project financing for arange of sectors across emerging markets including chemicals textiles generalmanufacturing and mining. He has extensive investment experience in project evaluationfinancial structuring and investment management across the chemicals fertilizers carbonblack plastics fibers specialty chemicals and primary metals industries.

In the opinion of the Board the appointment of Mr. Brian McNamara as IndependentDirector will be value addition to the Board and would be beneficial for the Company.

Re-appointment

Mr. Jagan Mohan Reddy Nellore and Mr. N. Sujith Kumar Reddy Directors of the Companyretire by rotation and being eligible offer themselves for re-appointment.

Key Managerial Personnel

The following have been designated as the Key Managerial Personnel of the Companypursuant to Sections 2(51) and 203 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014.

Mr. N. Radhakrishna Reddy - Managing Director
Mr. T. Srinivasa Rao - Chief Financial Officer
Mr. S. Venkat Ramana Reddy - Company Secretary

During the year under review there has been a change in the Key managerial personnel.Mr. Jagan Mohan Reddy Nellore resigned from the position of Managing Director of theCompany but continues to be Director of the Company and Mr. N. Radhakrishna Reddy wasappointed as a Managing Director who is a Key Managerial Personnel as per Section 203 ofthe Companies Act 2013.

Meeting of Independent Directors

A separate meeting of the Independent Directors was held under the Chairmanship of Mr.Varun Batra Independent Director on November 12 2019 inter-alia to discuss evaluationof the performance of Non-Independent Directors the Board as a whole evaluation of theperformance of the Chairman taking into account the views of the Executive andNon-Executive Directors and the evaluation of the quality content and timeliness of flowof information between the management and the Board that is necessary for the Board toeffectively and reasonably perform its duties.

The Independent Directors expressed satisfaction with the overall performance of theDirectors and the Board as a whole.

Registration of Independent Directors in Independent Directors Databank

All the Independent Directors of the Company have been registered and are members ofIndependent Directors Databank maintained by Indian Institute of Corporate Affairs.

Confirmation from the Board

All the Independent Directors of the Company have given their respectivedeclaration/disclosures under Section 149(7) of the Act and Regulation 25(8) of theListing Regulations and have confirmed that they fulfill the independence criteria asspecified under section 149(6) of the Act and Regulation 16 of the Listing Regulations andhave also confirmed that they are not aware of any circumstance or situation which existor may be reasonably anticipated that could impair or impact their ability to dischargetheir duties with an objective independent judgment and without any external influence.Further the Board after taking these declaration/disclosures on record and acknowledgingthe veracity of the same concluded that the Independent Directors are persons ofintegrity and possess the relevant expertise and experience to qualify as IndependentDirectors of the Company and are Independent of the Management.

Opinion of the Board

The Board opines that all the Independent Directors of the Company strictly adhere tocorporate integrity possesses requisite expertise experience and qualifications todischarge the assigned duties and responsibilities as mandated by Companies Act 2013 andListing Regulations diligently.

Deposits

The Company has not accepted any deposits from the public in terms of Chapter V of theCompanies Act 2013. Hence no amount on account of principal or interest on publicdeposits was outstanding as on the date of the balance sheet.

Statutory Auditors

The Company's Statutory Auditors BSR and Associates LLP Chartered Accountants (ICAIRegn. No.116231W/W-100024) were appointed as the Statutory Auditors of the Company for aperiod of 5 years at the 43rd Annual General Meeting of the Company i.e. up to theconclusion of the 48th Annual General Meeting of the Company.

Accordingly BSR and Associates LLP Chartered Accountants Statutory Auditors of theCompany will continue till the conclusion of Annual General Meeting to be held in 2023. Inthis regard the Company has received a Certificate from the Auditors to the effect thattheir continuation as Statutory Auditors would be in accordance with the provisions ofSection 141 of the Companies Act 2013.

Auditors Report

There are no qualifications reservations or adverse remarks or disclaimer made by BSR& Associates LLP Chartered Accountants (ICAI Regn. No.116231W/W-100024) StatutoryAuditors in their report for the Financial Year ended December 31 2019.

Secretarial Auditors Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorshave appointed DVM & Associates LLP Company Secretaries as Secretarial Auditors toconduct Secretarial Audit of the Company for the Financial Year ended December 31 2019.

The Secretarial Auditors Report issued by DVM & Associates LLP Company Secretariesin Form MR-3 is annexed to this Board's Report (Annexure - 8).

The Secretarial Auditors Report does not contain any qualifications reservation oradverse remarks or disclaimer.

Secretarial Audit of Material Unlisted Indian Subsidiaries

The Material Unlisted Indian Subsidiaries of the company (i.e. Rain Cements Limited(RCL) and Rain CII Carbon (Vizag) Limited (RCCVL)) undertake Secretarial Audit every yearunder Section 204 of the Companies Act 2013. The Secretarial Audit of RCL and RCCVL forthe Financial Year ended December 31 2019 was carried out pursuant to Section 204 of theCompanies Act 2013 and Regulation 24A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. The Secretarial Audit Report of RCL issued by Mr. M.B.Suneel

Practicing Company Secretary partner P.S Rao and Associates and Secretarial AuditReport of RCCVL issued by Mr. DVM Gopal Partner DVM & Associates LLP CompanySecretaries does not contain any qualification reservation or adverse remark ordisclaimer.

The Secretarial Auditors Report of RCL and RCCVL in Form MR-3 are annexed to thisBoard's Report (Annexure - 8A and 8B).

Annual Secretarial Compliance Report

The Company has undertaken an audit for the Financial Year ended December 31 2019 forall applicable compliances as per Securities and Exchange Board of India Regulations andCirculars/Guidelines issued thereunder. The Annual Secretarial Compliance Report issued byMr. DVM Gopal practicing Company Secretary has been submitted to the Stock Exchangeswithin 60 days of the end of the Financial Year and same is annexed to this Board'sReport. (Annexure - 8C)

Board's response on Auditor's qualification reservation or adverse remarks ordisclaimer made

There are no qualifications reservations or adverse remarks made by the statutoryauditors in their report or by the Practicing Company Secretary in the Secretarial AuditReport for the year.

Internal Auditors

The Board of Directors of the Company has appointed Ernst & Young LLP as InternalAuditors to conduct Internal Audit of the Company for the Financial Year ended December31 2019. Further the Company has an in-house internal audit department to carry-outextensive internal audits and special management reviews of all operating subsidiarycompanies in India Europe and North America.

Maintenance of Cost Records specified by the Central Government under Section 148 ofthe Companies Act 2013

The provisions relating to maintenance of Cost Records as specified by the CentralGovernment under Section 148 of the Companies Act 2013 is not applicable to the Company.

Reporting of Frauds by Auditors

During the year under review the Statutory Auditors Internal Auditors and SecretarialAuditor have not reported any instances of frauds committed in the Company by its Officersor Employees to the Audit Committee under section 143(12) of the Companies Act 2013details of which needs to be mentioned in this Report.

Audit Committee

The Audit Committee consists of the following Members (all are Independent Directors):

Ms. Nirmala Reddy Chairperson Mr. H.L. Zutshi Member

Mr. Varun Batra Member Ms. Radhika Vijay Haribhakti Member and Mr. Brian McNamaraMember.

There has been no such incidence where the Board has not accepted the recommendation ofthe Audit Committee during the year under review.

Four Audit Committee Meetings were held during the Financial Year ended December 312019. The maximum time gap between any two meetings was not more than one hundred andtwenty days.

The Audit Committee meetings were held on February 26 2019 May 7 2019 August 132019 and November 12 2019.

Attendance at the Audit Committee Meetings

Name of the Director Designation

Number of Meetings

Held Attended
Ms. Nirmala Reddy Chairperson 4 4
Mr. H. L. Zutshi Member 4 4
Mr. S. L. Rao1 Member 1 1
Ms. Radhika Vijay Haribhakti Member 4 3
Mr. Varun Batra Member 4 4
Mr. Brian McNamara2 Member 3 3

 

1 Mr. S. L. Rao resigned from the Directorship of the Company w.e.f. March 152019.

 

2 Mr. Brian McNamara was appointed as member of Audit Committee w.e.f. February28 2019.

Corporate Governance

The Company has a rich legacy of ethical governance practices and committed toimplement sound corporate governance practices with a view to bring about transparency inits operations and maximize shareholder value.

A Report on Corporate Governance along with a Certificate from the Statutory Auditorsof the Company regarding compliance with the conditions of Corporate Governance asstipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 forms part of the Annual Report.

Vigil Mechanism (Whistle Blower Policy)

The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribedthereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is implemented through the Company's Whistle Blower Policy.

The Company has adopted a Whistle Blower Policy establishing a formal vigil mechanismfor the Directors and employees to report concerns about unethical behavior actual orsuspected fraud or violation of Code of Conduct and Ethics. It also provides for adequatesafeguards against the victimization of employees who avail of the mechanism and providesdirect access to the Chairperson of the Audit Committee in exceptional cases. It isaffirmed that no personnel of the Company have been denied access to the Audit Committee.The policy of vigil mechanism is available on the Company's website.

The Whistle Blower Policy aims for conducting the affairs in a fair and transparentmanner by adopting highest standards of professionalism honesty integrity and ethicalbehavior.

All employees of the Company are covered under the Whistle Blower Policy.

Statement of particulars of appointment and remuneration of managerial personnel

The Statement of particulars of Appointment and Remuneration of Managerial personnel asper Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed to this Board's Report (Annexure - 9).

Investor Education and Protection Fund (IEPF)

Pursuant to the provisions of Section 124 of the Companies Act 2013 and otherapplicable provisions of the Companies

Act 2013 and rules made thereunder unclaimed dividend amount of Rs. 4685496 of theCompany for the Financial Year ended December 31 2011 has been transferred to theInvestor Education and Protection Fund (IEPF) established by the Central Governmentpursuant to Section 125 of the Companies Act 2013 on May 28 2019.

During the year 212196 equity shares have been transferred to IEPF.

The Company has transferred an amount of Rs. 2873436 towards dividend to IEPF on theshares which were already transferred to IEPF.

Information in respect of unclaimed dividend and due dates for transfer to the IEPF aregiven below:

Sl. No. For the Financial year ended Percentage of Dividend Date of Declaration Due date for transfer to IEPF
1 December 31 2012 55% April 27 2013 May 26 2020
2 December 31 2013 (Interim dividend) 50% November 14 2013 December 13 2020
3 December 31 2014 (Interim dividend) 50% November 6 2014 December 7 2021
4 December 31 2015 (Interim dividend) 50% August 14 2015 September 15 2022
5 December 31 2016 (Interim dividend) 50% August 13 2016 September 14 2023
6 December 31 2017 (Interim dividend) 50% August 11 2017 September 10 2024
7 December 31 2017 (Final dividend) 50% May 11 2018 June 10 2025
8 December 31 2018 (Interim dividend) 50% November 14 2018 December 13 2025
9 December 31 2019 (Interim dividend) 50% November 13 2019 December 12 2026

Insurance

All properties and insurable interests of the Company have been fully insured.

Adequacy of Internal Financial Controls with reference to the Financial Statements

The Corporate Governance Policies guide the conduct of affairs of the Company andclearly delineates the roles responsibilities and authorities at each level of itsgovernance structure and key functionaries involved in governance. The Code of Conduct forSenior Management and Employees of the Company (the Code of Conduct) commits Management tofinancial and accounting policies systems and processes. The Corporate GovernancePolicies and the Code of Conduct stand widely communicated across the Company at alltimes.

The Company's Financial Statements are prepared on the basis of the SignificantAccounting Policies that are carefully selected by Management and approved by the AuditCommittee and the Board. These Accounting policies are reviewed and updated from time totime.

The Company maintains all its records in ERP (SAP) System and the work flow andapprovals are routed through ERP (SAP).

The Company has appointed Internal Auditors to examine the internal controls and verifywhether the workflow of the organization is in accordance with the approved policies ofthe Company. In every Quarter while approval of Financial Statements the InternalAuditors present to the Audit Committee the Internal Audit Report and Management Commentson the Internal Audit observations. The reports of in-house internal auditors are reviewedby the audit committees of respective subsidiary companies and the minutes of themeetings and key observations of the in-house internal audit team are reported to theAudit Committee of the Company on a quarterly basis.

The Board of Directors of the Company have adopted various policies such as RelatedParty Transactions Policy Whistle Blower Policy Material Subsidiaries Policy CorporateSocial Responsibility Policy Anti Corruption and Anti Bribery policy Risk ManagementPolicy Dissemination of material events Policy Documents preservation policy Monitoringand Reporting of Trading by Insiders Code of Internal Procedures and conduct forRegulating monitoring and reporting of trading by Insiders Code of Practices andProcedures for Fair Disclosures Policy on Prevention of Fraud and Internal FinancialControl Policy and such other procedures for ensuring the orderly and efficient conduct ofits business for safeguarding of its assets the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.

The Company recognises Internal Financial Controls cannot provide absolute assurance ofachieving financial operational and compliance reporting objectives because of itsinherent limitations. Also projections of any evaluation of the Internal FinancialControls to future periods are subject to the risk that the Internal Financial Control maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate. Accordingly regular audits and reviewprocesses ensure that such systems are reinforced on an ongoing basis.

Names of Companies which have become or ceased to be Company's Subsidiaries JointVentures or Associate Companies during the year

During the Financial Year no Company has become or ceased to be Company's SubsidiaryJoint Venture or Associate Company.

Change in the nature of business

There has been no change in the nature of business of the Company.

The details of significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and Company's operations in future

There have been no significant material orders passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company and its futureoperations.

Material changes and commitments

There are no material changes and commitments affecting the financial position of theCompany which occurred between the Financial Year ended December 31 2019 to which theFinancial Statements relates and the date of signing of this report.

Financial Year of the Company

The Company has wholly owned subsidiary Companies situated in India and outside India.The Companies situated outside India follow the Financial Year from January 1 to December31 and they contribute significant revenue to the consolidated revenue of the Company andtheir statutory financials tax filings are also made on this basis in the respectivejurisdictions where they are registered. A common Financial Year of the Company and itsSubsidiary Companies has synergies in closing of accounts compilation and disclosure ofdata internal control assessment and audit thereof and preparation of ConsolidatedFinancial Statements hence the Company is following the Financial Year from January 1 toDecember 31.

The Company Law Board vide its order dated October 16 2015 permitted the Company tofollow the Financial Year from January 1 to December 31.

Business Responsibility Report

The ‘Business Responsibility Report' (BRR) of the Company for the year endedDecember 31 2019 forms part of this Annual Report as required under Regulation 34(2)(f)of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. (Annexure- 10).

Nomination and Remuneration policy

In pursuance of the Company's policy to consider human resources as its invaluableassets to pay equitable remuneration to all Directors Key Managerial Personnel (KMP) andemployees of the Company to harmonize the aspirations of human resources consistent withthe goals of the Company and in terms of the provisions of the Companies Act 2013 and theSEBI (LODR) Regulations 2015 as amended from time to time the policy on nomination andremuneration of Directors

Key Managerial Personnel and Senior Management has been formulated.

Nomination and Remuneration policy of the Company forms part of this Annual Report.(Annexure - 11) and the policy is also available on the Company's website at:https://rain- industries.com/investors/#policies.

Human Resources

The Company believes that the quality of its employees is the key to its success and iscommitted to providing necessary human resource development and training opportunities toequip employees with additional skills to enable them to adapt to contemporarytechnological advancements.

Industrial relations during the year continued to be cordial and the Company iscommitted to maintain good industrial relations through effective communication meetingsand negotiation.

Prevention of Sexual Harassment

The Company has adopted policy on Prevention of Sexual Harassment of Women at Workplacein accordance with the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013.

The Company has not received any complaints during the year.

The Company regularly conducts awareness programs for its employees.

The following is a summary of sexual harassment complaints received and disposed offduring the year:

Sl. No. Particulars Status of the No. of complaints received and disposed off
1 Number of complaints on Sexual harassment received Nil
2 Number of Complaints disposed off during the year Not Applicable
3 Number of cases pending for more than ninety days Not Applicable
4 Number of workshops or awareness programme against sexual harassment carried out The Company regularly conducts necessary awareness programmes for its employees
5 Nature of action taken by the employer or district officer Not Applicable

Constitution of Internal Complaints Committee under the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013

The Company has constituted an Internal Complaints Committee under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. TheCompany has not received any complaints during the year.

Initiatives for Stakeholder and Customer Relationship

The Company has an effective Investor Relations programme ("IR") throughwhich the company continuously interacts with the investor community across variouschannels (Periodic Earnings Calls Individual Meetings Participation in one-on- oneinteractions and group meetings). The Company ensures that critical information about theCompany is available to all the investors by submitting all such information to the StockExchanges and also uploading the information on the Company's website under the Investorssection.

The company strives to adopt emerging best practices in IR and building a relationshipof mutual understanding with investors and analysts.

We place our customers at the center of everything we do aiming to provide relevantproducts effortlessly through the channels they choose. Development and investment ofrobust customer relationship management structures can be very costly. RAIN hastherefore taken great care in recognizing the processes and frameworks that requireattention to meet the targets of greater efficiency. It requires us to spend significantmanagement time but at the same time leads to better business and a better brand.

Customer satisfaction is the most important measure of success in our industry. All theeffort we put in everyday gets translated into our high Customer retention and repeatcustomer volume. We reach out to key influencers from our customers to get their feedbackabout our products. In addition we seek inputs on their future roadmap and priorities.This helps us measure the health of our relationships with our customers and what we cando to add value.

Environment Health and Safety

The Company considers it is essential to protect the Earth and limited naturalresources as well as the health and wellbeing of every person.

The Company strives to achieve safety health and environmental excellence in allaspects of its business activities. Acting responsibly with a focus on safety health andthe environment to be part of the Company's DNA.

In line with the ‘Go Green' philosophy the Company is continuously adopting newtechniques to eliminate and minimize the environmental impact. Various projects have beenimplemented by the Company to use alternate sources of energy wherever possible.

The Company does not just talk about ‘sustainability'; it follows in true letterand spirit. Sustainability is about how RAIN operates. RAIN strives to promote circulareconomy and deliver societal value. RAIN's approach is to innovate collaborate andeducate communities.

With an intensive focus on safety we have achieved an exponential decline in our totalrecordable injury rate (TRIR) which has resulted in the avoidance of approximately 163recordable incidents between 2015 and 2019. The total first-aid rate has significantlydeclined to 0.48 in 2019. Today our safety performance exceeds the industry benchmark (USBureau of Labor Statistics) to be comparable with best-in-class companies.

We firmly believe that we can progress only as fast as the successful implementationand acceptance of our safety programmes and initiatives. While our TRIR of 0.29 in 2019was a company record we will only be satisfied by becoming a zero- incidentsorganisation.

Our aim is to build a more mature and sustainable safety culture that will allow us toincrease our productivity and operational discipline and facilitate highly competitiveorganic growth. Our safety culture is centrally driven with a global Safety Health andEnvironment (SHE) organisation steering the company-wide programmes.

Occupational health is a key aspect of RAIN's safety activities. Currently there areseveral health programmes initiated at each site and location including global healthdays with dedicated initiatives.

Process safety is an integral part of our mission to operate in the safest mannerpossible by increasing the efficiency and reliability of our operations.

Compliance with Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India.

Prevention of Insider Trading Code

As per SEBI (Prohibition of Insider Trading) Regulation 2015 the Company has adopteda Code of Conduct for Prevention of Insider Trading. The Company has appointed Mr. S.Venkat Ramana Reddy Company Secretary as Compliance Officer who is responsible forsetting forth procedures and implementing of the code for trading in the Company'ssecurities. During the year under review there has been due compliance with the saidcode.

Acknowledgements

We express our sincere appreciation and thank our valued Shareholders CustomersBankers Business Partners/Associates Financial Institutions Insurance CompaniesCentral and State Government Departments for their continued support and encouragement tothe Company.

We are pleased to record our appreciation of the sincere and dedicated services of theemployees and workmen at all levels.

On behalf of the Board of Directors
for Rain Industries Limited
N. Radhakrishna Reddy Jagan Mohan Reddy Nellore
Place: Hyderabad Managing Director Director
Date: February 28 2020 DIN:00021052 DIN: 00017633

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