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Somany Ceramics Ltd.

BSE: 531548 Sector: Consumer
NSE: SOMANYCERA ISIN Code: INE355A01028
BSE 00:00 | 26 Feb 435.20 -12.15
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NSE 00:00 | 26 Feb 436.95 -11.55
(-2.58%)
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OPEN 445.00
PREVIOUS CLOSE 447.35
VOLUME 5718
52-Week high 453.00
52-Week low 77.00
P/E 93.59
Mkt Cap.(Rs cr) 1,845
Buy Price 435.20
Buy Qty 23.00
Sell Price 440.00
Sell Qty 36.00
OPEN 445.00
CLOSE 447.35
VOLUME 5718
52-Week high 453.00
52-Week low 77.00
P/E 93.59
Mkt Cap.(Rs cr) 1,845
Buy Price 435.20
Buy Qty 23.00
Sell Price 440.00
Sell Qty 36.00

Somany Ceramics Ltd. (SOMANYCERA) - Director Report

Company director report

Dear Members

Yours Directors have pleasure in presenting the 52nd AnnualReport together with the Annual Audited Financial Statements of the Company for the yearended March 31 2020.

FINANCIAL SUMMARY

Particulars Standalone Consolidated
Year ended Year ended Year ended Year ended
March 31 2020 March 31 2019 March 31 2020 March 31 2019
Revenue 159525.06 169554.98 161007.10 171505.40
Profit Before Depreciation Interest and Taxes 9160.13 13638.62 14412.30 18251.03
Profit before Tax (after Exceptional item) 117.02 7185.51 958.03 8009.51
Tax Expenses (1209.20) 2555.84 (992.25) 2684.46
Profit After Tax 1326.22 4629.67 1950.28 5325.05
Non-controlling Interests - - 450.03 693.39
Profit After Tax (attributable to controlling interest) 1326.22 4629.67 1500.25 4631.66
Transferred to General Reserve - - - -

FINANCIAL REVIEW

(The financial discussion is based on Standalone Financial Statements)

The year under review (FY20) continued to be a challenging year foryour Company because of the overall economic slowdown. However the year was furtherimpacted due to the outbreak of the novel corona virus (COVID-19) in March 2020 in thecountry. This resulted in a significant impact on the financial performance of yourCompany in general and for the quarter ended March 31 2020 in particular.

Due to this unprecedented global pandemic our revenue decreased toRs.159525.06 Lakhs in FY20 from Rs.169554.98 Lakhs in FY19. The Earnings beforeInterest Depreciation and Tax (EBIDTA) Profit before Tax (PBT) excluding Exceptionalitems and Profit after Tax (PAT) for the year under review were Rs.9160.13 LakhsRs.2735.28 Lakhs and Rs.1326.22 Lakhs respectively. Compared to the previous fiscalEBITDA came down by 32.8% mainly due to lower sales; PBT (before Exceptional Item) reducedby 65.4% on account of lower sales and higher depreciation on a larger gross block. TheCompany's PAT reduced by 71.3% compared to the previous year standing at Rs.1326.22 Lakhs.

On the Balance Sheet front your Company's Net Worth decreased toRs.58374.76 Lakhs in FY20 compared to Rs.59208.80 Lakhs in FY19. The

Company's total debt remained at similar level at Rs.28051.63Lakhs compared to Rs.28398.19 Lakhs during FY20. The Net block (including capitalwork-in-progress) of your Company increased to Rs.44137.22 Lakhs during FY20 as comparedto Rs.39640.39 Lakhs during FY19 primarily due to the investments made in the plant andequipment and recognition of right of use assets. The long-term investment increasedmarginally to Rs.6468.01 Lakhs in FY20 from Rs.6368.01 Lakhs in FY19 due to additionalinvestment in a subsidiary. The Company's net current assets decreased toRs.39322.70 Lakhs during FY20 from Rs.44482.28 Lakhs during FY19 mainly due to adecrease in total receivables.

GLOBAL HEALTH PANDEMIC FROM COVID-19

In view of the Novel Coronavirus pandemic (COVID-19) social distancingwas enforced as a result of which our factories offices and showrooms operated withminimal staff. In keeping with its employee-safety first approach the Company institutedmeasures to trace all employees and assure them of their well-being. Our HR and IT teamsreacted with speed and efficiency and leveraged technology to shift the workforce to anentirely new ‘work-from-home' model wherever practicable. Proactive preparationswere done in our work locations during this transition to ensure that our factoriesoffices and showrooms remained safe.

Policy changes related to working from home and IT infrastructuresupport were rolled out to help our employees shift to this new work paradigm. Continuouscommunication on the latest updates played a key role in enabling our employees to stay ontop of the evolving situation.

Several initiatives were rolled out to make teams and managerseffective while working from different locations. Our HR launched a series of initiativesrelated to COVID-19 awareness and a new remote way of working with a focus on the healthand wellness of employees. The Company has been implementing phased and safereturn-to-work place as per the relaxations during the lockdown.

As a responsible member of the communities that it operates in theCompany contributed to various COVID-19 relief and monitoring programs.

There was a significant impact on account of demand destruction inthe short term. However the management believes that there may not be a significantimpact of Covid-19 pandemic on the financial position and performance of the Company inthe long term. Further the Company's focus on liquidity and acceleration in costoptimization initiatives would help in navigating any near-term challenges in the demandenvironment.

CORPORATE HIGHLIGHTS

Access to Capacity

During the year under review your Company had access to ~63 millionsquare meters (msm) of tiles mainly through its own plants (26.28 msm) throughsubsidiaries/associates (26.39 msm) and through other outsourced partners (~10 msm). Inthe Bathware segment your Company had manufacturing capacity of ~1.15 million pieces perannum of sanitaryware and ~0.65 million pieces per annum of bath fitting items in itssubsidiaries.

Capital Expenditure

Your Company continued to invest in expanding and upgrading its plantand machinery and infrastructure. During the year under review one old line at Kadi platwas revamped completely resulting in a conversion of existing low value-added capacityinto value-added. Gross block increased by Rs.10109.50 Lakhs (previous year Rs.3682.75Lakhs) on account of addition in fixed assets.

Branding and Distribution

Your company maintained a positive brand index. Mr. Salman Khan wasintroduced as Brand ambassador and a new TV campaign was launched with a tagline‘Zameen Se Judey' on August 31 2019 and subsequently three TV campaigns werelaunched across the year each spanning 4-5 weeks. The TV campaigns had spots aired acrossleading GEC – Star Plus Colors Sony News – Aajtak ABP News News 18 IndiaZee News and regional news channels Asianet News Polimer News Mathrubhumi News and manymore.

To grab more eyeballs certain spots were taken in key prime time showslike Kapil Sharma Show KBC and Bigg Boss. Additionally we sponsored big ticketproperties in Hindi News like ‘Special Report' and ‘DNA'.

In print advertising more than 130 print advertisements were taken inFY 2019-20. The average circulation being 75000+ across various publications namelyArchitectural Digest BBC Good Homes Elle Dcor India Today Homes Jagran SakhiFemina Forbes Veedu and many more.

In line with changing consumer behaviour your company updated andmaintained all SKUs on the Somany app and website. It reached out to customers throughpush notifications and added new features in the tile visualizer. Further the companyengaged with consumers on digital platforms through banner ads on high traffic websiteslike YouTube Cricbuzz Zee News and NDTV. Along with this sponsored ads were run onsearch and display networks (campaign based brand-based and product-based). The Google MyBusiness (Somany Experience Center listing on Google) and the Zameen Se Judey Campaign waspromoted on YouTube Social Media Website and other online platforms. Lead generationcampaigns were run on Indiamart along with showroom walkthroughs.

Moving ahead in strengthening the distribution network and expandingyour Company's footprints we now have 362 franchise outlets. Your Company recentlyopened company-owned-company-operated (COCO) at Morbi spread over 20000-sq ft comprisingthe display of the entire Tiles and Bathware products.

For brand visibility the company covered approximately 2000 dealers andmore than 7000 sub dealers counters with ZSJ campaign Branding POSM and standees. Yourcompany conducted several dealer meets including new product launch across locations. Tocapture customers and create top-of-mind recall airport advertising was continued .

Your company launched Water Heaters in the Bathware division during theyear which got a good response from the market. The range comprised varied offerings likeInstant water heaters and Storage water heaters with capacity ranging from 3 to 50 litres.

INDIAN ECONOMY & INDUSTRY SCENARIO AND OUTLOOK

Economy

During FY20 overall economic growth remained under pressure which wasaggravated due to the outbreak of COVID-19 towards the end of financial year. The Indianeconomy slowed to 4.2% growth during the year compared to 6.1% growth in FY19. Howeverthe government took numerous measures like the announcement of various infrastructureprojects (National Infrastructure Pipeline) capital infusion into the banking sector andreduction in corporate tax rates etc. to counter the slowdown.

Going forward the economic scenario likely to be impacted in shortterm even though the government has taken various steps in terms of stimulus and economicreforms to boost the economy against the COVID-19 effect including the ambitious missionof self-reliant India (Atmanirbhar Bharat).

Industry

Manufacturers within the tiles sanitaryware and bathroom fittingsindustry have been facing continuous a challenge due to sluggish demand and mutedperformance. The proposed improvements towards the implementation of GST by implementinge-invoicing could act as a game-changer and consequently reduce tax evasion by unorganizedplayers and aid the market share of organised players by creating a level playing field.

Although the short-term outlook seems gloomy your company is optimisticof medium to long term prospects in view of several government initiatives for encouraginginfrastructure development and favourable demographics including increasing urbanizationexpected to drive the offtake in the tiles sanitaryware and bathroom fittings industry .

DIVIDEND

During the year based on the Company's performance your Board ofDirectors declared and paid interim dividend of 100% i.e. Rs.2.00 per equity share onMarch 13 2020. The Board do not recommend any final dividend for the Financial Year2019-20.

DIVIDEND DISTRIBUTION POLICY

Pursuant to Regulation 43A of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the dividend declared by the Company is as per thedividend distribution policy adopted by the Company in the year 2016-17 which is asfollows:

• The Company was incorporated on January 20 1968 and started itscommercial production in 1972. The company has been paying dividend continuously since1974 except for the year 2002-03 to 2006-07.

• Dividend pay-out is decided on the basis of macro-economicfactors expected future cash flows and future capital needs for expansion of productioncapacities of the company from time to time and keeping in view contingencies for meetingunforeseen financial obligation of the Company.

The Dividend Distribution policy is also available on the website ofthe Company at the web link:

https://www.somanyceramics.com/pub/media/investorrelation/d/i/dividend_distribution_policy_scl.pdf

UTILISATION OF PROCEEDS ON ISSUE OF SHARES

Out of Rs.11999.97 Lakhs raised through qualified institutionsplacement of equity shares in December 2015 the Company has so far utilized Rs.7170.66Lakhs (including issue expenses of Rs.307.34 Lakhs) for the purpose the funds were soraised and balance Rs.4829.31 Lakhs has been temporarily invested mainly in debtinstruments/funds.

PUBLIC DEPOSITS

Your Company has not accepted any deposits within the meaning ofSection 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposits)Rules 2014.

SCHEME OF AMALGAMATION

A Scheme of Amalgamation of Bhilwara Holdings Limited SarvottamVanijya Limited and Scope Vinimoy Private Limited with Somany Ceramics Limited ("theCompany") and their respective Shareholders from the appointed date April 1 2018 wasfiled with National Company Law Tribunal Kolkata("NCLT") in the previous year.The said scheme was sanctioned by NCLT on September 4 2019 accordingly impact of thesame has been considered in the financials of current year. Further figures for theprevious year have been recasted giving effect to the said scheme w.e.f. above appointeddate which has no material impact.

Further the Board at its meeting held on August 22 2019 approvedscheme of amalgamation of Schablona India Limited with the company from the appointed dateApril 1 2019. SEBI has approved the said scheme. Necessary application is in process tofile before Hon'ble National Company Law Tribunal (NCLT) for its approval to the saidscheme.

SUBSIDIARY / ASSOCIATE / JOINT VENTURE COMPANIES

During the year the Board of Directors reviewed the affairs of itssubsidiaries and associate companies. In accordance with Section 129(3) of the CompaniesAct 2013 we have prepared consolidated financial statements of the Companyincorporating financials of all its subsidiaries and associate companies which forms partof this Annual Report.

In accordance with Section 136 of the Companies Act 2013 the auditedfinancial statements including the consolidated financial statements and relatedinformation of the Company and audited accounts of each of its subsidiaries are availableon Company's website http://www. somanyceramics.com. These documents will also beavailable for inspection at our registered office at 2 Red Cross Place Kolkata - 700001India between 3:00 p.m. and 5:00 p.m. in working days till the date of ensuing AGM.

The statement required under Section 134 of the Companies Act 2013 inrespect of the subsidiary companies associates and joint venture is provided at Annexure– 1 to this report which comprises performance and financial position of each ofsubsidiaries associates and joint venture.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All transactions entered with Related Parties during the financial yearwere on arm's length basis and were in the ordinary course of business. Furtherthere are no materially significant related party transactions during the year underreview made by the Company with Promoters Directors Key Managerial Personnel or otherdesignated persons which may have potential conflict with the interest of the Company atlarge. Accordingly the disclosure of related party transactions as required under Section134(3)(h) of the Companies Act 2013 in Form AOC-2 is not required. Your directors drawattention of the shareholders to the financial statements which set out related partydisclosures.

Related Party Transactions Policy as approved by the Board has beenuploaded on the Company's website www.somanyceramics.com at the web link:https://www.somanyceramics.com/pub/media/investorrelation/ p/o/policy_related_party_revised_2019.pdf

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 are given in the notes to Financial Statements (Standalone) forming apart of this annual report.

RISK MANAGEMENT

The Company has Risk Management Systems in place in accordance toSection 134(3)(n) of the Companies Act 2013. Risk Management Policy of the Company isalso in place and necessary steps have been taken from time to time to strengthen itfurther. The Risk Management process is followed to identify assess and prioritise risksthat need to be minimised monitored and mitigated is quite elaborate. These measures helpin reducing and controlling the impact of adverse events and maximise the realisation ofopportunities. Major risks are identified systematically and mitigated on a continuousbasis. A few of the identified risks pertain to competitive intensity and cost volatility.

During the year Mentor Financial Services Private Limited("Mentor") issued a cheque of Rs.2618.26 Lakhs against amounts due. This chequebounced owing to insufficient funds. Your Company has issued demand notices to Mentor itsdirectors and authorized signatories for repayment. In view of the continued default theCompany has also filed criminal complaint against Mentor and its directors. As an abundantcaution the Company has accounted for the cheque bouncing event in the financialstatements.

INVESTOR EDUCATION & PROTECTION FUND (IEPF)

The Company is required to transfer dividends which remained unpaid/unclaimed for a period of seven years to the IEPF established by the Central Government.The unpaid/ unclaimed dividend for the year ended March 31

2013 is due for transfer to IEPF on or after October 7 2020.

During the period under review the Company transferred 15065 Equityshares of Rs.2/- each dividends of which remained unclaimed for a consecutive seven yearsi.e. from 2011-12 to 2018-19 to Investor Education and Protection Fund (IEPF) pursuant toSection 124 (6) of the Companies Act 2013 within the scheduled time.

STATEMENT ON COMPLIANCES OF APPLICABLE SECRETARIAL STANDARDS

In requirement of para 9 of revised Secretarial Standards on BoardMeeting i.e. SS-1 your Directors states that they have devised proper systems to ensurecompliance with the provisions of all applicable Secretarial Standards and that suchsystems are adequate and operating effectively.

AUDITORS' REPORT

All the items on which the Auditors' have commented in theirreport are self-explanatory and suitably explained in the Notes to the Accounts. TheAuditors' Report to the Shareholders for the year under review does not contain anyqualifications reservation or adverse remark or disclaimer.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of the knowledge and belief of the Directors of the Companyand according to the information and explanations obtained by them your Directors makethe following statement in terms of Section 134(3) (c) of the Companies Act 2013:

a) In the preparation of the annual accounts for the year ended March31 2020 the applicable accounting standards read with requirements set out underSchedule III to the Act had been followed with proper explanation and there are nomaterial departures from the same;

b) The Directors' had selected such accounting policies appliedthem consistently and made judgments and estimates that were reasonable and prudent so asto give a true and fair view of the state of affairs of the Company as at March 31 2020and of the profit of the Company for the year ended on that date.

c) The Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities.

d) The Directors had prepared the annual accounts on a going concernbasis.

e) The Directors have laid down internal financial controls to befollowed by the Company and that such internal financial controls were adequate and areoperating effectively; and

f) The Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively.

CONSOLIDATED FINANCIAL RESULTS

As required by Regulation 33 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the consolidated financial statements havebeen prepared in accordance with applicable Accounting Standards. The audited consolidatedfinancial statements together with Auditors' Report forms part of this Annual Report.

The consolidated net profit of your Company was Rs.1500.25 Lakhs inthe year under review compared to Rs.4631.66 Lakhs in the corresponding previous year.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Ghanshyam Girdharbhai Trivedi retires by rotation at the ensuingAnnual General Meeting and being eligible has offered himself for re-appointment.

Mr. R. K. Daga and Dr. Y. K. Alagh Independent Directors of theCompany ceased to be the directors of the Company w.e.f. April 1 2019 owing to attainingthe age of 75 years. The Board places on record contributions made during their tenure ofdirectorship in the Company.

Mr. Tuljaram Maheshwari Chief Executive Officer and Key ManagerialPersonnel of the Company resigned from the Company w.e.f. April 16 2019.

During the period under review the Company has appointed Mr. VineetAgarwal as an Independent Director and Mr. Tuljaram Maheshwari Non-Executive NonIndependent Director both with effect from May 1 2019.

Mr. Tuljaram Maheshwari Non- Executive Non Independent Director of theCompany resigned from the Directorship of the Company w.e.f. June 9 2020. The Boardplaces on record contribution made during his tenure of Directorship in the Company.

DELCARATION OF INDEPENDENCE

The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet the criteria of independence asprescribed both under sub-section (6) of section 149 of the Companies Act 2013 andRegulation 16(1) (b) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and also a declaration Rule 6 of the Companies (Appointment andQualifications of Directors) Rules 2014 amended as on date.

The Independent Director of the company have complied with the Code forIndependent Directors prescribed in Schedule IV to the Act.

Further as required under section 150(1) of the Companies Act 2013they have registered themselves as Independent Directors in the independent director databank. They shall pass the proficiency self-assessment test in due course in terms ofCompanies (Appointment and Qualifications of Directors) Rules 2014 (as amended).

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 evaluation iscarried out by the Board Nomination Remuneration Committee (NRC) and by the

Independent Directors. The Board has carried out an annual performanceevaluation of its own individual Directors including Independent Directors (excluding thedirector being evaluated) and its Committees.

Board evaluation was carried out on the basis of questionnaireprepared after considering various inputs received from the Directors covering variousaspects revealing the efficiency of the Board's functioning such as Development ofsuitable strategies and business plans size structure and expertise of the Board andtheir efforts to learn about the Company and its business obligations and governance.

Performance evaluation of every Director was carried out by Board andNomination & Remuneration Committee on parameters such as appropriateness ofqualification knowledge skills and experience time devoted to Board deliberations andparticipation in Board functioning extent of diversity in the knowledge and relatedindustry expertise attendance and participations in the meetings and workings thereof andinitiative to maintain high level of integrity & ethics.

Independent Directors had carried out performance evaluation ofNon-Independent Directors in their separate meeting the Board as a whole and performanceevaluation of Chairman was carried out taking into account the views of Executive andNon-Executive Directors.

The quality quantity and timeliness of flow of information between theCompany Management and the Board which is necessary for the Board to effectively andreasonably perform their duties were also evaluated in the said meeting.

The performance of Committees was evaluated on parameters such aswhether the Committees of the Board are appropriately constituted Committees has anappropriate number of meetings each year to accomplish all of its responsibilitiesCommittees maintain the confidentiality of its discussions and decisions Committeeconducts a self-evaluation at least annually Committee makes periodically reporting tothe Board along with its suggestions and recommendations.

Independent Director's performance evaluation was carried out onparameters such as Director upholds ethical standards of integrity the ability of thedirector to exercise objective and independent judgment in the best interest of Companythe level of confidentiality maintained. The Directors expressed their satisfaction withthe evaluation process.

The Board founded the evaluation satisfactory and no observations wereraised during the said evaluation in current year as well as in previous year.

NOMINATION AND REMUNERATION POLICY

Your Company has formulated the nomination and remuneration policy forits Directors Key Managerial Personnel and other Employees of the Company. This Policysets out the guiding principles for Nomination and Remuneration Committee of the Companyfor recommending to the Board the remuneration of the directors key managerial personnelSenior

Management and other employees of the Company.

The Nomination and Remuneration Committee shall identify and ascertainthe integrity qualification positive attributes expertise and experience of the personfor appointment as Director KMP or at Senior Management level and recommend to the Boardtheir appointment based upon the need of the Company.

Nomination and Remuneration policy covered the Nomination/ appointmentof Directors Key Managerial Personnel and Senior Management and other employees of theCompany Remuneration to Directors and Key Managerial Personnel Remuneration to ExecutiveDirectors and Key Managerial Personnel of the Company Remuneration to Non-ExecutiveDirectors and Remuneration to Senior Management and other employees of the Company.

The Nomination and Remuneration policy is available for thestakeholders at the website of the Company https://www.somanyceramics.com/pub/media/investorrelation/n/o/nomination_and_remuneration_policy_revised. pdf

MEETINGS OF THE BOARD

Ten (10) meetings of the Board of Directors Three (3) meetings ofNomination and Remuneration Committee Four (4) meetings of Stakeholders RelationshipCommittee and Five (5) meetings of Audit Committee were held during the year under reviewthe details of which are given in the Corporate Governance Report forming part of thisAnnual Report.

AUDIT COMMITTEE

Mr. R. K. Daga and Dr. Y. K. Alagh Independent Directors ceased to bethe directors of the Company w.e.f. April 1 2019 owing to attaining age of 75 years..

During the year under review the Audit Committee was reconstitutedw.e.f. May 1 2019 by the Board of Directors in their meeting dated April 30 2019 andMr. Rameshwar Singh Thakur was appointed as the Chairman of the Committee and Mr. VineetAgarwal was inducted as member of the Committee.

The Audit Committee was again reconstituted by the Board of Directorsin their meeting held on November 6 2019 upon resignation of Mr. Siddharath Bindra frommembership of Audit Committee. Thus the present constitution of the Audit Committee isMr. Rameshwar Singh Thakur Chairman of the Committee and Mr. Salil Singhal Mr. VineetAgarwal and Mr. Ghanshyam Girdharbhai Trivedi are other members of the Audit Committee.

All the recommendations made by the Audit Committee were accepted bythe Board.

AUDITORS

M/s. Singhi & Co. Chartered Accountants having Firm RegistrationNo.302049E were appointed as Statutory Auditors of the Company for a period of 5 (Five)consecutive years at the 49th Annual General Meeting

(AGM) held on August 25 2017 to hold office till the conclusion ofthe 54th AGM of the Company subject to ratification of their appointment atevery AGM in terms of first proviso to Section 139 of the Companies Act 2013 read withRule 3(7) of the Companies (Audit and Auditors) Rules 2014.

Further the members of the Company ratified the appointment of theStatutory Auditor for their remaining term of 4 consecutive years i.e. from the conclusionof the 50th Annual General Meeting till the conclusion of the 54thAnnual General Meeting of the Company without any further ratification by the Members interms of the provisions of the Companies Act 2013 at the 50th Annual GeneralMeeting of the Company.

SECRETARIAL AUDITOR AND THEIR REPORT

The Board had appointed M/s Pinchaa & Co. Company Secretarieshaving registration number P2016RJ051800 to conduct Secretarial Audit under the provisionsof Section 204 of the Companies Act 2013 for the financial year 2019-20. The SecretarialAudit Report for the financial year ended March 31 2020 is annexed and marked as Annexure– 2 to this Report. The Secretarial Audit Report does not contain any qualificationreservation or adverse remark.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3)(a) of the Companies Act 2013 anextract of the annual return in the prescribed format is appended as Annexure–3 tothis report and is also available in on the website of the Company at https://www.somanyceramics.com

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company implemented Corporate Social Responsibility Policy inaccordance with the provision of Section 135 of the Companies Act 2013 read with TheCompanies (Corporate Social Responsibility Policy) Rules 2014 on recommendation ofCorporate Social Responsibility Committee (CSR Committee) and approval of the Board ofDirectors of the Company.

CSR Committee undertakes CSR activities in accordance with itsCorporate Social Responsibility Policy (CSR Policy) uploaded on the Company's websiteat www.somanyceramics.com at the web link: https://www.somanyceramics.com/pub/media/investorrelation/s/c/scl-corporate-social-responsibility-policy.pdf

The CSR Committee comprises of four members namely Mr. Abhishek SomanyManaging Director is Chairman of the Committee and Mr. Salil Singhal Mr. SiddharathBindra and Mr. Ravinder Nath Independent Directors of the Company are other members of theCommittee.

The Company works primarily through H.L Somany Foundation to supportprojects in the areas of protecting / conserving national heritage restoration ofhistorical sites promotion of art and culture animal welfare destitute care andrehabilitation environmental sustainability and ecological balance promoting educationenhancing vocational skills and promoting healthcare including preventive health care.

In fiscal 2020 the Company's CSR efforts included COVID-19 reliefalso. The 2% of the average net profit of the Company made during the three immediatelypreceding financial years comes out to be Rs.198.42 Lakhs. A report on CSR activities isprovided in Annexure – 4 to this report.

INTERNAL CONTROL SYSTEMS

The Company has an effective Internal Control System in placeconsidering the size scale and complexity of operations.

The internal control is supplemented by the detailed internal auditprogramme reviewed by management and by the Audit Committee and documented PoliciesSOPs Guidelines and Procedures.

The Internal Audit monitors and evaluates the efficacy and adequacy ofinternal control system in the company its compliance with operating systems accountingprocedures and policies at all locations of the company.

INTERNAL FINANCIAL CONTROL

The Company has an adequate Internal Financial Control System inaccordance with the Section 134(5)(e) of the Companies Act 2013 for ensuring the orderlyand efficient conduct of its business including adherence to company polices safeguardingof its assets prevention & deduction of frauds and errors accuracy &completeness of accounting records and Timely preparation of reliable financialinformation.

The standard controls defined in the IFC framework are reviewed by theInternal auditors and management concurrently to strengthen the Internal control system ofthe company by way of formulating new guidelines and incorporating necessary changes inthe SOP.

HUMAN RESOURCE (HR)

In the past year Somany invested efforts in strengthening its employerbrand by consistently improvising its various people practices creating e-channels forinformation sharing and established its employer brand presence by participating and bywinning one of the India's most prestigious award: Significant Excellence in HRpractices by Confederation of Indian Industry (CII). This hard-earned recognition not onlygave us confidence and trust in our people philosophy and processes but also encouraged usto reach milestones of Somany's journey of people excellence. As people are the realessence of our competitiveness this award has indeed taken us very closer to our long–aspired vision of Being the best employer in the Ceramics Industry'. Thismoment hasn't come in a few days months or years. This came after an era ofconsistent transformation led by our best-in-class talent force their innovativemind-sets technology learning excellence and strong focus on our team's commonvision.

We deeply analysed the demand of business and aligned our L&D goalsto address the existing skill gaps and business requirements. Regressive product know-howbuilding through well-planned online learning series made our learning program receptiveand impactful. Technology acted as a great business tool by enabling us to offer latestproduct updates or new business strategies to our large multi-locational employee base.With our increasing focus on data collection and analysis we have been able to developkey HR metrics based on business goals. These metrics display clear outcomes of ourefforts in terms of business productivity process effectiveness individual performanceand overall business results.

Based on valuable eye-opening business insights the Big Data generateswe will invest more time and efforts in enriching awareness and insights of modernanalytical tools and approaches in future. Going ahead in the near future we look forwardfor building an integrated HR module where each incoming and outgoing data of HRprocesses is seamlessly connecting with the business strategy and finally merging withbusiness outcomes.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Company has a continuous vigil mechanism in the form of WhistleBlower Policy in line with Regulation 22 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and in terms of Section 177(9) of the Companies Act 2013.The policy enables the stakeholders (including Directors and employees) to reportunethical behaviour actual or suspected fraud or violation of the Company's Code ofConduct.

The Policy provides adequate safeguards against victimization ofDirector(s)/ employee(s) and enable direct access to the Chairman of the Audit Committeein exceptional cases. The protected disclosures if any reported under this Policy areappropriately and expeditiously investigated by the Chairman. The details of the WhistleBlower Policy is also explained in the Corporate Governance Report and is also availableon the website of the Company at the weblink: https://www.somanyceramics.com/pub/media/investorrelation/s/c/scl_whistle_blower_policy-revised.pdf

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report forms integral part of thisAnnual Report.

CONSERVATION OF ENERGY RESEARCH AND

DEVELOPMENT TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy R&D technologyabsorption foreign exchange earnings and outgo as required under Section 134 of theCompanies Act 2013 read with the Companies (Accounts) Rules 2014 is annexed as Annexure– 5 forming part of this Report.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as requiredunder

Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are providedat Annexure – 6.

In terms of the provisions of Section 197(12) of the Companies Act2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 a statement showing the names of employees and otherparticulars of the top ten employees and employees drawing remuneration in excess of thelimits as provided in the said rules are set out in the Board's Report as an addendumthereto. However in terms of provisions of the first proviso to Section 136(1) of theCompanies Act 2013 the Annual Report is being sent to the members of the Companyexcluding the aforesaid information. The said information is available for inspection atthe Registered Office of the Company during working hours and any member interested inobtaining such information may write to the Company Secretary and the same will befurnished on request.

CORPORATE GOVERNANCE

Your Company has been following the principles and practices of goodCorporate Governance. A separate report on Corporate Governance and a certificate from theStatutory Auditors confirming compliance with the

Corporate Governance requirements forms part of this Report as Annexure– 7.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013

Your Company continue to follow robust policy on PreventionProhibition and Redressal of Sexual Harassment of Women at Workplace.

The Company has a Policy on Prevention Prohibition and Redressal ofSexual Harassment of Women at Workplace and matters connected therewith or incidentalthereto covering all the aspects as contained under "The Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Act 2013". The company hascomplied with the provision relating to the constitution of Internal Complaints Committeeunder the Sexual Harassment of Women at the Workplace (Prevention Prohibition andRedressal) Act 2013.

During the period under review the Company has not received anycomplaint under this Policy.

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