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Sumitomo Chemical India Ltd.

BSE: 542920 Sector: Agri and agri inputs
NSE: SUMICHEM ISIN Code: INE258G01013
BSE 00:00 | 26 May 432.50 9.45
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NSE 00:00 | 26 May 433.25 10.40
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OPEN 418.00
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VOLUME 44884
52-Week high 476.70
52-Week low 308.50
P/E 52.23
Mkt Cap.(Rs cr) 21,588
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 418.00
CLOSE 423.05
VOLUME 44884
52-Week high 476.70
52-Week low 308.50
P/E 52.23
Mkt Cap.(Rs cr) 21,588
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sumitomo Chemical India Ltd. (SUMICHEM) - Director Report

Company director report

TO THE MEMBERS

Your Directors have pleasure in presenting the Twenty-First Annual Report and theAudited Financial Statements of the Company for the year ended 31st March 2021.

1. FINANCIAL RESULTS

The salient features of the Company's working are:

( Rs in Million)
2020-21 2019-20
Gross Profit for the year 4996.80 3082.04
Less: Depreciation and amortization expense 465.56 409.23
Profit before tax 4531.24 2672.81
Less: Tax expense (current and deferred tax) 1078.27 616.55
Profit after tax 3452.97 2056.26
Add: Balance of Retained earnings brought forward from the
previous year 977.09 2493.24
Available retained earnings 4430.06 4549.50
Other Comprehensive Income 12.89 (60.19)
4442.95 4489.31
Dividend Paid during the year 274.53 215.28
Tax on Dividend 46.94
Transfer to General Reserve 2750.00 3250.00
Retained earnings carried forward to the next year 1418.42 977.09

2. DIVIDEND

Your Directors have recommended a dividend of Rs 0.80 (previous year Rs 0.55) perequity share on 499145736 shares of

Rs10 each aggregating Rs 399.32 million (previous year Rs 274.53 million). TheDirectors consider this appropriate having regard to the requirements for funds forbusiness and future growth of the Company.

3. OPERATIONS

During the year under review the sales increased from Rs 23898.24 million in theprevious year to Rs 26210.17 million. Domestic sales turnover increased to Rs 21814.53million from Rs 19231.05 million in the previous year. Export turnover decreased from Rs4667.19 million in the previous year to Rs 4395.64 million in the year under review. Thereduction in export sales was mainly due to improved demand and attractive pricerealization in the domestic market as also the challenges in production and logisticsposed by the pandemic and restrictions imposed in its wake in the first few months in2020-21. After making provision for depreciation interest and Tax the Net profit duringthe year under report amounts to Rs 3452.97 million as against Rs 2056.26 million in theprevious year.

4. COVID – 19

In the first half of the financial year 2020-21 Covid-19 pandemic caused severe impactglobally and in India. India announced country-wide strict lock-down in the last week ofMarch 2020. The unlocking process was undertaken in a gradual manner in the next fewmonths. Though the Company's operations were classified as ‘essential' the Companyhad to operate under the lock-down guidelines. Due to the Company's emphasis on safety anddue to several difficulties faced at operational level the Company's manufacturingoperations were impacted initially. The Company put in the best possible efforts tominimize the negative impact on the operations. Overall production in the financial year2020-21 is marginally lower due to safety precautions taken in line with restrictionsimposed on account of Covid-19. The level of operations improved gradually over the periodduring the financial year. The demand side factors remained largely positive during theyear.By the second half of the year all the functions including sales and distributionprocurement supply chain logistics and corporate functions became near-normal dulyfollowing safety guidelines and without any material adverse impact. Unfortunately thefinancial year 2021-22 has begun with outbreak of second wave of Covid-19 which engulfedalmost the entire country in the first two months of the year. Covid-19 and its severalvariants including B .1.617 (double mutant variant first identified in India) areturning out more contagious spreading faster and leading to medical emergencies andcasualties. Unfortunately unlike the first wave of Covid-19 last year the second wavehas spread to rural and semi-rural areas in addition to large cities and towns. SeveralCompany employees across categories and locations their family members and the Company'sbusiness partners / their employees were infected by the virus and some fatalitiesreported. Various state governments have imposed lockdown-like restrictions to restrictspread of the virus. These restrictions have adversely impacted economic and commercialactivities in the country. The Company's manufacturing operations though categorized as‘essential' have also been impacted but not materially. In view of virus spread inrural and semi-rural areas close to the upcoming monsoon season from June which is one ofthe key factors for the industry one has to watch out for its overall impact on theindustry and the Company in the next few days though at present the impact for Company isnot material. The Company continues to make efforts to minimise adverse impact on itsoperations and performance.

5. DIGITAL TRANSFORMATION – INTEGRATED SAP S4 HANA

During the financial year 2020-21 as a part of the initiatives for digitaltransformation the Company started and completed integration of different legacy SAPversions in use. Accordingly effective 2021-22 all the operations of the Company acrossall locations in the country have migrated to the newly configured latest version of SAPSH4 HANA including its various advanced modules. The integrated system is expected tofacilitate seamless operations smooth realigned processes and integrated reporting andinformation management system. In view of changing technological landscape across theglobe and the industry and to be future-ready technologically the Company plans tocontinue the digital transformation journey during the financial year 2021-22 byimplementing additional modules including SAP Integrated Business Planning SAP AdvancedAnalytics Cloud Integrated PMS modules Spend Management modules and dealer portal.

6. NEW PRODUCTS/IMPROVEMENTS/EXPANSIONS

In the year under review your Company continued to pursue initiatives to optimizeutilization of its manufacturing facilities and also expand manufacturing capacities tomeet demand. During the year your Company expanded manufacturing capacities for its onetechnical grade product introduced a new formulation product and commercialized one newformulated product. Your Company continues its efforts in the area of product and processimprovement for enhancing yields and reducing manufacturing costs for staying innovativeand competitive. Your Company also continues to focus on reducing effluent load andadopting innovative effluent treatment processes as well as on energy conservation andenergy cost reduction.

The Company continues to maintain ISO:9001:2015 ISO14001:2015 and OHSAS18001:2007certifications for the manufacturing sites at Bhavnagar Gajod and Silvassa for continualimprovement in quality health safety and environment. The Company's Tarapur and Vapiplants hold ISO:9001:2015 ISO14001:2015 and ISO 45001:2018 certifications. The quality ofproducts is maintained and upgraded to the applicable national and international standardsthrough rigorous pursuit of the quality management systems. The Company continues to enjoythe reputation of a consistent and reliable quality supplier.

7. OUTLOOK

Though the International Monetary Fund raised growth forecast for India to 12.5%resurgent Covid-19 spread threatens to undermine the country's economic recovery. Variousmeasures of the Government under Make in India and other initiatives have begun to showpositive results. Use of agrochemicals including pest-control products continues togrow. India is the second biggest consumer of agrochemical products in the world afterChina.

Due to outbreak of the second wave of Covid-19 in the financial year 2021-22 theIndustry is likely to witness situation similar to the first-half of preceding financialyear like lockdown restrictions on people movements and economic activities logisticsissues increase in cost of raw materials transportation and inputs at least for a fewmonths. In 2020-21 despite all the odds the agrochemicals sector grew and agriculturalactivities remained largely unaffected. The Company's business and products fall under‘essential commodities' hence it expects to produce and deliver products and servicesto the market and the farmers without material interruption. Last year the Industry wasable to pass on the cost increases to the market. In spite of the pandemic which islikely to affect the normal life for at least few months domestic demand foragrochemicals is expected to remain elevated with favourable agronomical conditions inAgriculture sector like normal monsoon forecast by Indian Meteorological Department goodfarm-production in the previous year and good output prices which will translate in toincrease in area under-cultivation for crops like cotton soybean paddy and groundnutwhich are major agrochemicals consuming crops.

Your Company's efforts in devising and implementing business growth strategies andimproving productivity across the resources and assets and presence of strong productbrands should serve it well in the times to come. With new product launches planned forthe year and for the future years regular revenue growth is expected to continue in thecoming years. During the year the Central Government has issued a notification expressingits intention that Glyphosate a weedicide and an important product for the Company willbe allowed to be used only through ‘pest control operators'. The Company otherindustry players and the industry associations have filed appeals before the appellateauthority against the proposal as the proposal is not feasible and not implementable owingto ground realities. Hearing in the matter is pending. The proposal if implemented willhave impact only on domestic use of Glyphosate. It will not impact exports.

8. SAFETY HEALTH AND ENVIRONMENT

The Company continues to play the role of a responsible corporate citizen in thefulfillment of its aims of protecting and enriching the environment and human health andsafety. In the Covid-19 situation the Company followed and adopted recommended measuresand protocols to safeguard health of its personnel (including contract and contractors'employees) and other people and stakeholders connected with its operations.

The Company has adopted Responsible Care Policy and its initiatives demonstrate itscommitment towards comprehensive environment health and safety of all stake holders andaims at achieving and sustaining high standards of performance. The Company continues tohold and maintain ISO-14001:2015 and OHSAS18001:2007 certifications which help incontinuous improvement in the field of safety health and environment. Safety audittraining programmes and other safety management processes and programmes are carried outat regular intervals. The Company has also decided to make positive contribution to thesociety by working for reduction of greenhouse gases and create sustainable economic andsocial values. This initiative is being implemented through ‘Science Based Targets'under the guidance of the parent company.

9. EDUCATION LEARNING AND HUMAN RESOURCES

Learning and development is one of the top priorities for the Company. The Companyfocuses on enhancing knowledge skills and capabilities at all levels strengthening theleadership talent effective succession planning and fostering employee engagement. YourCompany has taken systematic and detailed development initiatives to build right skillsand competencies as well as reskilling of its existing and new employees to meet thepresent and future needs of its business. Your Company endeavors to ensure that it hasrequisite competencies to meet the new challenges in the ever changing businessenvironment. The employee relations in the Company continued to remain healthy cordialand progressive in the year under review. Your Directors wish to record their appreciationof the continued support efforts and cooperation of the employees at all levelsespecially their contribution in the face of Covid-19 pandemic and restrictions imposed onmovement of people and materials.

Your Company is making continuous and intensive efforts to educate farmers with variousaspects of farming latest technology and also ensuring to educate the efficient use ofcrop protection chemicals for improving/ increasing crop productivity.

10. INSURANCE

The Company continues to carry adequate insurance cover for all its assets againstforeseeable perils like fire flood earthquake etc. and continues to maintain theLiability Policy as per the provisions of the Public Liability Insurance Act.

11. SUBSIDIARIES

Highlights of the financial performance of Excel Crop Care (Africa) Limited Tanzaniaand Excel Crop Care (Europe) NV Belgium the subsidiary companies are as follows:

Excel Crop Care (Africa) Limited Tanzania

(Tanzania Schillings in million)

2020-21 2019-20
Revenue 2433 2571
Profit before Tax 314 138
Profit after Tax 202 78
Excel Crop Care (Europe) NV Belgium
(Euros in thousand)
2020-21 2019-20
Operating Loss 98 99
Loss 111 101

Excel Crop Care (Africa) Limited Tanzania has declared a dividend of TanzaniaSchillings 100000 per share i.e. 100% for the year 2020-21.

Excel Crop Care (Europe) NV Belgium did not have sales turnover during FY 2020-21.During the year 2020-21 Excel Crop Care (Europe) NV Belgium distributed intermediarydividend aggregating Euro 31500 at the rate of Euro 315 per share i. e 50%. Theintermediary dividend was paid out of past retained profits.

The Financial Statements and the Reports of the Board of Directors and the Auditors ofthe Company's subsidiaries are posted on the Company's website: www.sumichem.co.in.

12. DISCLOSURE UNDER THE COMPANIES ACT 2013

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

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

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

Annual return as on 31st March 2020 in form MGT-7 filed with the Ministry of CorporateAffairs is available on the Company's website www.sumichem.co.in Annual return as on 31stMarch 2021 in form MGT-7 will also be posted on the Company's website after the same isfiled with the Ministry of Corporate Affairs.

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

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

d) Particulars of Loans Guarantees and Investments:

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

e) Related Party Transactions:

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

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

Pursuant to the provisions of Regulation 23 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("the said Regulations") allmaterial related party transactions require approval of the members through a resolution.The said Regulations define the term ‘material' to mean a transaction with a relatedparty which individually or taken together with previous transactions during a financialyear exceeds ten percent of the annual consolidated turnover of the Company as per thelast audited financial statement of the Company.

During the year the Company entered into transactions with Sumitomo Chemical CompanyLimited Japan the holding company which are considered ‘material transactions' interms of the said Regulations. At the annual general meeting held on 27th December 2019the shareholders have given approval by an Ordinary Resolution passed pursuant to theprovisions of Regulation 23 of the Regulations for the Company's transactions with itsholding company entered into during the Financial Year 2020-21.

The Company is seeking approval of the shareholders through an Ordinary Resolution atthe ensuing annual general meeting for the transactions entered into / proposed to beentered into with the holding company during the Financial Year 2021-22 up to an amountnot exceeding Rs 7000 million.

The Company had no transactions during F.Y.2020-21 requiring disclosure in the FormAOC-2 under the Companies Act 2013.

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

f) Business Risk Management:

During the financial year the Board has formed Risk Management Committee pursuant tothe provisions of Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 to identify and monitor risks faced by the Company.

The Committee deliberated on the major enterprise and business risks identified by themanagement analysis of their impact and mitigation measures for addressing the risks. Themajor risk areas relate to risks associated with material procurement and manufacturingoperations regulatory risks cyber security / IT related risks human resources relatedrisks currency risks credit risks mainly relating to exports and insurance adequacyrisks.

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

The Board has adopted a formal mechanism for evaluating its performance as well as thatof its Committees and individual Directors including performance of the Chairman of theBoard. As a part of this mechanism a structured questionnaire which has been approved bythe Company's Nomination and Remuneration Committee is used to carry out evaluation ofperformance of the Board Committees of Directors and individual Directors. Thequestionnaires take into consideration various criteria and factors.

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

On 21st June 2019 Gujarat Pollution Control Board ("GPCB") issued a noticeto Excel Crop Care Limited (ECCL) which amalgamated with the Company in FY 2019-20instructing it to close manufacturing operations of its Bhavnagar Plant. The notice wascaused as GPCB had found waste which was associated to a product which had beendiscontinued over 20 years back. ECCL submitted an action plan to GPCB for scientificdisposal of waste and agreed to undertake other remedial measures. Based on the actiontaken by ECCL and the Company in January 2021 GPCB has withdrawn its Closure Order.

i) Internal Financial Controls and their adequacy:

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

j) Performance of Subsidiaries:

Details of performance and financial position of the Subsidiaries are given in FormAOC-1 in Annexure III. The Company has no associate company.

k) Corporate Social Responsibility (CSR) initiatives:

The Company has formulated its Corporate Social Responsibility Policy which has beenposted on its website www.sumichem.co.in A brief outline of the Policy and theAnnual Report on CSR Activities is given in Annexure IV.

l) Particulars of Employees:

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

m) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rules madethereunder Mr. Prashant Diwan Practicing Company Secretary (FCS:1403; CP NO.1979)Mumbai was appointed Secretarial Auditor to conduct secretarial audit for the year ended31st March 2021. The Report of the Secretarial Auditor is attached as Annexure VI.As regards the compliance matter pointed out in the Secretarial Audit Report it may benoted that the affirmation to the effect that ‘the director appointed is not debarredor disqualified from holding directorship by SEBI MCA or any such other authority' wasmissed out inadvertently in the intimation letter sent to the stock exchanges.

n) Secretarial Standards:

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

13. DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board appointed Mr. Masanori Uzawa as Additional Non-Executive Non IndependentDirector at its meeting held on 10th July 2020. At the annual general meeting held on10th September 2020 the members have appointed Mr. Masanori Uzawa as a Director whoseoffice is liable to retire by rotation.

Mr. Sushil Marfatia and Mr. Tadashi Katayama Directors retire by rotation and beingeligible offer themselves for re-appointment.

14. DIRECTORS' RESPONSIBILITY STATEMENT

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

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and that no material departures have been made from the same; (b) they haveselected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year and of the profit of theCompany for that period; (c) they have 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) they have prepared the annual accounts on agoing concern basis; (e) they have laid down internal financial controls to be followed bythe Company and that such internal financial controls are adequate and are operatingeffectively; and (f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and are operatingeffectively.

15. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report prepared in the prescribed form pursuant to Regulation24 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 inrelation to initiatives taken from environmental social and governance perspective formspart of the Annual Report and is given in Annexure VII.

16. CORPORATE GOVERNANCE

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

17. SHAREHOLDING OF PROMOTERS AND PROMOTER GROUP

Sumitomo Chemical Company Limited the holding company and its Japan based subsidiarywere holding about 80.3% of the share capital of the Company. During the year the holdingcompany sold about 5 .3% of the share capital pursuant to the requirements of SecuritiesContracts (Regulation) Rules 1957 SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and circulars issued thereunder. The sale of shares was undertakenthrough ‘offer for sale' process through the stock exchanges. The shareholding of thepromoters and the promoter group now stands at 75% of the Company's share capital ensuring25% shareholding by public.

18. COST AUDIT REPORT

The Cost Audit Report of M/s. Kishore Bhatia & Associates Cost Auditors for thefinancial year 2019-20 which was required to be filed with the Ministry of CorporateAffairs on or before 31st December 2020 was filed on 29th June 2020 vide SRN:R43725811.

19. ACKNOWLEDGEMENTS

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

For and on behalf of the Board of Directors
CHETAN SHAH SUSHIL MARFATIA
Managing Director Executive Director
DIN: 00488127 DIN: 07618601
Mumbai 28th May 2021

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