MANAGEMENT'S DISCUSSION & ANALYSIS

To

Dear Members

Your Directors have the pleasure of presenting the 58th Annual Report and the auditedfinancial statement of the Company for financial year ended March 31 2019.

FINANCIAL RESULTS:

A summary of the Company's Financial Results for the financial year 2018 -19 is asunder:

* includes exceptional item

DIVIDEND:

Your Directors have recommended a dividend of ' 4.50 per share of the nominal value of' 2.00 each for the year ended March 31 2019 [previous year ' 4.25 per share of nominalvalue ' 2.00 per share]. The payment of dividend together with the tax thereon absorbed asum of ' 1581.50 Lakhs. The dividend if declared by the members at the forthcomingAnnual General Meeting will be paid to all the eligible members by 6th August 2019.

OPERATIONS AND FINANCIAL PERFORMANCE:

For the first time since inception the Company has crossed ' 300 Crores in totalrevenue including other income. At ' 317 Crores the revenue shows a 9% growth over theprevious year. This growth includes a record ' 100 Crores in the Pigments division againa company first and 28% increase in revenue from ITeS. The overall performance of theCompany has been good. Profit before tax stands at ' 74 Crores for the year a 28% marginexcluding exceptional income of almost ' 6 Crores. Total export sales for the year was '95 Crores as against ' 77 Crores in the Financial Year(FY) 2017-18.

Detailed analysis of division wise performance is given below.

PIGMENT DIVISION:

The revenue for the year from this division has gone up by 15% in spite of a marginalreduction in volume. This is mainly due to increased focus on selling highly value addedproducts and was achieved due to investments in technology over the past two years. Theprevailing economic conditions in the domestic market caused a mild down trend which wasbalanced by increased volumes in exports. Sales of Complex Inorganic Colour Pigmentspicked up speed in both the Domestic and Exports markets showing returns from anincreased investment in R&D.

The Pigments division achieved a net revenue of ' 100 crores in this financial year ascompared to ' 87.47 crores in the previous financial year.

SURFACTANTS DIVISION:

The Surfactants division has achieved 100% capacity utilisation. With continualimprovement processes the division has seen an increase in productivity. The companycontinues to invest in technology to reduce bottlenecks with a plan to further improvehourly productivity.

This division has seen a 7% increase in profits and a 5% increase in revenues to ' 167crores in FY 2018 -19 as compared to ' 159 crores in FY 2017-18.

The implementation of expansion project at Naidupetta has gained momentum during theyear. Civil construction is under progress and orders for major equipment have beenplaced. Commercial production is likely to commence during first quarter of next financialyear.

WIND MILL GENERATION:

Wind mills have generated 58.78 lakhs units as against 59.79 lakhs units. The marginaldrop is due to seasonal wind variations. Captive consumption from the wind mills grew to43.74 lakh units an increase of 2 lakh units over the previous year.

ITES DIVISION:

During the year under review this division reported an income of ' 38.85 crores whichwas higher by 28% when compared to previous year figure of ' 30.25 crores. This is mainlydue to additional revenue from Data conversion and health care. The division continues todiversify its service offerings to ensure sustainability and profitability.

EXPORTS:

The company's total export sales reached 94 Crores a 24% improvement over FY 2017-18.Export earnings from Manufacturing divisions went up by 21% primarily due to a growth insales volumes of highly value added Pigments in Asia Europe and North America. ITeSexports grew by 33% over the previous year.

ENERGY AND WATER:

As one of 49 companies in India that have been awarded the Responsible Care logo(2017) your company takes environmental sustainability seriously. We have been awardedthe Go Green Initiative Award from the Tamil Nadu Energy Consumer's association a 3 starrating for Environmental Health and Safety practices from the CN-Southern Region and aCertificate of Appreciation from the National Safety Council of India.

As a company that includes caring for the environment in our core values we havecontinuously focused on energy conservation in our manufacturing processes reduction inwater consumption and maximum recycling of process water and reducing our dependence onnon-renewable electricity. In the FY 2018-19 almost 70% of the power consumed by themanufacturing division came from renewable resources with 43.74 lakh units from our windmills and the rest from our onsite solar plants. Additionally due to our focus onreduction and recycling of our water we have reduced raw water consumption by 40% from FY2017-18 levels in our Ranipet facility. In FY 2019-20 we hope to finish implementingthese changes in Ambattur and continue to improve our reuse efficiency and reduce ourraw water intake.

EARNINGS PER SHARE (EPS):

Earnings Per Share (EPS) is at ' 19.34 including exceptional items. EPS withoutexceptional items is ' 17.68 registering a growth of 19% over previous year.

INTERNAL FINANCIAL CONTROL:

Your company maintains adequate controls over financial reporting. All the financialdata are captured from the system with in-built security developed for both financial dataaccuracy and for prevention of data leakage. Your company has an effective ERP systemwhich is customized to suit the company specific requirements. Majority of approvals andwork flows are routed through the system.

Periodical health check-up audit for IT Systems is carried out by a consultant tostrengthen the existing system and update data security measures.

Your company has put in place adequate systems and procedures for ensuring internalfinancial controls and these are being followed in the normal course of operations of theCompany.

Your company has well defined updated Standard Operating Procedures (SOP) for each andevery function of the company. A suitable risk mitigation plan for each pre-defined SOPhas also been developed and it is well documented. The Internal Auditor's reportsobservations and management responses are placed before the audit committee in thepresence of the Internal Auditor and the same is discussed in detail. Corrective actionsif any are taken promptly. The action taken report is also placed before the AuditCommittee for review at each meeting. Audit committee ensures that appropriate actions tocorrect deviations if any are taken up immediately by the management.

The Audit Committee of the Company briefs the Board on the effectiveness of internalcontrol system in the operations of the Company.

PERSONNEL

Industrial Relations continued to be harmonious throughout the year under review. YourCompany currently employs 338 people. We finished the year with 37 women employees (11%)as compared to 28 in the previous year and 21 in the year before that.

Throughout the year the HR team executes multiple training programmes with externaltrainers for communication coaching technical education managerial skills and changeleadership and with internal trainers for a continuing on-the-job training programme forall employees. This was coordinated with last year's training needs assessment and issupported by continuous monitoring to aid retention and retraining.

Your company's employees have taken on special projects large and small to help improvethe company's well-being and support its continued profitability. The directors appreciateall the contributions they have made to achieve this year's improved performance andtheir contributions to the future of the organisation.

RISKS AND CONCERNS.

Ultramarine Blue consumption in the laundry segment has been falling on a yearly basis.This year this was accompanied by a dip in industrial sales in the domestic market.Mitigation of this requires further geographical expansion and increased value additionmoving out of the low end laundry grades.

The surfactant plant is operating at maximum capacity and volume growth withoutcapacity addition is unlikely. The project in Naidupeta must be completed expediently inorder to retain momentum.

PROSPECTS & OUTLOOK.

The company expects to enter commercial production at the Naidupeta plant by the firstquarter of FY20-21.

With a focus on improving yield of high value grades of pigments the company isinvesting in R&D in all stages of the production process from Raw Materialprocurement and processing to the final stages of value addition. We currently process 30%more of the high value grades than we did last year by volume and 150% more than we didin 2016-17 entirely due to internal innovation.

New products are being introduced in both the surfactants and the pigments divisions ina forward looking manner and have been seeded in the domestic and exports market tobetter understand customer needs and applications. The company anticipates that they willbecome commercially viable over the next two years.

CAUTIONARY STATEMENT:

The statements made in the report describe the company's objectives projectionsestimates expectations and predictions which may be "forward lookingstatements" within the meaning of the applicable securities laws and regulations. Theannual results can differ materially from those expressed or implied depending on theeconomic conditions Government Policies and other incidental factors and developments.

SHARE CAPITAL:

The paid up equity share capital as on 31st March 2019 was ' 5.84 crores. During theyear under review the Company has not issued shares with differential voting rights norgranted stock options nor sweat equity.

DIRECTORS:

i) As per the provisions of Companies Act 2013 Mrs. Indira Sundararajan(DIN.00092203) retires by rotation at the ensuing Annual General Meeting (AGM) and beingeligible offers herself for re-appointment.

ii) Mr. Rajeev Mahendra Pandia (DIN: 00021730) and Mr. C.R. Chandra Bob (DIN: 07384175)were appointed as Additional Directors of the Company with effect from 12.11.2018. Basedon the recommendation of Nomination and Remuneration Committee their appointment asIndependent Directors is proposed at the ensuing AGM.

iii) In compliance with Regulation 17 (1A) of SEBI (Listing Obligations &Disclosure Requirements) (Amendment) Regulations 2018 Dr. Gopakumar G. Nair aged 78Independent Director (DIN: 00092637) tendered his resignation with effect from31.03.2019.

iv) Dr. P. Arunasree (DIN: 01351504) was appointed as an Additional Director of theCompany with effect from 01.04.2019. Based on the recommendation of Nomination andRemuneration Committee her appointment as an Independent Director is proposed at theensuing AGM.

v) Mr. R. Sampath Chairman of the Board Non-Executive Promoter Director (DIN:00092144) will be attaining the age 75 on 11.11.2019. In terms of Regulation 17 (1A) ofSEBI (Listing Obligations & Disclosure Requirements) (Amendment) Regulations 2018 andbased on the recommendation of Nomination and Remuneration Committee his continuation asa Director is proposed at the ensuing AGM by means of special resolution.

vi) The first term of Mr. Nimish U. Patel (DIN:00039549) and Mr. Navin M. Ram(02410242) Independent Directors expires on 29.07.2019 and 10.11.2019 respectively. Basedon the recommendation of Nomination and Remuneration Committee their re-appointment asIndependent Directors for the second term is proposed at the ensuing AGM by means ofspecial resolution.

vii) The tenure of Ms. Tara Parthasarathy Joint Managing Director (DIN: 07121058)expires on 15.03.2020. Based on the recommendation of Nomination and RemunerationCommittee her re-appointment as Joint Managing Director is proposed at the ensuing AGM.

viii) The tenure of Mr. R. Senthil Kumar Whole-time Director (DIN: 07506927) expireson 31.07.2019. Based on the recommendation of Nomination and Remuneration Committee hisre-appointment as Whole-time Director is proposed at the ensuing AGM.

ix) The Nomination and Remuneration Committee has recommended appointment of Mr. V.Bharathram (DIN.08444583) as a Whole-time Director subject to the approval of theShareholders at the ensuing AGM.

x) The Nomination and Remuneration Committee has recommended appointment of Mr. HarshR. Gandhi (DIN.00133091) as an Independent Director subject to the approval of theShareholders at the ensuing AGM.

DECLARATION BY INDEPENDENT DIRECTORS:

All the Independent Directors had furnished to the Company a declaration under section149 (7) of the Companies Act 2013 stating that they meet the criteria of independence asprovided under section 149(6) of the Companies Act 2013 and SEBI Listing Regulations.

MEETINGS:

During the year five Board meetings and four Audit Committee meetings were convenedand held. The details are given in the Corporate Governance Report. The intervening gapbetween the meetings was within the period prescribed under Companies Act 2013.

BOARD EVALUATION:

Pursuant to the provisions of Companies Act 2013 and Regulation 17 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 an annual performanceevaluation of the performance of the Board the Directors individually as well as theevaluation of Board Committees was carried out.

The performance of Chairman of the Board was reviewed by the Independent Directorstaking into account the views of the Executive Directors. The parameters considered wereleadership ability adherence to corporate governance practices etc.

The performance evaluation of the Non Independent Directors was carried out by theentire Board of Directors (excluding the Director being evaluated). The Parametersconsidered were compliance to regulation and statutes with due emphasis on corporategovernance technical competence contribution to discussion on strategy / performancemotivating and reviewing key employees etc.

The Independent Directors have assessed the quality quantity and timeliness of flow ofinformation between the Company management and the Board.

The evaluation of Independent Directors was done by the entire Board of Directors(excluding the Independent Director being evaluated). They are evaluated on variousparameters viz. participation in Board and Committee meetings value addition todiscussions on strategy objectivity and independence of views suggesting best practicesand new perspectives from their experience. etc.

The evaluation process was conducted through a format of questionnaire with provisionfor rating on a scale from 1 to 5 (5 being the highest and 1 being the lowest).

A summary report including score against each of the evaluation criteria and verbatimcomments was submitted to the Chairman of the Board.

The Chairman of the Board shared the report with the Board members in the subsequentBoard meeting discussions were held on the feedback and the Board has identified areaswhere the improvements need to be effected.

POLICIES:

SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandated theformulation of certain policies for all listed companies. In compliance with the same theCompany has formulated the policies. The corporate governance policies viz. Policy onRelated Party Transactions Corporate Social Responsibility Policy Policy on BoardDiversity Policy on Disclosure of Material Event / Information Code of Fair Disclosureunder SEBI (Prohibition of Insider Trading) Regulations 2015 Whistle Blower Policy etc.are available on our Company's website: www.ultramarinepigments.net.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION:

The policy of the Company on director's appointment and remuneration includingcriteria for determining qualification positive attributes independence of a directorand other matters provided under sub - section (3) of Section 178 of the Companies Act2013 was framed on the recommendation of Nomination and Remuneration Committee andapproved by the Board.

The key objective of this policy is selection appointment of and remuneration to KeyManagerial Personnel Directors and Senior Management Personnel. The said policy is givenas Annexure - 1 to the Director's Report.

RISK MANAGEMENT POLICY:

A Risk Management Policy was framed and approved by the Board. The objective of thispolicy is to minimize the adverse impact of various risks on business goals and objectivesand enhancement of the value of stakeholders. A Risk Management Committee has beenconstituted. The risk management process has been reviewed by the Risk ManagementCommittee.

VIGIL MECHANISM (WHISTLE BLOWER POLICY):

The vigil mechanism of the Company incorporates a whistle blower policy in terms oflisting agreement (now SEBI Listing Regulations) with Stock Exchange. Through this policyit aims to provide an avenue for employees to raise their concerns on any violation oflegal or regulatory requirements fraud malfeasance misrepresentation of financialstatements and reports. During the year the policy was amended by incorporating theprovision of SEBI (Prohibition of Insider Trading) (Amendment) Regulations 2018 relatingto leak of unpublished price sensitive information (UPSI) or suspected leak of UPSI andthe procedure for inquiry relating thereto.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013:

The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints regarding sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed offduring the year 2018-19. No. of complaints received: Nil No. of complaints disposed off:NA

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Sec. 134 (5) of the Companies Act 2013 the Directorsconfirm that.

i] in preparation of the annual accounts for the year ended March 31 2019 theapplicable accounting standards have been followed along with proper explanation relatingto material departures.

ii] appropriate accounting policies have been selected and applied and such judgmentand estimates have been made that are reasonable and prudent so as to give true and fairview of the state of affairs of the company as at March 31 2019 and of the profit of thecompany for the year ended that date.

iii] proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities

iv] the annual accounts have been prepared on a "going concern "basis.

v] that proper internal financial controls are laid down and are adequate and operatingeffectively.

vi] that proper systems to ensure compliance with the provisions of all applicable lawshave been devised and such systems are adequate and operating effectively.

PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS:

Particulars of loans and investments are provided in the financial statements (Pleaserefer Note 671113 & 15 to the financial statement).

RELATED PARTY TRANSACTIONS:

All related party transactions entered into during the financial year were on an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions entered into by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.

Prior omnibus approval of the Audit Committee was obtained for the transactions whichwere foreseen and repetitive in nature. The transactions for which omnibus approval wasrequired were placed before the Audit Committee and the Board for their review andapproval.

A policy on the Related Party Transactions was framed approved by the Board and postedon the Company's website www.ultramarinepigments.net.

The disclosure of Related Party Transactions as required under Section 134(3)(h) of theCompanies Act 2013 in Form AOC - 2 is not applicable.

STATEMENT PURSUANT TO SEBI LISTING REGULATIONS:

The Company's shares are listed with Bombay Stock Exchange Ltd. Your Company has paidthe respective annual listing fees and there are no arrears.

REPORT ON CORPORATE GOVERNANCE

A report on Corporate Governance is annexed herewith. As required by Schedule V of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Auditor'sCertificate on Corporate Governance is enclosed to the Board's Report.

STATEMENT SHOWING UNCLAIMED DIVIDEND AS ON MARCH 31 2019

Pursuant to the provisions of Section 124(5) of the Companies Act 2013 dividend whichremains unpaid or unclaimed for a period of seven years from the date of its transfer tounpaid dividend/ unclaimed account required to be transferred by the Company to InvestorEducation and Protection Fund (IEPF) established by the Central Government under theprovisions of Section 125 of the Companies Act 2013. The unclaimed amounts along withtheir due dates for transfer to IEPF is mentioned below:

The details of unclaimed dividend are available on the Company's website:www.ultramarinepigments.net/ investors/ investors information

TRANSFER OF SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

pursuant to the provisions under Investor Education and Protection Fund (AccountingAudit Transfer and Refund) Amendment Rules 2017 shares in respect of which dividendwere not claimed by the shareholders for seven consecutive years have been transferred toInvestor Education and Protection Fund (IEPF).

64500 shares were transferred to IEPF on 21.12.2018 and 10.01.2019.

The details are posted in the Company's website: www.ultramarinepigments.net /investors/ investors information.

DETAILS RELATING TO DEMATERIALISED UNCLAIMED SUSPENSE ACCOUNT:

The voting rights on the abovementioned shares shall remain frozen till the rightfulowner of such shares claims the shares.

AUDITORS:

M/s. Brahmayya & Co was appointed as statutory auditors at the AGM held on 7thAugust 2014 to hold office from the conclusion of the meeting till the conclusion ofAnnual General Meeting to be held in the year 2019. Reappointment of M/s. Brahmayya &Co as statutory auditors is proposed at the ensuing AGM.

COST AUDIT:

Our Company falls under the applicability of maintenance of cost records and theiraudit. Mr. G. Sundaresan Cost Accountant (Membership no.11733) has been appointed as Costauditor for the financial year 2018-19.

SECRETARIAL AUDIT:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Companies(Appointment and Remuneration of Managerial Personnel) Rule 2014 the Company hasappointed M/s. R.M. Mimani & Associates LLP a firm of Company Secretaries in practiceas Secretarial Auditor to undertake the secretarial audit of the Company. The Secretarialaudit report in Form MR- 3 is given in Annexure -2 to this report.

EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of Annual Return in Form MGT- 9 are given inAnnexure - 3 to this report. PARTICULARS OF EMPLOYEES:

The information required under section 197 of the Companies Act 2013 read with Rule5(1)(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 in respect of employees of the Company is given in Annexure - 4 & 5 tothis report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNING AND OUTGO:

The particulars required to be included in terms of section 134(3)(m) of the CompaniesAct 2013 with regard to Conservation of Energy Technology absorption Foreign Exchangeearnings and outgo are given in Annexure - 6 to this report

REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES OF THE COMPANY:

A report on CSR initiatives of the Company and the CSR policy are given in Annexure - 7to this report.

ACKNOWLEDGEMENT

Your Directors thank the various Central and State Government DepartmentsOrganisations and Agencies for the co-operation extended by them. The Directors alsogratefully acknowledge all stakeholders of the Company viz. shareholders customersdealers vendors and banks for their support. The Directors place on record their sincereappreciation of all employees of the Company for their commitment and continuedcontribution to the Company