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MANAGEMENT’S DISCUSSION & ANALYSIS

To

Dear Members

Your Directors have the pleasure of presenting the 60 th Annual Report and the auditedfinancial statements of the Company for financial

FINANCIAL RESULTS

A summary of the Company’s Financial Results for the financial year 2020 -21 is asunder:

Rs. Lakhs

DIVIDEND

Your Directors have recommended a dividend of Rs. 5.00 Per share of the nominal valueof Rs. 2.00 each for the year ended March 31 2021 [previous year Rs. 5.00 per Share ofnominal value of Rs. 2.00 per share]. The payment of dividend will absorb a sum of Rs.1460 Lakhs. The dividend if declared by the members at the forthcoming Annual GeneralMeeting will be paid to all the eligible members by 20 th July 2021.

OPERATIONS AND FINANCIAL PERFORMANCE

The revenue for the year from operations stood at Rs. 308 Crores in 2020-21 the sameas the previous year. This is in spite of the severe impact on our operations due tolockdown & supply chain is a dip of 3% in profit before tax. A larger negative impacton margins was curtailed due to various timely measures taken by the management. Totalexport sales for the year was Rs. 79 Crores as against Rs. 94 Crores in the previousfinancial year. The Company was able to same level but ITES division’s revenuedeclined. There were many difficulties in mobilising labour / contractors during and afterthe first lockdown. Overcoming those the Company has successfully commissioned theSulphonation plant at Naidupeta Andhra Pradesh in the beginning of the fourth quarterthereby expanding our total capacity for surfactants.

Detailed analysis of division-wise performance is given below.

PIGMENT DIVISION

Revenue from Pigments division dropped by 7% as compared to previous year due tosevere lock down measures & curbs imposed during the first quarter. Your Company facedsupply chain bottlenecks and logistical challenges which slowed our export shipments.Steep increase in freight cost & non-availability of containers added to these woes.The division was able to ramp up the production in subsequent quarters maintaining allthe Covid-19 protocols.

It also averted major erosion in margins by focusing on value-added / premium gradePigments.

The Pigments division achieved a net revenue of Rs. 92 crores in this financial year ascompared toRs. 98 crores in the previous financial year.

SURFACTANTS DIVISION

As reported in earlier annual reports this division continues

Ranipet Plant. Sales grew by 14% in volume and by 12% in value mainly due to aflexible product mix & the efficient operation of the plant. The division improvedmargins through better working capital management & reported an all-time high incontribution. This has to a large extent compensated for the profit erosion of otherdivisions. This division reported a revenue of Rs. 184 crores as against Rs. 164 croresfor the previous year. The Company had announced earlier that the project at NaidupetaAndhra Pradesh will be commencing operations in the 4th quarter of FY 2020-21. The projectteam has achieved this in spite of the problems created by the pandemic subsequentlockdowns and extreme weather conditions. The Naidupeta was commissioned on 8^thJanuary 2021. This is Ultramarine & Pigments first plant outside Tamil Nadu andstrengthens its commitment to growth and expansion. This is a state-of-the-art plantcapable of producing multiple sulphonated products with a quick turnaround.Implementation of a green field project to manufacture premium grade Pigments through a100% subsidiary at Naidupeta has gathered momentum. This project involves a capital outlayof Rs. 67 Crores. Upon implementation this facility will help meet the market demand forfine grade pigments reduce the Pigments division’s operation cycle and contribute toa better profit margin. It is likely to commence operation in the third quarter of thisyear.

WIND MILL GENERATION

Your company currently owns and operates 8 Wind Turbine Generators (WTG) with acapacity of 4.3 MW all in the state of Tamil Nadu. Out of these 4 are more than 25 yearsold. In accordance with the Tamil Nadu State Government policy your Company is in theprocess of replacing them with new and higher efficiency machines in a phased manner. Inthe first phase it will be replacing 750KW capacity during the current financial year.

Windmills have generated 52.11 lakhs units in 2020-21 as against 53.34 lakhs units inthe previous year. The marginal drop is due to seasonal wind variations. Captiveconsumption from the wind mills is 39.61 lakh units a decline of 1.46 lakh units over theprevious year.

ITeS DIVISIoN

During the year under review this division reported an income of Rs. 32 crores whichwas lower by 27% when compared to previous year figure of Rs. 44 crores. This is mainlydue to the drop in revenue from domestic BPO business. The division continuesto diversifyits service offerings to ensure sustainability and profitability.

EARNINGS PER SHARE (EPS)

Earnings Per Share (EPS) is at Rs. 19.10 as compared to Rs. 21.24 for the previousyear. The decline is on account of lock down impact in the first quarter of the year underreview.

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 financialprevention of data leakage. Data accuracy and Your company has an effective ERP systemwhich is customised to suit the company-specific requirements. The majority of approvalsand work-flows are routed through the system. Periodical health audit for IT Systems iscarried out by a consultant to strengthen the existing system and update data securitymeasures.

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 welldocumented. The Internal Auditor’s reports observations the audit committee in theactions if any are taken promptly. The action taken report is also placed before theAudit Committee for review at each meeting. Audit committee ensures that appropriateactions to correct 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’s manufacturing division(s) currently employs 393 people. We finished theyear with 45 women employees (11.45%) as compared to 46 in the previous year.

Throughout the year the HR team executed virtual training programs wherever possiblewith specialist trainers from both within and outside the organisation. Employees wereencouraged to discuss their concerns and share their experiences with the Directorsthrough monthly virtual town hall meetings. Your company has prioritised employee healthduring this Pandemic. All employees who were infected by the SARS COV-2 virus wereprovided additional leave and were covered by medical insurance in case ofhospitalisation. Masks hand sanitiser hand wash and OTC meds for infected employees andwere provided at no cost. Vaccination was arranged in Chennai and Ranipet and manyemployees took advantage of this to get themselves and their family members vaccinated.

Your company’s employees have displayed a remarkable commitment to the companyduring this extraordinary year. The directors appreciate all the contributions they havemade to achieve this year’s performance and their contributions to the future of theorganisation.

RISKS AND CONCERNS

A continued Pandemic with unpredictable lockdowns and uncertain global and domesticeconomic forecast creates a great deal of uncertainty for both the ITES and themanufacturing business. This is a risk that is difficult to control for obvious reasons.Where possible the company will continue to mandate home for non-essential personnel.Additionally both the manufacturing raw material sources to ensure supply constraintsare minimised.

In order to ensure profit margins are not adversely impacted the company will continueto focus on value added grades in the pigments business reducing the exposure to theunpredictable retail market. The surfactants business will be focused on ensuring optimalcapacity utilisation of the Naidupeta plant fully utilisingthe Ranipet plant andcreating a product mix that will take advantage of both market access and raw materialavailability.

The Company does expect a minor reduction of the profit margin in the surfactantsbusiness over the next financial year as the market stabilises post crisis shock.

PROSPECTS & OUTLOOK

With the phased commissioning of new capacity in our 100% subsidiary company for thePigments business in Naidupeta over the next year the Company expects to have a shorteroperations cycle and higher proportion of value-added products.

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. The Pigments plantscurrently process 30% more of the high-value grades than they did last year (by volume)and 150% more than they did in 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.

The company is increasing its investment in research adding both human resources andinfrastructure. It is confident that this will improve both the offering to the market inthe short term and the capacity to innovate in the long term.

CAUTIONARY STATEMENT

The statements made in the report describe thecompany’sobjectivesprojectionsestimates expectations and predictions which may be“forward-looking statements” within the meaning of the applicable securitieslaws and regulations. The annual results can differ materially from those expressed orimplied depending on the economic conditions Government Policies and other incidentalfactors and developments.

SHARE CAPITAL

The paid-up equity share capital as on 31st March 2021 was Rs. 5.84 crores. During theyear under review the Company has not issued shares with differential

Director retiring by rotation and re-appointment

As per the provisions of Companies Act 2013 Mr. V. Bharathram (DIN.08444583) retiresby rotation at the ensuing Annual General Meeting (AGM) and being eligible offers himselffor re-appointment.

Declaration by Independent Directors

All the Independent Directors had furnished to the Company a declaration under sectionAct 2013 stating that they meet the criteria of independence as provided under sectionAct 2013 and SEBI Listing Regulations.

MEETINGS

During the year Six Board meetings and four Audit Committee meetings are given in theCorporate Governance Report. The intervening gap between the meetings was within theperiod prescribed under Companies Act 2013.

BOARD EVALUATION

Pursuant to the provisions of Companies Act 2013 and Regulation 17 of SEBI (ListingObligations Requirements) Regulations 2015 an annual performance evaluation of theperformance of the Board the Directors individually as well as the evaluation of BoardCommittees 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 and new perspectives from theirexperience etc. The evaluation process was conducted through a format of questionnairewith provision for rating on a scale from 1 to 5 (5 being the highest and 1 being thelowest).

The evaluation forms were submitted to the Lead Independent Director the Chairman ofthe Nomination and Remuneration Committee.

The Lead Independent Director prepared the summary report and discussion was held atthe Independent Directors meeting. A summary of discussion held at the independentdirectors meeting was circulated to Chairman of the Board and all the Directors.

In the subsequent Board meeting the Lead Independent Director briefed the Board aboutthe deliberations at the Independent Directors’ meeting discussions were held on thefeedback and the Board has identified areas where the improvements need to be effected.

POLICIES

SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 policies forall listed companies. In compliance with the same the Company has formulated thepolicies. The corporate governance policies viz. Policy on Related Party TransactionsCorporate Social Responsibility Policy Policy on Board Diversity Policy on Disclosure ofMaterial Event / Information Code of Fair Disclosure under SEBI (Prohibition of InsiderTrading) Regulations 2015 Whistle Blower Policy etc. are available on ourCompany’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 Section 178 of the Companies Act 2013 wasframed on the recommendation of Nomination and Remuneration Committee and approved by theBoard. The key objective of this policy is selection appointment of and remuneration toKey Managerial Personnel Directors and Senior Management Personnel. The said policy isgiven as 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 minimise the adverse impact of various risks on business goals and objectivesand enhancement of the value of stakeholders. A Risk Management Committee has beenconstituted to assess the risk and mitigation.

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 tatements offinancial and reports.

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 2020-21. No. of complaints received: Nil No. of complaints disposed off:Nil

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Sec. 134 (5) of the Companies Act 2013 the Directorsconfirm i. in preparationof the annual accounts for the year ended March 31 2021 theapplicable accounting standards have been followed along with proper explanation relatingto material departures. ii. appropriate accounting policies have been selected and appliedand such judgment and estimates have been made that are reasonable and prudent so as togive true and fair view of the state of affairs of the company as at March 31 2021 and ofthe profit of the company for the year ended that date. iii. proper and sufficient carehas been taken for the maintenance of adequate accounting with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother 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 andoperating effectively. vi. that proper systems to ensure compliance with the provisions ofall applicable laws have been devised and such systems are adequate and operatingeffectively.

SUBSIDIARY COMPANY

The Company has a wholly owned subsidiary namely Ultramarine Specialty ChemicalsLimited which is implementing a green field project to manufacture pigments at APIICIndustrial Park Naidupet Nellore district in the state of Andhra Pradesh (AP).

Project details:

Details

1. Project Cost: Rs. 6650 Lakhs

2. Funding: mix of equity preference shares;

(Investment by Holding Company Ultramarine & Pigments Limited)

And debt:

Term loan from Banks / Financial Institutions

3. Proposed capacity: 1500 MT

4. Capacity is to be added in a phased manner starting from September 2021.

PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS

Particulars of loans and investments are provided in the financial statements (Pleaserefer Note 7 11 &15 to the financial statement).

RELATED PARTY TRANSACTIONS

All related party transactions entered into during the financial year were on anarm’s length basis and were in the ordinary course of business. There were nomaterially significant related party transactions entered into by the

Company with Promoters Directors Key Managerial Personnel or other designated personswhich may have a potential conflict 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 haspaid the 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 theAuditor’s Certificate on Corporate Governance is enclosed the Board’s Report.

STATEMENT SHOWING UNCLAIMED DIVIDEND AS ON MARCH 31 2021

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 theprovisions under Investor Education and Protection Fund (Accounting Audit Transfer andRefund) Amendment Rules 2017 shares in respect of which dividend were not claimed by theshareholders for seven consecutive years have been transferred to Investor Education andProtection Fund (IEPF).

29361 shares were transferred to IEPF on 14.10.2020.

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

DETAILS RELATING TO DEMATERIALISED UNCLAIMED SUSPENSE ACCOUNT

STATUTORY AUDITORS

M/s. Brahmayya & Co Chartered Accountants (Firmregistrationno.000511S) werere-appointed as statutory auditors at the AGM held on 29^th July 2019 to holdoffice for a periodoffive years from the conclusion of the meeting till the conclusion ofAnnual General Meeting to be held in the year 2024.

COST AUDITORS

Our Company falls under the applicability of maintenance of cost records and theiraudit. GSVK & Co. Cost Accountants (Firm Regn. No. 002371) have been appointed asCost auditor for the financial year 2020-21.

INTERNAL AUDITORS

The Internal Auditors M.S. Krishnaswamy & Co. Chartered Accountants have played animportant role in strengthening the internal controls within the Company.

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 (Firm Registration No. L2015MH008300) afirm of Company Secretaries in practice as Secretarial Auditor to undertake thesecretarial audit of the Company. The Secretarial audit report in Form MR- 3 is given inAnnexure -2 to this report.

WEB LINK OF ANNUAL RETURN

Pursuant to the provisions of Section 92 (3) and 134 (3) (a) of the Companies Act2013 extract of the Annual Return (Form MGT-9) for the year ended March 31 2021 will beplaced on the website of the Company at www. ultramarinepigments.net / investors /investors information.

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 3 & 4 to thisreport.

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 5 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 6to this report.

BUSINESS RESPONSIBILITY REPORT

Regulation 34(2) of SEBI Listing Regulations 2015 as amended inter alia providesthat the Annual Report of the top 1000 listed entities based on market capitalisation(calculated as on 31st March of every financial year shall include a BusinessResponsibility Report.

Your Company is in top 1000 listed entities as on 31st March 2021. The Company haspresented its Business Responsibility report for the financial year 2020 -21 which isgiven as Annexure 7 to this report.

ACKNOWLEDGEMENT

Your Directors thank the various Central and State Government DepartmentsOrganisations co-operation extended by them. The Directors also gratefully acknowledge allstakeholders of the Company viz. shareholders customers dealers vendors and banks fortheir support. The Directors place on record their sincere appreciation of all employeesof the Company for their commitment and continued contributionto the Company

On Behalf of the Board

For Ultramarine & Pigments Limited

Place: Chennai

Date : 20th May 2021

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