DIRECTORS' REPORT TO THE MEMBERS, Your Directors have pleasure in presenting the Thirty Sixth Annual Report together with Audited Accounts of the Company for the Financial Year ended 31st March, 2016 STATE OF AFFAIRS OF THE COMPANY Your Company has achieved the top line of Rs. 4,258.72 Crore (including Rs. 1,938.44 Crore from trading operations) during the year under review, which is higher by 15% over previous year's level of Rs. 3,711.77 Crore (including Rs. 1,672.63 Crore from trading operations). Despite continuance of the unfair discriminatory gas cut, Profit Before Tax (PBT) for the year under review was Rs. 169.40 Crores as against Rs. 108.22 Crore in the previous year. Net Profit for the current year was recorded at Rs. 121.13 Crore as against Rs. 78.35 Crore in the previous year. A detailed analysis of the performance is available in the Management Discussion and Analysis (MDA), which forms part of this Report, and inter-alia, deals adequately with the operations and also current and future outlook of the Company. SCHEME OF AMALGAMATION WITH THE WHOLLY OWNED SUBSIDIARY With a view to maintain a simple corporate structure and to enable effective management and unified control of operations, the Board of Directors of the Company approved the "Scheme of Amalgamation" providing for amalgamation of SCM Soilfert Limited, a Wholly Owned Subsidiary of the Company, with the Company, at its meeting held on 5th November, 2015. The Appointed Date for the said Scheme is 1st April, 2015. The Scheme is subject to sanction of Hon'ble High Court of Judicature at Bombay and other requisite approvals and will be given effect upon receipt of said sanction / approvals. The Company has filed the application before the Hon'ble High Court of Judicature at Bombay upon receipt of necessary clearance from the Stock Exchanges and the Securities and Exchange Board of India (SEBI). The detailed Scheme is available on the website of the Company, www.dfpcl.com ¦ SCHEME OF ARRANGEMENT WITH SCM FERTICHEM LIMITED AND SMARTCHEM TECHNOLOGIES LIMITED (BOTH WHOLLY OWNED SUBSIDIARIES OF THE COMPANY) In order to enable better realization of potential of the businesses of the Company and its Wholly Owned Subsidiary Companies viz. SCM Fertichem Limited (SCM Fertichem) and Smartchem Technologies Limited (Smartchem) and yield beneficial results and enhanced value creation for the Companies, their respective shareholders, lenders and employees, on 29th March, 2016, the Board of Directors of the Company approved the Scheme of Arrangement amongst the Company, SCM Fertichem and Smartchem and their respective shareholders and creditors involving: ¦ The slump exchange of (a) the Technical Ammonium Nitrate ("TAN") undertaking of the Company together with its business and operations including its manufacturing and related facilities located at (i) Taloja & Pune, Maharashtra (ii) Jawaharlal Nehru Port, Maharashtra and (iii) Paradeep and its marketing & corporate office(s) ("TAN Undertaking"), and (b) the Fertiliser undertaking of the Company together with its business and operations including its manufacturing and related facilities located at (i) Taloja and Pune, Maharashtra (ii) Jawaharlal Nehru Port, Maharashtra and (iii) Panipat, Haryana and its marketing & corporate office(s) ("Fertiliser Undertaking") (and collectively, (a) and (b) are hereinafter referred to as the "Transferred Undertakings") of the Company to SCM Fertichem, on a going concern basis ("Slump Exchange"); and ¦ Thereafter, the subsequent demerger of the Transferred Undertakings and vesting of the same from SCM Fertichem in Smartchem, on a going concern basis, in accordance with Section 2(19AA) of the Income Tax Act, 1961 ("Demerger"); with effect from the Appointed Date, 1st January, 2015, in terms of the draft Scheme of Arrangement ("Scheme of Arrangement") under Sections 391 to 394 of the Companies Act, 1956 and other applicable provisions, if any, of the Companies Act, 1956 and Companies Act, 2013. The Scheme is subject to sanction of Hon'ble High Court of Judicature at Bombay and other requisite approvals and will be given effect upon receipt of said sanction / approvals. The Company has filed the draft Scheme of Arrangement with the Stock Exchanges in terms of applicable Regulations for securing necessary approval before approaching the High Court. The detailed Scheme is available on the website of the Company, www.dfpcl.com ¦ DIVIDEND Considering the performance of the Company, the Board of Directors of the Company at its meeting held on 11th March, 2016 had declared an Interim Dividend @ 50% i.e. Rs. 5 per Equity Share of Rs. 10 each of the Company for the year ended 31st March, 2016. The said dividend, which is already paid to the shareholders, is recommended as final dividend for the financial year 2015-16. ¦ CHANGES IN BOARD OF DIRECTORS During the year under review, Shri. Partha Bhattacharyya resigned as an Executive Director with effect from 22nd January, 2016 due to health reasons. Considering the wealth of knowledge and experience, Shri. Partha Bhattacharyya was requested and he consented to continue on the Board of the Company as a Non- Executive Non Independent Director with effect from 22nd January, 2016. Smt. Parul S. Mehta, Non-Executive Director of the Company, who has been spear-heading your Company's CSR initiatives, retires by rotation at the ensuing Annual General Meeting pursuant to the provisions of Section 152 of Companies Act, 2013 and being eligible, offers herself for re-appointment. Six Board Meetings were held during the year. These meetings were held on 21st May, 2015, 5th August, 2015, 5th November, 2015, 21st January, 2016, 11th March, 2016 and 29th March, 2016. Independent Directors have given declaration that they meet the criteria of independence as provided in subsection (6) of Section 149 of the Companies Act, 2013. ¦ CHANGES IN KEY MANAGERIAL PERSONNEL (KMP) Shri Somnath Patil resigned as 'Chief Financial Officer' of the Company with effect from 22nd January, 2016 and Shri Vipin Agarwal has been appointed as 'Chief Financial Officer' with effect from 22nd January, 2016. Shri Tushar Dey, Executive Vice President & Company Secretary, a Key Managerial Personnel (KMP), resigned from the services of the Company with effect from 16th September, 2015. Shri Mandar Velankar, Assistant Company Secretary was appointed as 'Company Secretary' and KMP in terms of provisions of the Companies Act, 2013, without any change in designation, with effect from 14th March, 2016. ¦ SIGNIFICANT MATERIAL ORDERS PASSED BY THE REGULATORS / STATUTORY AUTHORITIES I. Pursuant to the Order by Ministry of Petroleum & Natural Gas (MOPNG), the supply of domestic gas to the Company's Plant situated at Plot No. K-1, Taloja MIDC, Dist. Raigad, Maharashtra had been stopped by Gas Authority of India Ltd. (GAIL) and Reliance Industries Ltd. (RIL) on 15th May, 2014. The Company challenged this decision by filing the Writ Petition before the Hon'ble High Court of Delhi. The Single Judge of Hon'ble High Court of Delhi vide his Order dated 7th July, 2015 directed the Government of India to resume the supply of gas to the Company. However, the supply of natural gas was not restored and therefore an appeal was filed before the Division Bench of the High Court of Delhi. The Division Bench of Hon'ble High Court of Delhi vide its Order dated 19th October, 2015, re-affirmed the direction of the Learned Single Judge in his Order dated 7th July, 2015 to resume supply of natural gas to the Company. The Government of India filed a review petition before he Hon'ble High Court of Delhi, seeking review of the Order dated 19th October, 2015. The Division Bench of the Hon'ble High Court of Delhi, vide its Order dated 2nd February, 2016, rejected the said review petition of the Government. Accordingly, the Company was offered to resume gas supply from GAIL at revised commercial terms, which were not in conformity with the Order of the High Court and hence the Company has filed the petition seeking justice. II. The Department of Fertilisers (DoF), Ministry of Chemicals and Fertilisers has withheld a subsidy of Rs.795 Crore (net of Rs.35.16 Crore released against the Bank Guarantee) due to the Company in accordance with applicable Nutrient Based Subsidy Scheme of the Government of India (GOI). The Company has filed a writ petition before the Hon'ble Bombay High Court challenging the withholding as being arbitrary and discriminatory. According to the submission of DoF before the Hon'ble Bombay High Court, formal framework of alleged undue gain is yet to be notified. The petition is pending before the Bombay High Court. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of sub-section (5) of Section 134 of the Companies Act, 2013, your Directors confirm that: i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) the accounting policies had been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year on 31st March, 2016 and of the profit and loss of the Company for that period; iii) proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) the annual accounts had been prepared on a going concern basis; v) internal financial controls, to be followed by the Company are duly laid down and these controls are adequate and were operating effectively; and vi) systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. STATUTORY AUDITORS AND THEIR REPORT The Shareholders of the Company in their Thirty Fourth Annual General Meeting held on 31st July, 2014 had accorded their approval pursuant to the provisions of Sections 139, 141 and other applicable provisions of Companies Act, 2013 and Rules made thereunder to appoint M/s. B. K. Khare & Co., Chartered Accountants, as the Auditors of the Company for the period of three years commencing from the conclusion of Thirty Fourth Annual General Meeting until the conclusion of Thirty Seventh Annual General Meeting. The Board of Directors of the Company has, pursuant to the provisions of Section 139, recommended ratification of appointment of M/s. B. K. Khare & Co., Chartered Accountants, for the approval of the Shareholders from the conclusion of Thirty Sixth Annual General Meeting till the conclusion of Thirty Seventh Annual General Meeting. The Auditors' Report to the Shareholders for the year under review does not contain any qualification, reservation or adverse remark or disclaimer. ¦ SECRETARIAL AUDITORS The Secretarial Auditors, M/s. SVD & Associates, Company Secretaries, have issued Secretarial Audit Report for the Financial Year 2015-16 pursuant to Section 204 of the Companies Act, 2013, which is annexed to Directors' Report. (Refer Annexure-1) The Secretarial Audit Report for the year under review does not contain any qualification, reservation or adverse remark or disclaimer. ¦ COST AUDITORS Your Directors have appointed M/s. Y. R. Doshi & Company, Cost Accountants, as the Cost Auditors for the Financial Year 2016-17. M/s. Y. R. Doshi & Company, Cost Accountants will submit the cost audit report along with annexure to the Central Government (Ministry of Corporate Affairs) in the prescribed form within specified time and at the same time forward a copy of such report to your Company. The Cost Audit Report for the Financial Year ended 31st March, 2015 was duly filed with the Central Government (Ministry of Corporate Affairs) on 30th September, 2015. Pursuant to the provisions of Section 148 of Companies Act, 2013, Board of Directors of the Company has appointed M/s. Y. R. Doshi & Company, Cost Accountants, for conducting Cost Audit of the Company for the Financial Year ending 31st March, 2017. ¦ PARTICULARS OF LOANS, INVESTMENTS AND GUARANTEES Details of investments made and loans advanced by the Company have been given in notes to the Financial Statement. The Company has not given any guarantee pursuant to the provisions of Section 186 of Companies Act, 2013. ¦ RELATED PARTY TRANSACTIONS The Company has entered into contract / arrangements with the related parties in the ordinary course of business and on arm's length basis and hence none of the transactions with related parties fall under the scope of Section 188(1) of the Act. ¦ CORPORATE GOVERNANCE Pursuant to provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a separate section titled 'Corporate Governance' is attached to this Annual Report ¦ SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES During the year under review, Platinum Blasting Services Pty Ltd. (PBS), subsidiary of Smartchem Technologies Limited, has acquired ownership interest in Australian Mining Explosives Pty. Ltd. (AME) for a consideration of AUS $ 3.7 Million. Due to the aforesaid acquisition by PBS, AME has become subsidiary of the Company pursuant to the provisions of the Companies Act, 2013. Report on the performance and financial position of subsidiaries, associates and joint venture companies in specified format is annexed to this Report. (Refer Annexure-2). ¦ NOMINATION AND REMUNERATION COMMITTEE The Board of Directors of the Company has constituted Nomination and Remuneration Committee (NRC) and also has approved the Nomination and Remuneration Policy which inter alia contains appointment criteria, qualifications, positive attributes and independence of Directors, removal, retirement and remuneration of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel of the Company. Nomination and Remuneration Policy is annexed to this Report. (Refer Annexure-3) and is also available on the website of the Company www.dfpcl.com ¦ RISK MANAGEMENT COMMITTEE Information on the development and implementation of a Risk Management Policy for the Company including identification therein of elements of risk which in the opinion of the Board may impact the working of the Company is given in the Corporate Governance Report. ¦ CORPORATE SOCIAL RESPONSIBILITY COMMITTEE Shri Pranay Vakil, Smt. Parul S. Mehta and Shri S. R. Wadhwa constitute the Corporate Social Responsibility (CSR) Committee. Please refer the Corporate Governance Report for further details. The details of the initiatives taken by the Company on CSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed to this Report. (Refer Annexure-4) ¦ ANNUAL RETURN The extract of Annual Return is annexed to this Report. (Refer Annexure-5). ¦ PERFORMANCE EVALUATION OF CHAIRMAN, DIRECTORS, BOARD AND COMMITTEES Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is given in the Corporate Governance Report. ¦ ADEQUACY OF INTERNAL FINANCIAL CONTROLS Your Company's internal financial control systems are commensurate with the nature, size, and complexity of the businesses and operations. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant audit observations and the follow up actions are reported to the Audit Committee. ¦ MATERIAL CHANGES AND COMMITMENTS There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report. ¦ PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(1) and 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours. Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report and the Accounts are being sent to all the Members of the Company excluding the aforesaid information. ¦ FIXED DEPOSITS Your Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on date of the balance sheet. ¦ DISCLOSURE AS PER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14, the internal committee constituted under the said act has confirmed that no complaint/case has been filed/ pending with the Company during the year. ¦ CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO As required by the Companies (Accounts) Rules, 2014 the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are annexed to this Report. (Refer Annexure-6). ¦ ACKNOWLEDGEMENT Your Directors wish to place on record their sincere appreciation to the Company's bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedication and contribution made by employees at all levels who through their competence and hard work have enabled your Company achieve good performance during these challenging times and look forward to their support in the future as well. For and on behalf of the Board of Directors, S. C. MEHTA Chairman & Managing Director Dated 26th May, 2016 Place : Mumbai |