DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the 59th Annual Report together with the audited statement of accounts for the 15 months ended March 31, 2016. 1. Financial Year change of the Company Pursuant to the provisions of Section 2(41) of Companies Act, 2013, the Companies are required to have a uniform financial year for the period from 1st April to 31st March. Accordingly, the Company changed its Financial Year from the period ending 31st December to 31st March. The accounting / financial year under review was thereby, extended by a period of three months consequent to which the financial year under review is for a period of fifteen months commencing from January 1, 2015 to March 31, 2016. Financial year 2015-16 / year ended March 31, 2016 / period under review, wherever mentioned in this entire Annual Report, refers to the period of fifteen months from January 1, 2015 to March 31, 2016. 3. Review of operations The Company has registered a good performance over the previous year, despite loss of sales due to divestment of leather business in the previous year and Industrial consumer business in the period under review. The business sentiments confronted with the challenges of market conditions and slowdown in global demand remained extremely challenging. Our agility in adapting to our customers' innovative needs and the aligned team work by our dedicated employees are the key enablers helping the Company accomplish its growth. The Company has reported total Net Sales of Rs. 1139.80 crores for the 15 months period under review as compared to Rs. 1008.20 crores in the previous year, registering a growth of 13%. The Company's Net Sales for the continuing Businesses, registered a growth of 12% on a like-tolike period. Of the total sales revenue of the continuing Businesses for the period, 27% is contributed by exports. During the 15 months period, the Profit before exceptional items & tax stood at Rs. 44 crores as against Rs. 4 crores in the previous year. Due to the strong sales, effective raw material management and better cost controls, the Profit as a percentage of sales increased from 0.4% to 3.9%. The Net Profit after accounting of exceptional items and tax is lower over the previous year mainly due to higher exceptional income in the previous year from sale of Kolshet site. The Company remains committed to its growth strategy and focused to improve its continuing usiness, looking for higher market share in the business segments it operates. 4. Dividend During the period under review, based on the exceptional income arising from the sale of Kolshet land in the previous year, your Directors had declared an interim dividend of Rs. 140/- per share (1400%) for the Financial year 2015-16 and paid the same in January 2015. The interim dividend together with tax thereon entailed cash outflow o f Rs. 447.88 crores and pay out of 41.3 % of the Net Profits from sale of Kolshet site. The Board of Directors is pleased to recommend a Final Dividend o f Rs. 10/- per share (100%). The final dividend together with tax thereon entails cash outflow of Rs. 27.78 crores and pay out of 52.6% of the Net Profit for the 15 months period ended March 31, 2016. The total dividend for the peried under review amounts to Rs. 150 per share (1500%) as compared to Rs. 39/- per share (390%) paid for the previous year. 5. Acquisition of Carbon Black Business from Lanxess India Private Limited In terms of the Business Transfer Agreement signed between the Company and Lanxess India Private Limited, the Company acquired the "Carbon Black Business" from Lanxess India Private Limited effective close of business hours on March 31, 2015, comprising the Carbon Black Dispersion plant located at Nagda, India, together with its respective assets, liabilities and employees as a going concern on a slump sale basis for a lump sum consideration of Rs. 13.46 crores (including non-compete fees) after working capital adjustment, as at March 31, 2015. The acquisition of Carbon Black Business was strategic for Clariant for survival of its current business in similar products. 6. Sale of Industrial & Consumer Specialties (ICS) Business In accordance with the approval granted by the Board pursuant to the provisions of Section 179 of the Companies Act, 2013 and the powers conferred upon the Board by Articles of Association of the Company and as per the Valuation Report of Deloitte Haskins & Sells, the Company sold its Industrial & Consumer Specialties (ICS) Business along with employees, assets, liabilities and including all licenses, permits, consents and approvals thereto on a going concern by way of a slump sale on a "as is where is basis" to Clariant India Limited, (erstwhile known as Clariant India Private Limited) for a total consideration of Rs. 42 Crore, effective from August 1, 2015. The profit on sale of the ICS business amounting to Rs. 26.56 crores is shown under "Exceptional Items, credit (net)" 7. Buyback of Equity Shares In accordance with the approval grantedby the Shareholders by way of special resolution through postal ballot and pursuant to Section 68, 69, 70 and all other applicable provisions, if any, of the Companies Act, 2013 and SEBI (Buy Back of Securities) Regulations, 1988, the Company made an offer of Buyback of 35,78,947 Equity Shares of Rs. 10 each to the shareholders of the Company (representing 13.42 % of the total number of the equity share capital of the Company) at the price o f Rs. 950/- per equity share aggregating to Rs. 340 Crore. The Buyback was through "Tender Offer" by Stock Exchange mechanism. The Buyback Offer was open for a period from September 22, 2015 to October 7, 2015. The response to the Buyback Offer was 143.45% and the Company bought back the entire 35,78,947 equity shares offered to the shareholders. The Paid up Equity Capital of the Company post Buyback is Rs. 23,08,17,980/-. 8. Appointment of Link Intime Private Limited as Registrar & Transfer Agent of the Company During the period under review, an investigation was carried out by SEBI which revealed serious and alarming irregularities by Sharepro Services (India) Private Limited ("Sharepro"), Company's erstwhile Registrar & Transfer Agent, with regard to share related and dividend encashment activities. Subsequently, SEBI passed an ad interim order against Sharepro on March 22, 2016, restricting the Promoters, Directors, Senior Management and other associated persons mentioned in the said Order from accessing the Market. In said Order, SEBI also advised the clients of Sharepro to change their Registrar and Transfer Agent and to conduct thorough Audit of the records and systems of Sharepro for past several years with respect to Dividends paid and securities transferred. The Board of Directors, vide Circular Resolution dated April 7, 2016, terminated the Memorandum of Understanding entered into with Sharepro and appointed Link Intime India Private Limited ("Link Intime"), who are duly registered with the Securities and Exchange Board of India (SEBI) under SEBI (Registrars to an issue and Share Transfer Agents) Regulations, 1993, as Registrar and Share Transfer Agents of the Company effective from April 11, 2016. The Board has appointed N. L. Bhatia & Associates, Practising Company Secretaries, for conducting the audit and the same is in progress. The Board recommends for your approval the shifting of the Registers and Index of Members and Returns from the office of Sharepro to Link Intime, effective from April 11,2016. 9. Corporate Governance, Management Discussions and Analysis Report The Company is committed to compliance standards, ensuring checks and balances between the Board and Management, as well as a sustainable approach to create value for all stakeholders. As stipulated under SEBI (Listing Obligations & Disclosure Requirements) Regulation, 2015, Report on Corporate Governance, Management Discussion and Analysis report as well as Auditor's Certificate confirming the compliance with the conditions of corporate governance are attached herewith and forms part of this annual report. 10. Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future During the period under review, there has been no such significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. 11. Subsidiary Company As on March 31, 2016, the Company does not have any subsidiary. 12. Details of Directors and Key Managerial Personnel During the period under review, Mr. B. L. Gaggar, Executive Director retired from the services of the Company on June 30, 2015. The Board placed on record their sincere appreciation for the valuable service rendered by Mr. B. L. Gaggar during his entire tenure and thanked him for all the dedication, insights and expertise which was brought by him on the Board and guidance and vision shown to the management team of the Company. During the period under review, Mr. Y. H. Malegam and Mr. Bharat Patel resigned as a member of the Board effective from October 15, 2015 and October 20, 2015 respectively. The Board appointed Mr. Kewal Handa and Mr. Sunirmal Talukdar as Directors of the Company w.e.f. November 5, 2015 to fill in the casual vacancy caused by the resignation of Mr. Bharat Patel and Mr. Y. H. Malegam respectively. Mr. Kewal Handa was also appointed as the Chairman of the Company. The Board of Directors placed on record its sincere appreciation for the valuable services rendered by Mr. Bharat Patel and Mr. Y. H. Malegam for the contribution made during their tenure as Chairman and Director of the Company respectively and wished them success for their future endeavors. In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Karl Holger Dierssen retires by rotation at the forthcoming Annual General Meeting and being eligible, he offers himself for re-appointment. The above appointment and re-appointment forms part of the Notice of the 59th Annual General Meeting and the respective Resolutions are recommended for your approval. All Independent Directors of the Company have given declarations that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The Board appointed Ms. Amee Joshi as a Company Secretary & Compliance Officer effective from April 25, 2015 consequent to the resignation of Mr. B. L. Gaggar as a Company Secretary & Compliance Officer on April 24, 2015. The Board appointed Mr. Rajasubramanian N. as a Chief Financial Officer of the Company effective from July 1, 2015, consequent to the retirement of Mr. B. L. Gaggar from the Company on June 30,2015. Further, on resignation of Mr. Rajasubramanian N. from the services of the Company on August 31, 2015, the Board appointed Ms. Raksha Kamdar as an Interim Chief Financial Officer w.e.f. September 1,2015. At the Board Meeting held on May 20, 2016, Mr. Sanjay Ghadge was appointed as the ChiefFinancial Officer of the Company effective from May 20,2016. 13. Audit Committee The details of the composition, meeting, attendance, etc. of the Audit Committee are provided in the Corporate Governance Section of the Annual Report. The Board has accepted all the recommendations of the Audit Committee during the Financial period under review. 14. Number of meeting of the Board During the period under review, the Board of Directors met 7 times on January 12, 2015, February 12, 2015, April 22, 2015, August 4, 2015, November 5, 2015 (two meetings) and February 12, 2016. 15. Conservation of energy, technology absorption, foreign exchange earnings and outgo As required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant information and data for the 15 months period ended March 31, 2016 are attached to this report as "Annexure A". 16. Corporate Social Responsibility In terms of the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility ("CSR") Committee which is chaired by Dr. (Mrs.) Indu Shahani, Independent Director of the Company, the other members of the committee are Dr. Deepak Parikh, Vice Chairman & Managing Director and Mr. Karl Holger Dierssen, Non-Executive Director. Your Company also has in place a CSR policy and the same is available on the website of the Company at www.clariant.com. A detailed report as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as "Annexure B" forming part of this report. 17. Nomination and Remuneration Policy The Board has, on the recommendation of Nomination and Remuneration Committee, framed a policy on Nomination and Remuneration of its Directors and Key Managerial Personnel, which is attached as "Annexure C". 18. Board Evaluation and Familiarisation programme Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulation, 2015, the Board has carried out the annual evaluation of its own performance and Board Committees by seeking the inputs of Directors on various aspects of the Board / Committee Governance. The Board have reviewed the performance of the individual directors and the Chairperson. The manner in which the evaluation has been carried out is stated in the Corporate Governance Report. The details of programme for familiarization of the Independent Directors of your Company is available on the Company's website at www.clariant.com. 19. Particulars of Employee The disclosure required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as "Annexure D". The statement of particulars of employees pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Annual Report. However, pursuant to provisions of Section 136(1) of the Companies Act, 2013, the report and accounts are being sent to members excluding this statement of particulars of employees. Any member interested in obtaining a copy of this statement, may write to Company Secretary at the registered office of the Company. 20. Directors' Responsibility Statement Pursuant to the requirement under Section 134(3)(C) of the Companies Act, 2013 with respect to Directors' Responsibility Statement, it is hereby confirmed that: (i) In the preparation of the annual accounts for the 15 months period ended 31st March, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) The Directors had selected such accounting policies and applied them 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 as at March 31,2016 and of the profit and loss of the Company for that period; (iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The Directors had prepared the annual accounts on a going concern basis; (v) The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 21. Statutory Auditor & Audit Report In accordance with Section 139 of the Companies Act, 2013, M/s. Price Waterhouse Chartered Accountants LLP, (Firm Regn. No 012754N/ N500016), were appointed as Statutory Auditors for a period of 4 years from the conclusion of last Annual General Meeting, subject to ratification by the shareholders at every subsequent Annual General Meeting. The Statutory Auditors being eligible offer themselves for reappointment. Your Directors recommend the ratification of their appointment as Statutory Auditors of the Company from the conclusion of this Annual General Meeting till the conclusion of next Annual General Meeting. The Auditor's in their report have commented that the back up of the books of accounts and other books and papers maintained in electronic mode has not been maintained on servers physically located in India. The Company would like to clarify that the Company's SAP is centralized in Global Data Centers outside India where the backup storage is maintained. The Company is reviewing the maintenance of backup of SAP data in India as required under Rule 3 of the Companies (Account) Rules, 2014. 22. Cost Audit The Board of Directors, pursuant to provisions of Section 148 of the Companies Act, 2013, appointed M/s. RA & Co., Cost Accountants, as Cost Auditors of the Company to carry out the audit of the cost accounts relating to organic and inorganic chemicals of the Company for the Financial year 2016-17, subject to approval of Central Government. The cost audit report for the Financial year 2014 has been filed on due date. 23. Secretarial Audit Report Pursuant to provisions of Section 204 of the Companies Act, 2013, and Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board have appointed Mr. Jagdish Ahuja, Practising Company Secretary, as Secretarial Auditor to carry out the Secretarial Audit for the 15 months ended March 31, 2016. The Secretarial Audit Report is attached as "Annexure E". The Secretarial Auditor's Report does not contain any qualification, reservation or adverse remark and is self - explanatory and thus does not require any further comments. 24. Internal Financial Controls and their Adequacy The details in respect of Internal Financial Controls and their adequacy are included in the Management Discussion & Analysis Report, which forms part of this Report. 25. Extract of Annual Return Pursuant to the provisions of Section 92(3) of the Companies Act, 2013, an extract of Annual Return in Form MGT-9 is attached as "Annexure F" to this report. 26. Risk Management The Company has a robust Risk Management to identify and evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. Many risks identified by the business and functions are systematically addressed through mitigating actions on a continuing basis. The Company has framed a Risk Management Policy to manage the risks involved in all activities of the Company, to maximize opportunities and minimize adversities. 27. Related Party Transactions In line with the requirements of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has framed a Policy on Material Related Party Transactions which is available on Company's website at www.clariant.com. All the Related Party Transactions entered duringthe period under review were in ordinary course of business and on arm's length basis. All the Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval are granted by Audit Committee for Related Party Transactions which are of repetitive nature, entered in the ordinary course ofbusiness and are on arm's length basis. The disclosure of Related Party Transactions as required under Section 134(3)(h) of Companies Act, 2013 read with Rule 8(2) of The Companies (Accounts) Rules, 2014 in the Form AOC-2 is attached as "Annexure G" to this report. 28. Particulars of loans, guarantees or investments The details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013, is given in notes forming part of financial statements. 29. Public Deposits During the period under review, the Company has not accepted any deposits from the public falling under Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 and as such no amount of principal or interest was outstanding as on the balance sheet date. 30. Vigil Mechanism The Company believes in upholding professional integrity and ethical behavior in the conduct of its business. To uphold and promote these standards, the Company has adopted Group's Integrity Line Policy which is akin to Whistle Blower Policy or Vigil Mechanism Policy for its Directors and Employees to report genuine concerns about unethical behavior, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. 31. Prevention of Sexual Harassment ofWomen at Workplace The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the period under review, no complaints were received regarding Sexual Harassment. 32. Acknowledgement The Board of Directors wish to place on record its sincere appreciation for the support received from its stakeholders including shareholders, bankers, distributors, suppliers and business associates. The Directors recognize and appreciate the sincere and hard work, loyalty, dedicated efforts and contribution of all the employees that ensured sustained performance in a challenging business environment. The Directors also express their appreciation of the assistance and unstinted support received from Clariant group companies. For and on behalf of the Board of Directors Mr. Kewal Handa Chairman Dr. Deepak Parikh Vice-Chairman & Managing Director Navi Mumbai, May 20, 2016 |