REPORT OF THE BOARD OF DIRECTORS AND MANAGEMENT DISCUSSION AND ANALYSIS 1. Your Directors have pleasure in presenting their Fifty Fourth Annual Report and Audited Accounts for the year ended 31st March 2015. 2. DIVIDEND The Directors are pleased to recommend the payment of Dividend of Rs. 2.00 per share (Rs. 2.50 per share, including Special Dividend of Rs. 0.30 equivalent to 15% on the occasion of Demerger of Lubricants Division) on the Paid Up Capital of the Company. The dividend of Rs. 11.90 crores (Rs. 24.79 crores), if approved by the Shareholders at the Fifty Fourth Annual General Meeting, will be paid out of the profits for the current year to all Shareholders of the Company whose names appear on the Register of Members as on the date of the Book Closure. 3. OPERATIONS The total turnover of the Company was Rs. 116.10 crores ( previous year Rs. 1100.22 crores ). The profit before exceptional items and taxation was Rs. 31.62 crores (Rs. 87.48 crores). The profit before tax was Rs. 41.87 crores ( Rs. 78.83 crores ). The profit after provision for current tax of Rs. 8.74 crores and deferred tax of Rs. 2.45 crores was Rs. 30.68 crores ( Rs. 58.34 crores ) resulting in an EPS of Rs. 6.19 for the year ( Rs. 5.88 ). 4. DIVISIONAL PERFORMANCE Detonators and Accessories (Energetics) Domestic markets for explosives and detonators / accessories recorded a negative growth in 2014 - 15 mainly on account of slowdown in production in the metal sector, uncertainty in private coal mining and consequent over supply and price decline in the trade market. However, the gross turnover of the Division was at Rs. 79.99 crores as against Rs. 69.77 crores in the previous year. The Division has manufactured 53.75 million Detonators (92.42 million), 19.05 million meters of Detonating Cord (4.05 million meters), Explosives The production for the domestic market and sales of non-electric detonators was high along with underground products. But surface detonators and trade detonators were affected due to market conditions. Export production however, was increased for surface dets, detonating fuse and non-electrics as the demand was good. Overall the demand from the trade segment remained sluggish but larger mining projects' requirements were steady and fully met. Production of Special Products for Defence and Space applications increased and several new products were developed during the year. All these new products found acceptance from the defence laboratories and companies. Production of these items will be increased during the current year. The Division increased its focus on more value added products such as Raydets, E-dets and Cord Relays. The Company markets its Detonators and Accessories through IDL Explosives Limited, a wholly owned subsidiary. This arrangement has been necessitated on account of market conditions, as customers prefer to place combined orders for industrial explosives and accessories. Mining and Infrastructure Mining and Infrastructure suffered in the last 4 years due to various issues with the Government / regulatory bodies and our operation was scaled down drastically. Commencement of mining projects is expected to take more time and is largely dependent on Government policy announcements. However, events in 2014 -15 have indicated that this sector being the life-line for the growth of the country, is going to be revived. During the year mining activity in parts of the country picked up with renewed business confidence and growing industrial activity. In this background, the Division had taken up a few infrastructure projects along with a mining contract for reputed industrial house and achieved a turnover of Rs. 19.10 crores with a profit of Rs. 5.79 crores for the year. The large equipment bank of excavators, heavy duty earth moving tippers, dozers, etc. which impaired during the last year in view of the bleak mining scenario, have now been sorted. The older equipment has been disposed and all the operating equipment are currently being put into use for various mining projects. Our current focus is in the mining areas in eastern India with large corporate where the Division had operations earlier. Other Business Groups The 4 Wind Mills ( 1 MW ) located at Ramagiri in Andhra Pradesh generated 33,100 units ( 1,44,307 units ). The Hyderabad factory received the benefit of the generation through the TRANSCO grid. Exports Export Sales of Explosive Accessories which declined to Rs. 9 crores in the previous year bounced back to Rs. 24.70 crores in the current year with the re-commissioning of the Detonating Cord production facility at Hyderabad. The Division is exploring higher volumes and new markets / opportunities to offset the high incidence of freight and handling costs on account of statutory compliances. 4.6 Property Development Bangalore: In the "Ecopolis" project, located at Yelahanka, Bangalore, out of the total built-up area of about 77.31 lacs sq. ft., the construction by the Developer Company ( "HRVL" ) has been completed to the extent of 14.54 lacs sq. ft. This comprises of one Main Building ( Block 3 ) plus a Multi-Level Car Park space. All MEP services such as lifts, internal and external electrical & plumbing and HVAC services have been installed and completed. The main trunk road within the site from Bellary Road till Block 3 is completed. The external facade works are under completion. Approvals for the start of construction of Block 2 are in place. Contract for the civil work has been finalized and excavation for start of the second block comprising of 10 lacs sq. ft. approx. is also completed. The Company has undertaken civil construction works to the extent of Rs. 9 crores in this project. During Q1 of 2015-16, the Company will be undertaking further civil works of Rs. 4 crores approx. Hyderabad: The Master Plan for the project has been drawn up by the Developer Company, Hinduja Estates Private Ltd. ( "HEPL" ) through reputed Architects. The development will be an Integrated Residential Commercial Township which will comprise of residential apartments, IT / commercial office spaces, Health care and educational areas. The development will also have areas for the hospitality industry. The Company has surrendered approximately 9 acres of land for development of new and widening of existing road to improve the infrastructure in the vicinity of the Hyderabad factory. For the areas surrendered Transferable Development Rights ( TDR ) and Impact fee concessions would be made available to the Company. In the quarter ended December 2014, the Company sold its share of Transferable Development Rights ( TDR ) to the Developer Company at a value of Rs. 922 lakhs. In the quarter ended March 2015, the Company earned further revenue of Rs. 350 lakhs, being the initial amount payable by the Developer Company towards remission of impact fees payable for approval of high rises. 5. OVERSEAS ACQUISITION In December 2012, the Company had acquired 100% stake in Houghton International Inc, in USA through its 100% subsidiary HGHL Ltd in the UK, which was reduced to 10% as a result of infusion of fresh capital by Gulf Oil International into the Houghton intermediary holding entity, as a measure of de-risking and de-leveraging. Simultaneously, the Company has been released of all its obligations to the lenders. The new investor has taken over the obligations for repayment of the $ 180 mn loan obligation. Thus the Company retains 10% stake in Houghton through a subsidiary. The Company will realize the investment at an appropriate time so as to fetch optimum value to the Company. Further, the Company continues to receive commission towards providing of security of its properties for the said loan. 6. RESTRUCTURING OF THE COMPANY The Company has demerged the Lubricants Undertaking into a separate company, namely Gulf Oil Lubricants India Limited (GOLIL ) with effect from 1st April 2014. The shares of GOLIL which were allotted to the Shareholders of the company are also listed on BSE Limited and the National Stock Exchange of India Limited, with effect from 31st July 2014. As part of the aforesaid Scheme, the share capital of the Company was reduced by half. The Demerger proved to be a substantial value enhancer to the Shareholders as expected. 7. PROMOTER OF THE COMPANY As part of internal restructuring by the promoter group entities, Hinduja Power Limited, Mauritius ( HPL ) became the Holding Company and Promoter of the Company, by acquiring the entire shareholding from Gulf Oil International (Mauritius) Inc. by way of inter-se transfer on 17th March 2015. HPL has subsequently acquired further 4.99% of the equity share capital of the Company, increasing their shareholding to 64.94%. 8. INTERNAL CONTROL SYSTEMS Your Company has in place a robust Internal and Financial control systems which assists the Board and Management to fulfill business objectives, safeguards the shareholders'interest, financial transactions and company's assets. The primary objective of our internal control framework is to ensure that internal controls are established, properly documented, maintained and adhered to in each functional department for ensuring orderly and efficient conduct of business which includes proper use and protection of the Company's resources, accuracy in financial reporting, compliance with the statutes, timely feedback on achievement of operational and strategic goals. The Company's internal control system, supported by SAP ERP implemented a few years ago, is driven by well defined policies and procedures across its business divisions. In addition the Company is ISO 9001(QMS), ISO 14001(EMS) and ISO 18001 (OHSAS) compliant which provides added comfort to our business partners and regulatory bodies. The Company has an Internal Audit function which provides the Audit Committee and the Board of Directors an independent, objective and assurance of the adequacy, efficiency and effectiveness of the Organization's risk management, internal and financial control and corporate governance processes. The Audit Committee/Board approved annual audit plan prepared in consultation with business heads and inputs obtained from the Company's statutory auditors ensures coverage of significant areas of operations with a risk based approach in order to conduct the audit in an efficient and timely manner. Process reviews for critical functions at all locations are performed in accordance with the audit plan. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations to the Senior Management. The Audit Committee of the Board of Directors regularly meets to review the significant audit findings, action taken thereon, adequacy of internal and financial controls and implementation of various comprehensive policies. During the year, the Audit Committee met six times to review the reports submitted by the Internal Audit Department. The Audit Committee also regularly meets the Company's Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports. 9. PUBLIC DEPOSITS The Company has during the previous financial year repaid / prepaid all the public deposits and there are no outstanding public deposits at the beginning of the year under review. The Company has not accepted any public deposits during the year under review. The Board of Directors of the Company will consider accepting fresh public deposits at the appropriate time, in view of the regulatory changes under the Companies Act 2013. 10. TAXATION Odisha Sales Tax The matter pertaining to the transfer of finished goods from Rourkela factory (since transferred to IDL Explosives Limited as part of the Demerger) situated in the State of Odisha to other States. Tax Revision Petition in respect of assessment years viz 1976-77 to 1983-84 filed before the Commissioner of Commercial Taxes at Cuttack had been dismissed in February 2012. Against the said dismissal fresh Writ Petitions were filed in March, 2013 in the Odisha High Court. I n respect of assessment year 1998-99 application for rectification of apparent errors in its order was filed before the Odisha Sales Tax Tribunal in January 2014. The appeal filed before the Central Sales Tax Appellate Tribunal was withdrawn. As regards the assessment years 2002-03, 2004-05 and 2005-06, the 2nd appeal filed before the Odisha Sales Tax Tribunal and application for stay filed before the Commissioner of CommercialTaxes. Against the order of Commissioner of Commercial Taxes in stay application, Writ Petition was filed in the Odisha High Court for the same assessment years. The Company filed Review Petition in the High Court of Odisha against its order in the Writ Petition. 11. RESEARCH & DEVELOPMENT The in-house R&D developed and implemented a shift in the process technology of Delay Detonator Elements manufacture from Alloy Lead to Soft Lead metal thus simplifying the process with a more compact layout while achieving better quality and safety. Significant work was also done in manufacture of PETN to modify the crystallization/granulation that eliminates reprocessing of batches and enables better utilization in different products. R&D work on the Electronic Detonator system was carried out to double the capability of the system to handle single blasts of over 300 holes as against the earlier limitation of 150 holes making the system suitable for larger mines. In the special products category, a host of critical components and chemicals were developed for Missile applications in the Defence sector. These included squibs, ignitors, fuseheads and pre-charge assemblies for various types of missiles. 12. SUBSIDIARIES: The Company has four subsidiaries. Of which, only one is a material one, namely IDL Explosives Limited. The UK subsidiary is an SPV incorporated for the purpose of overseas acquisition. The remaining two subsidiaries do not, at present, undertake any business activity. The annual performance of the subsidiaries is as under: ? HGHL Holdings Limited, UK reported a profit of Rs. 486.45 lakhs (Rs. 412.68 lakhs). ? IDL Explosives Limited reported a profit of Rs. 722 lakhs (Rs. 431.13 lakhs). ? IDL Buildware Limited reported a profit of Rs. 553.51 lakhs ( Rs. 5.19 lakhs). ? Gulf Carosserie India Limited inucrreded a loss of Rs. 0.19 lakhs ( profit of Rs. 2.38 lakhs). Gulf Oil Lubricants India Limited (formerly known as Hinduja Infrastructure Limited), ceased to be subsidiary of the Company during the year under review, consequent to the demerger of the Lubricants Division and transfer of the same to the said Company. A statement containing salient features of the financial statement of the Company's Subsidiaries (in Form-AOC-1) is attached as Annexure-A. 13. HUMAN RESOURCES / INDUSTRIAL RELATIONS: The Energetics Division at Hyderabad has continued to maintain cordial industrial relations, with low absenteeism while maintaining output levels. Programmes were conducted to improve the competency levels of workmen. As part of strategic plans and enhancing capability building for our employees in the Energetics Division, based on the performance Management System and training need identification, extensive training program on Statistical Quality control has been introduced at Hyderabad Works for core group comprising Production, Maintenance, Quality control, Materials and Safety Departments to improve Operational Efficiency without compromise on Quality and Safety standards. Regular Training programs have been conducted on Safety for Executive Staff and workmen to re-emphasize importance of Safety Systems. As a measure to improve focus and ensure alignment of Organization goals, Strategic H R interventions are being implemented in the Energetics Division. Staff Welfare The Energetics Division has also demonstrated its commitment to recognizing employee performance by conducting employee of the Month awards to recognize exceptional performances by employees and inculcating a commitment to perform beyond the regular roles and responsibilities. Safety Various programmes have been conducted during the year covering Safety Awareness, Alteration Authority, Job Safety Analysis (JSA), Hazard Identification, Risk Assessment, Risk Control (HIRARC). In addition, Internal / External Safety Audits; Safety Committee Meetings on regular basis; Job Study Analysis; HIRA / HAAZOP studies, SQC ; First Aid Training; Fire & Safety aspects and Emergency Rescue methods, have helped to strengthen the overall safety and disaster management processes in the Hyderabad Factory. Preventive Health Check-ups As part of preventive healthcare, the Hyderabad Factory organized series of free medical check-ups, consisting of Diabetes, Cardiology, Orthopedic and General Medical Check up, to all the employees. Security As part of enhanced security of the Hyderabad Factory and other assets of the Hyderabad Works, compound walls have been reinforced, height raised and fencing of barbed wire & concertina coils provided. Other measures include CC TV monitoring at Key areas especially magazines relaying of patrolling route, erection of watch towers and construction of additional Security Check posts, installation of tower flood lights for better night illumination, installation of guard monitoring systems for effective patrolling checks. Communication systems from magazines watch towers through land lines have been streamlined. As such over the years considerable additions and precautions have been added to strengthen the Security of the Factory. Employment Practices The Company believes in fair employment practices and is committed to provide an environment that ensures that every employee is treated with dignity and respect and afforded equitable treatment. The Company has a large proportion of women on the workforce and has adopted a Policy in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Company has not received complaints in this regard, during the year. 14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has during the year under review acquired an additional 60,00,000 Equity Shares at par Face Value of Rs. 10 in its subsidiary, IDL Explosives Ltd., aggregating to Rs. 6.00 crores. The Company has further made an investment of Rs. 38,67,800 in the equity shares @ Rs. 100 per share at par, of Gulf Ashley Motor Limited, by way of Rights. The Company has provided guarantee/ security during the year to Gulf Oil Lubricants India Limited of an amount of Rs. 345.50 crores pursuant to the Scheme of Arrangement. The Company subsequently divested the shares of Gulf Ashley Motor Limited due to synergy issues. 15. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS The growth of the industrial sector in India is dependent on the large extent on mining. Mining constitutes 10 - 11% of the total industrial sector. The Government plans to increase GDP by 7 - 8%, and, therefore development and growth of basic industries such as iron and steel, cement, aluminum, copper, etc. have to be nurtured. Mining activities supporting these basic industries will therefore be in the Government focus, if GDP target of 7.5% annual growth is to be achieved. In fact, during 2014 - 15 the new Union Government's first year in office mining activities showed a marginal growth of 1.4% as against 0.6% negative in 2013 - 14. 15.1 Detonators and Accessories The demand for explosives and accessories registered a contraction in volumes in 2014 - 15. With the growth of the economy in general & mining in particular demand pattern is expected to grow steadily in all coal and metal sectors. It is expected to grow around 50% over the next 4 /5 years. The products of the Division will, therefore, grow year on year. However, there is expected to be a change in product-mix as high volume trade items have changed to higher end initiating systems such as non electrics, electronic detonators due to the change in storage and licensing requirements for Ammonium Nitrate. The Division has also recorded healthy growth in export where the demand has increased especially in Africa, Middle East and East European countries. In the meantime, with intense follow up from the industry the Government of India has permitted export of explosives material from Chennai port in addition to Mumbai. This will help to improve the flexibility of availing vessels and reduce handling as well as freight cost. This will increase the competitiveness of exports. The improvement in production process and quality systems in the Hyderabad plant has helped to improve the demand for the products besides making them competitive. As a result, in the recent tenders from Coal India Limited, the major consumer of explosives and initiating devices in the country, the Company has won large orders compared to the previous years. The Company is poised to grow steadily over the next few years on the basis of favourable decisions from tender driven PSUs such as Coal India, Singareni Collieries, NMDC, etc. and large non-PSU organizations, supported by growth in export business. Special products for Defence and Space agencies along with sophisticated products such as the electronic detonator range would add to the business volumes of this Division. 15.2 Mining and Infrastructure The Division which has had rich exposure in providing support services to the mining industry with services such as mine planning, execution of mine plans, overburden removal, extraction of ore, crushing and grading of ore, etc. should be able to grow and recover its former activities levels. The Government has already fast tracked various mining related regulatory issues, a few actions are already visible but will take time to yield visible results. The Government has recently allotted / re-allotted coal blocks which were earlier cancelled by the Supreme Court. Most of these mines are expected to commence operations shortly giving ample opportunities for the Division. We expect the mine scenario in the country to grow at a healthy pace after nearly four years of downtrend. The Division is already tendering / quoting for projects over the last few months and should be able to finalise some of the projects during the year. In preparation for infrastructure work, which is also in the Government focus, the Division has started taking elevated road, bitumen roads and other building projects in order to qualify for larger projects. 15.3 Realty In Bangalore, with the completion of the first building and multi-level car park of 15.54 lakhs sq.ft., the 2nd Building of another 10 lakhs sq.ft. has been started. The elevated approach road to the 2 buildings is also in place. Marketing of the space in the first building will be completed in the coming year. Major initiatives for the economic development of the State announced by the new Telangana State Government such as industry specific clusters for IT, foundry, solar energy, cinema city, AIIMS, etc. is expected to increase the demand for realty space in Hyderabad. Planning work relating to the project is being modified anticipating the emerging demand pattern and approvals are being sought on sector-wise basis. Based on an assessment and feedback on current market needs, detailing for Phase 1 of 11 lakh sft, which will mainly be a residential development alongwith neighbourhood shopping, is being readied for statutory approvals. 16. RISKS & CONCERNS AND RISK MANAGEMENT Pursuant to the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board has authorized the Audit Committee to review the risk management plan of the Company from time to time. The executive Management identifies, evaluates business risks from time to time and furnishes the same to the Audit Committee along with risk mitigation plan. The Audit Committee reviews and renders advice for minimizing adverse impact, if any. The key business risks identified by the Company and its mitigation plans are as under: 16.1 Environmental Risks Regular safety audits are carried out by internal safety audit teams and at regular intervals by external teams. General Safety Directions (GSDs) are strictly enforced in all factories and plants within the factories to ensure minimisation of risk. In addition, strict compliance of the requirements of the Explosives Act and Rules are ensured to protect the exposure of adjacent neighbourhoods to the explosives and accessories factories from undue risk. Operations are carried out to comply with emission, waste water and waste disposal norms of the local authorities of the respective factories. In addition, the Hyderabad Factory has implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001. 16.2 Operational Risk The Energetics Division operates in a highly regulated and licensed industry environment and amendment / revision in licenses are required based on expiry of the licenses and change in production capacity and process. Amended / revised licenses for increase in license capacity for any of the explosives products may get delayed temporarily or for long periods thereby limiting our ability to cater to any increase in demand for these products from our customers. Non-availability of licenses / approvals for expansion of new products could affect our future growth and expansion plans. The Division, therefore, ensures that approvals are applied for well in advance to avoid launch dates / export of products and active follow up is maintained to get approvals in time. Location Risks Manufacturing facilities of our major subsidiary, are spread across six States. The optimum locations for packed explosives unit is determined by the customer location and the source of raw material. The advantage of the location of bulk explosives units is optimized to be close to the customer location. With changes in sources of raw material our location may not continue to be optimal in comparison with the competition. Moreover, if there is a consolidation in the industry, and the size of each manufacturing units go up, we may be disadvantaged by being sub-optimal. Raw Materials Many of the inputs of the Company and its major subsidiary are imported, availability of which is affected by global market situations. Also, prices of such items are volatile. Timely availability of raw materials is critical for continuous plant operations. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies. With crude oil prices showing an uptrend after an unexpected fall during the last six months or so, the raw material prices and input costs are expected to increase. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies. 16.3 Market Risks: Markets The Company and its major subsidiary operate in highly competitive markets where competition from all India players as well as regional players is high. The Energetics Division which manufactures explosive accessories and the Mining and Infrastructure Division operate in tender-driven markets, sometimes with onerous and unreasonable performance clauses. Therefore, there is a risk of cost increases not possible to be passed on to ultimate consumers. Any reversal in growth trend in the economy in general and weak monsoons in particular, could affect demand and consequent deceleration in manufacturing industry Concentration of Customers The Mining and Infrastructure Division which currently undertakes mining services in coal, iron ore and limestone sectors, is exposed to business risks on account of non-availability of environmental clearances in time and lack of adequate infrastructure for dispatch of ores from the mine, especially during the rainy seasons. In view of this, detailed review of approvals and quality of infrastructure is carried out before undertaking mining service contracts. Both the Energetics and Mining & Infrastructure Divisions are operating in the mining and infrastructure sectors, dominated by the PSUs, where the tendering system is in vogue, with the attendant risks. Missing L1 to L3 status in these tenders might result in loss of business opportunities for extended periods for the relevant tender(s). 16.4 Financial Risks: Currency Value and Interest Rate Fluctuations Financial risk management is done by the Finance Department at the various business Divisions and at Corporate Office under policies approved by the Board of Directors. Policies for overall foreign exchange loss risks and liquidity are regularly reviewed based on emerging trends. Interests' risks arising out of financial debt, are normally done at fixed rates or linked to LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levels may further impact base oil and ammonium nitrate rates. Credit Risk The Company and its major subsidiary sometimes sell its products by extending credit to customers, with the attendant risk of payment delays and defaults. To mitigate the risk, a credit risk policy is also in place to ensure that sale of products are made to customers after evaluation of their ability to meet financial commitments through allotment of specific credit limits to respective customers. Credit availability and exposure is another area of risk. Liquidity Risk The Company and its major subsidiary operate in working capital intensive industries. The Company realizes that its ability to meet its obligations to its suppliers and others is linked to timely and regular collection of receivables and maintaining a healthy credit rating. Review of working capital constituents like inventory of raw materials, finished goods and receivables are done regularly by the respective Divisions and closely monitored by Corporate Finance. 16.5 Legal and Statutory Risks: Contractual Liability All major contracts are reviewed / vetted by the in-house Legal department before the same are executed. In addition, the Company engages the services of reputed independent legal counsels, on need basis. In matters of tax law and other statutory obligations the outcome of litigation cannot always be predicted. Hence, appropriate financial provisions, insurance policies and credit lines are taken to limit the risk for the Company. Litigation Risks: The Company is exposed to the risk of litigation of prolonged nature. Apart from the Tax Matters referred to in the Financial Statements, Litigations having a major impact on the Company include those with Udasin Mutt pertaining to leased lands of Hyderabad Works, Competition Commission of India, which are being pursued by the Company with the appropriate Court/ Tribunal. 16.6 IT Risks The Company is dependent on intra-office and inter-office networks, as well as several business software operated from the Corporate Office and the business Divisions. Failure of system networks and consequential loss of business is attempted to be minimised by critical systems being operated on secured servers with regular maintenance, regular back up and off-site storage of data, selection of suitable firewall and virus protection systems / software. 16.7 Other Risks Various assets of the Company including plant and machinery, stocks, buildings, furniture, office equipment and computer systems could suffer damages / loss owing to occurrences like fire, accidental mishaps, etc. The Company has taken insurance covers to protect these assets from possible damage / loss. While the Company undertakes regular review of remuneration structures, threat of poaching by competitors, especially, new entrants in the industry of key persons is possible. Such actions could lead to temporary drop in efficiency and performance in the specific areas. 17. DIRECTORS During the year, Mr.Sanjay G Hinduja ceased to be Director of the Company. However, the Board has appointed him as the Chairman Emeritus of the Company in recognition of his valuable contributions made over the last more than twelve years and to be able to avail of his advice from time to time. Ms.Vinoo S Hinduja (Alternate: Mr.K.C.Samdani), Mr.Ramesh V Rao and Mr. Prakash Shah have resigned as Directors of the Company. The Board wishes to place on record its appreciation for the valuable guidance received from them from time to time. Mr.Ajay P. Hinduja had been appointed as Director of the Company in the casual vacancy caused by the resignation of Mr.Ramesh V Rao. He is proposed to be appointed as Director liable to retire by rotation. Mr. Ajay P. Hinduja holds a Degree in Economics from the University of Geneva, with specialisation in Finance. He has had varied experience in the International Banking arena, including as 'Director' and 'Member' of the Management Committee of Amas Bank (Switzerland) Ltd. {presently named "Hinduja Bank (Switzerland) Ltd."} since 1996. In accordance with the provisions of the Companies Act 2013 and the Articles of Association of the Company Mr.Ramkrishan P. Hinduja retires by rotation at the 54th Annual General Meeting of the Company and is eligible for reappointment. The number and details of the meetings of the Board and other Committees are furnished in the Corporate Governance Report. The Independent Directors have furnished declaration of independence under Section 149 of the Companies Act 2013. Familiarization Programme for Independent Directors The Company familiarizes its Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. through various programmes on a continuing basis. The Familiarisation programme for Independent Directors is disclosed on the Company's website. Separate Meeting of Independent Directors A separate meeting of Independent Directors of the Company, without the attendance of Non-Independent Directors and members of management, was held on 24th March, 2015, as required under Schedule IV to the Companies Act, 2013 (Code for Independent Directors) and Clause 49 of the Listing Agreement. At the Meeting, the Independent Directors: ? Reviewed the performance of Non-Independent Directors and the Board as a whole; ? Reviewed the performance of the Chairman of the Company, taking into account the views of Executive Director and NonExecutive Directors; and ? Assessed the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. All the Independent Directors attended the Meeting of Independent Directors. Board & Directors' Evaluation Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board, its Committees and the Directors have carried out annual evaluation / annual performance evaluation, covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. The performance evaluation of the Independent Directors was carried out by the entire Board. The criteria for performance evaluation are as follows: Role & Accountability - Understanding the nature and role of Independent Directors' position. - Understanding of risks associated with the business. - Application of knowledge for rendering advice to management for resolution of business issues. - Offer constructive challenge to management strategies and proposals. - Active engagement with the management and attentiveness to progress of decisions taken. Objectivity - Non-partisan appraisal of issues. - Own recommendations given professionally without tending to majority or popular views. Leadership & Initiative - Heading Board Sub-committees. - Driving any function or identified initiative based on domain knowledge and experience. Personal Attributes - Commitment to role & fiduciary responsibilities as a Board member. - Attendance and active participation. - Proactive, strategic and lateral thinking. Directors' Appointment and Remuneration Policy The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company and formulates the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement. The Board has, on the recommendations of the Nomination & Remuneration Committee framed a policy for remuneration of the Directors and Key Managerial Personnel. The objective of the Company's remuneration policy is to attract, motivate and retain qualified and expert individuals that the company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognizing the interests of Company's stakeholders. The Non-Executive Directors (NED) are remunerated by way of Sitting Fee for each meeting attended by them and an annual commission on the profits of the Company. Commission to respective non-executive directors is determined on the basis of an objective criteria discussed and agreed upon by the Committee Members unanimously. NEDs are reimbursed any out of pocket expenses incurred by them in connection with the attendance of the Company's Meetings. PARTICULARS OF EMPLOYEES AND REMUNERATION The information required under Section 197 (12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure B. The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of the Report. None of the employees listed in the said Annexure is related to any Director of the Company. 18 ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure C. 19. INFORMATION ON STOCK EXCHANGES The Equity shares of the Company are listed on BSE Limited and the National Stock Exchange of India Limited and the Listing Fees have been paid to them uptodate. 20. CORPORATE GOVERNANCE A detailed report on the subject forms part of this report. The Statutory Auditors of the Company have examined the Company's compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report. 21. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act 2013: (a) that in the preparation of the annual accounts/financial statements for the financial year ended 31st March 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any; (b) that the accounting policies as mentioned in the financial statements were selected and applied consistently and reasonable and prudentjudgments and estimates were made so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; (c) that proper and sufficient care had been taken 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; (d) that the annual accounts were prepared on a going concern basis; (e) that proper internal financial controls were in place and that such internal financial controls are adequate and were operating effectively; and (f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. 22. AUDITORS Statutory / Financial Audit M/s Deloitte Haskins and Sells, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for reappointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 141 of the Companies Act, 2013. Cost Audit The Ministry of Corporate Affairs had, vide its Order dated 31st December, 2014 directed audit of cost records of companies covered under the Companies (Cost Records & Audit) Amendment Rules, 2014. The said Order is applicable to the Company, being manufacturer of Detonators, Detonating Fuse, Explosives, etc. Accordingly, the Company has appointed M/s Dhananjay V Joshi and Associates, Cost Accountants, Pune for audit of the Cost Records for the financial year 2014-15. The Cost Auditor is required to forward his report to the Central Government by 27th September 2015. The Board of Directors has appointed M/s. Narsimha Murthy & Co, Cost Accountants, Hyderabad as the Cost Auditors of the Company for the financial year 2015-16. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs BS & Company, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as Annexure D. There was no qualification, reservation or adverse remark or disclaimer in the auditors report or the secretarial audit report. 23. CORPORATE SOCIAL RESPONSIBILITY (CSR) In compliance with Section 135 of the Companies Act 2013 and other applicable provisions, the Company has constituted Corporate Social Responsibility Committee consisting of Mr.Prakash Shah, Chairman of the Committee (Independent Director), Mr.Ajay Hinduja (Non Executive Director and Chairman of the Company) and Mr.K.N.Venkatasubramanian (Independent Director) as the Members of the Committee. The Committee met once during the year and laid down the policy on Corporate Social Responsibility stating therein the objectives, implementation and other issues pertaining to the achievement of the CSR objectives of the Company. The erstwhile Lubricants Division which was demerged from the Company, was the major profit generating Division. The remaining businesses of the Company does not have eligible profit on aggregate basis during the last three financial years. Gulf Oil Lubricants India Limited (GOLIL) to whom the Lubricants Division was transferred, has undertaken to incur the CSR expenditure, treating the profits of the erstwhile Lubricants Division as that of GOLIL for CSR purposes. In view of these circumstances, and based on legal advice, the CSR Committee concurred that the Company would not incur mandatory CSR expenditure. The Company, however, makes reasonable contributions to CSR purposes. Towards this objective, an ambulance was donated by the Company to Lions Club Eye Hospital, Balanagar, Hyderabad. The CSR Policy of the Company is displayed on the website of the Company. The Annual Report on CSR activities is annexed herewith as Annexure-E. 24. VIGIL MECHANISM / WHISTLE BLOWER POLICY In terms of the requirements of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Company has a vigil mechanism to deal with instance of fraud and mismanagement. The details of the vigil mechanism are displayed on the website of the Company. The Audit Committee reviews the functioning of the vigil / whistle blower mechanism from time to time. 25. RELATED PARTY TRANSACTIONS All related party transactions / arrangements that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel which may have a potential conflict with the interest of the Company at large. All related party transactions / arrangements were placed before the Audit Committee for prior approval, supported by a statement from the Management as to the adherence of arm's length basis and being in the ordinary course of business. The policy on Related Party Transactions as approved by the Board is displayed on the Company's website. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. Details of the material transactions are provided in Form AOC-2 which forms part of this Report. 26. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report. 27. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Pursuant to a complaint filed before the Competition Commission of India (CCI) by Coal India Limited, CCI had vide their Order dated 16th April 2012 held that the Company had, along with a few other explosive manufacturers, contravened the provisions of Section 3 of the Competition Act 2002. The CCI had on that basis imposed a penalty on the Company of Rs. 28.94 crores. The Company has filed an Appeal before the Competition Appellate Tribunal (COMPAT) and the COMPAT had vide its Order dated 18th April 2013, reduced the penalty to Rs. 2.89 crores; and a further Civil Appeal in the Supreme Court of India and the matter is subjudice. Based on expert legal advice, the Company believes that it has a good case and expects a favourable decision in the matter. 28. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure F. ACKNOWLEDGEMENTS Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company. For and on behalf of the Board of Directors Ajay P. Hinduja Chairman Place : Mumbai Date : August 7, 2015 CAUTIONARY STATEMENT Statement in this Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, raw material availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts businesses and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise. |