BOARD OF DIRECTORS' REPORT Your Directors are pleased to present the Annual Report of your Company together with the Audited Statement of Accounts and the Auditors' Report for the Financial Year ended 31 March, 2016. State of Company's Affairs: During the year under review, the Company achieved net revenue from operations of Rs 10,131/- Lakhs, as against Rs 11,039/- Lakhs in the previous year and made Profit Before Tax (PBT) of Rs.1,337/-Lakhs as against Rs 1,586/- Lakhs in the previous year. The PBT was affected due to marginal decline in sales volume and realization during the Financial Year 2015-16, as compared to the previous year, due to market conditions as well as Floods in Tamil Nadu/ Puducherry. Further additional provision towards capital work in progress, accelerated depreciation and exchange fluctuations had an adverse effect on the profitability of the Company. However, improvement in power consumption and reduction in raw material cost had a positive impact on the profitability. Directors & Key Managerial Personnel: Director, Mr. Suresh Krishnamurthi Rao retires by rotation and being eligible, offers himself for re-appointment. The Directors recommend Mr. Suresh Krishnamurthi Rao for re-appointment. Subsidiaries, Joint Ventures or Associate Companies: Your Company had no Subsidiaries, Joint Ventures or Associates during the year 2015-16. Fixed Deposits: During the year under review, the Company did not raise funds by way of fixed deposits from the public. Dividend: Your Directors recommend payment of Dividend of Rs. 1.25 per share (25%) for the year ended 31 March, 2016, absorbing a sum of Rs. 1,14,64,621/- , subject to the approval of the Members at the ensuing Annual General Meeting. Code of Conduct for prevention of Insider Trading: The Company has a policy viz., "Code of Conduct for prevention of Insider Trading" and the same has been posted in its website www. chemfabalkalis.com . Development and Implementation of a Risk Management Policy: The main objective of Risk Management is risk reduction and mitigation including identification of the risks faced by the business to optimize the risk management strategies. The Company has put in place a well-defined Risk Management framework. The Company has constituted a Risk Management Committee on its own, though constitution of Risk Management Committee is mandatory only for the top 100 listed Companies as per the Listing Regulations. The Risk Management Committee assists the Board in drawing up, implementing, monitoring and reviewing the Risk Management Plan. The Committee lays down the Risk Assessment and Minimization Procedures and it reviews the Procedures periodically to ensure that the Executive Management controls the risks through properly defined framework. The Company has obtained certification for ISO 14001 and OHSAS 18001 systems to take care of critical operational areas. It also utilizes the services of professional bodies like Central Leather Research Institute (CLRI) / The Energy and Resources Institute (TERI) / National Environmental Engineering Research Institute (NEERI) as also Consultants to continuously analyze and upgrade its operations. This year, the Company has also implemented Process Safety Management (PSM) to further improve our safety parameters. Details of significant and material orders passed by the regulators/ courts/ tribunals impacting the going concern status and company's operations in future: During the year, there were no instances of significant and material orders passed by the regulators, courts or tribunals on the Company. Internal Financial Control: Your Company has well defined and adequate internal controls and procedures, commensurate with its size and nature of its operations. This is further strengthened by the Internal Audit done concurrently. During the year, the Company got its internal controls over financial reporting and risk management process evaluated by independent Consultants. Besides, the Company has an Audit Committee, comprising Independent and Non-Executive Directors, which monitors systems, control, financial management and operations of the Company. The Audit Committee at its meeting held on 18.05.2016 has evaluated the internal financial controls and risk management system accordingly and found them adequate. Extract of the Annual Return: An extract of the Annual Return as prescribed under sub-section (3) of Section 92 of the Companies Act, 2013 ("Act") is given in Annexure 1 forming part of this Report. Number of Board Meetings held during the year along with the dates of the meetings: The meetings of the Board were held periodically, with not more than one hundred twenty days intervening between two consecutive meetings of the Board, as prescribed under Section 173(1) of the Companies Act, 2013. Directors' Responsibility Statement: As required under Section 134 (5) of the Companies Act, 2013, the Board of Directors hereby confirm:- (i) That in the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) That 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 the affairs of the Company at the end of the Financial Year and of the profit of the Company for that Financial Year; (iii) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) That the Directors had prepared the Annual Accounts on a going-concern basis; (v) That 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) That 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. Particulars of contracts or arrangements with related parties: The contracts or arrangements entered into with related parties along with justification for entering into such contract or arrangement, referred to in sub-section (1) of section 188 of The Companies Act, 2013 in the prescribed form no. AOC 2 is as per Annexure 2. Technology absorption, Conservation of energy and Research and development: The Company has an in-house Research Development Department, where the main areas of focus are Energy Conservation, Process Upgradation and Environmental Preservation. The Ministry of Science and Technology, Department of Scientific and Industrial Research, Government of India, has recognized the Company's in-house R & D facilities, which is valid upto 31 March, 2017. The Company has a sophisticated Quality Assurance (QA) Laboratory recognized by DuPont, USA for the analysis of Chlor- Alkali brine. The Brine from various Chlor- Alkali Industries in India is being analyzed at CAL-QA Laboratory. The Company continues to take all possible steps to conserve energy in every area of its operations. Brief details on Conservation of Energy and Technology Absorption are given in Annexure 3. Annual Evaluation made by the Board of its own performance and that of its Committees and Individual Directors The Board of Directors at its meeting held on 18.05.2016 has evaluated the performance of the Board, its Committees and the Individual Directors as per the Nomination and Remuneration Policy disclosed in Annexure 1 to Corporate Governance Report. Declaration by Independent Directors as required under Section 149(7) of the Companies Act, 2013 Mr. T. Ramabadran, Mr. N. Ganga Ram, and Mrs. Sujatha Jayarajan Independent Directors of the Company have given their statement of declaration under Section 149(7) of the Companies Act, 2013 ('the Act") that they meet the criteria of independence as provided in Section 149 (6) of the Act, and their Declarations have been taken on record. Statutory Auditors: The current Statutory Auditors of the Company, M/s Deloitte Haskins & Sells, Chartered Accountants, were first appointed as Statutory Auditors of the Company for the year 2005-06. Under the provisions of Section 139 of the Companies Act, 2013 and the Rules framed thereunder, which came into effect from 1st April, 2014, they were re-appointed for two consecutive Financial Years, 2015-16 and 2016-17, from the conclusion of the Annual General Meeting held on 30 July, 2015 upto the conclusion of the Annual General Meeting to be held in the calendar year 2017, subject to ratification by the Members at the Annual General Meeting to be held in the calendar year, 2016, on the terms of remuneration to be fixed by the Board of Directors. Now, the ratification by the Members at their ensuing Annual General Meeting is required for their re-appointment from the conclusion of the ensuing Annual General Meeting upto the conclusion of Annual General Meeting to be held in the calendar year 2017. The consent of M/s Deloitte Haskins & Sells and their confirmation that the ratification of their appointment, if made, will be in accordance with the prescribed conditions, have been received by the Company. The Directors recommend the ratification of re-appointment of M/s. Deloitte Haskins & Sells as the Statutory Auditors of the Company for the year ending 31 March, 2017. Cost Auditor: In conformity with the provisions of the Companies Act, 2013, the Company has appointed Mr. A. Madhavan, Cost Accountant in practice, Chennai, as the Cost Auditor, for the audit of cost accounts for the chemicals manufactured by the Company for the year ending 31 March 2017. The remuneration paid to him is being ratified at this Annual General meeting. Secretarial Audit Report: Mr. B. Ravi, Company Secretary, was appointed as Secretarial Auditor of your Company by the Board. The Secretarial Audit Report as required under section 204 of the Act, for the period 2015-16 is attached to the Annual Report. Vigil Mechanism: The Company has established a vigil mechanism, also called the Whistle Blower Policy, which has been adopted by the Board for Directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct or Ethics Policy. It provides for adequate safeguards against victimization of persons who use such mechanism and makes provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. Confidentiality of Whistle Blower shall be maintained to the greatest extent possible. Details of the vigil mechanism are posted in the Company's website. Audit Committee: The composition of the Audit Committee constituted by the Board in terms of Section 177 of the Companies Act, 2013 and Clause 49 (III) of the erstwhile Listing Agreement entered in to with the Stock Exchanges and in terms of Regulation 18 of The SEBI (LODR) Regulations, 2015 is as under: The Audit Committee acts in accordance with the terms of reference specified by the Board of Directors in terms of Section 177(4) of the Act and in terms of Regulation 18 of The SEBI (LODR) Regulations, 2015 . It also oversees the vigil mechanism and is obliged to take suitable action against the Directors or employees concerned, when necessary. Nomination and Remuneration Committee: In terms of Section 178 of the Companies Act, 2013 and the Rules prescribed thereunder, your Company is mandatorily required to constitute a Nomination and Remuneration Committee. Accordingly, the Company has set up a Nomination and Remuneration Committee which has formulated criteria for determining qualifications, positive attributes and independence of a Director and for ensuring that: 1) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; 2) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and 3) Remuneration to Directors, key managerial personnel and senior management involves a balance between fixed and initiative pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Nomination and Remuneration Policy of your Company is set out in Annexure 1 to the Report on Corporate Governance forming part of this Report. Corporate Social Responsibility (CSR): According to Section 135 of the Companies Act, 2013 ("the Act"), a Company having Net Worth of Rs. 500 Crores or more, or Turnover of Rs. 1,000 Crores or more, or Net Profit of Rs. 5 Crores or more during any financial year shall constitute a Corporate Social Responsibility (CSR) Committee of the Board consisting of three or more directors, of which at least one shall be an Independent Director. As your Company's Net Profit is more than Rs 5 Crores, the Board has constituted Corporate Social Responsibility Committee in accordance with Section 135 of the Act. The Company is committed to operating in a socially responsible manner in terms of protecting the environment and conserving water resources and energy. Details of the CSR Policy drawn up by the Company and of CSR expenditure and initiatives taken during the year 2015-16 are given in Annexure 4 to this Report. Remuneration details of Directors and Employees: The details of remuneration paid to the Directors and employees of your Company are set out in Annexure 5 Employees' Stock Option Scheme: The Shareholders of the Company approved the Employees' Stock Option Scheme titled as "CAESOS - 2015 through Postal Ballot on 05th March, 2016. CAESOS-2015 is in compliance with The SEBI (Share Based Employee Benefits) Regulations, 2014. The details are available on our website www.chemfabalkalis.com . The purpose of the Scheme is: i) to attract, retain and motivate talented and critical employees. ii) to encourage employees to align Individual performance with Company's Objectives; and iii) reward employee performance with ownership. The details of CAESOS - 2015 form part of the Notes to Accounts of the Financial Statements in this Annual Report. Shares issued under Employee Stock Option Scheme (ESOS) : Nil Equity Shares with differential voting rights : NA Sweat Equity Shares : NA Details of Voting rights not exercised : NA Acknowledgement The Directors thank all the Shareholders, customers, dealers, suppliers, bankers, financial institutions and all the other business associates for their continued support to the Company and the confidence reposed in its Management. The Directors also thank the Government authorities for their understanding and co-operation. The Directors wish to record their sincere appreciation of the significant contribution made by the employees of the Company at all levels to its profitable and successful operations. For and on behalf of Board of Directors of CHEMFAB ALKALIS LTD Suresh Krishnamurthi Rao Chairman DIN No: 00127809 Place: Chennai Date: 18th May, 2016 |