DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the 31st Annual Report on the business and operations of the Company along with the Audited Standalone and Consolidated Financial Statements of the Company for the Financial Year ended 31stMarch, 2016. 2. Business Operations Your Company has seen moderate sales growth across geographies during this fiscal, inspire of deficient rainfall, price erosion & degrowth of industry. The new launched products-SEMPRA and COVER have performed well. Your Company is well positioned to pursue its strong growth potential and has been moving forward with introducing its new products. Forecast of a good monsoon this year, is a good sign of revival for the troubled agriculture sector. It will not benefit only agriculture and farmers but will give a boost to India's economy also. Results financial year ended 31.03.2016 Your Company has recorded a growth of 5.57% increase in its Net Turnover of Rs.82,878.73 Lacs against Rs. 78,507.58 Lacs in the financial year 2014-15. Your Company has also reported EBIDTA of Rs.15,234.64 Lacs and Net Profit of Rs.10,731.06 Lacs for the financial year 2015-16 as compared to EBIDTA of Rs.13,783.86 Lacs and Net Profit of Rs.10,608.27 Lacs in the financial year 2014-15. Your Company continues to remain debt-free, due to it's strong performance in the recent years. Additionally, it has healthy Net Worth of Rs. 48044.02 Lacs. Your Company has been continuously re-afirmed (ICRA) A+ (Stable outlook) for fund based limits and (ICRA) A1 + for non fund based limits. CRISIL has assigned Fundamental grade 4/5 (Superior Fundamentals) and Valuation grade of 4/5 (upside from Current Market Price) to your Company. 3. Dividend During the financial year 2015-16, your Company had distributed Ist Interim Dividend @125% ( i.e. Rs. 2.50 perEquity Share having Face Value of Rs. 2/- each) in the Month February, 2016 and IInd Interim Dividend @ 200% (i.e. Rs. 4/- per Equity Share having Face Value of Rs. 2/-each) in the Month of March, 2016. The total outgo on account of above stated both the Interim Dividends was Rs.3915.69 Lacs (including total tax on Interim Dividends was Rs. 664.42 Lacs). The payment of both the Interim dividends has been made within prescribed time period. The total payout on account of Interim Dividends was Rs.6.50 per equity shares during the financial year 201516 as compared to final dividend Rs.4.50 per equity share of financial year 2014-15. In view of above Interim Dividends payout, the Board of Directors has not recommended inal dividend for the financial Year 2015-16. 4. Subsidiary Company At present your Company has one Wholly Owned Subsidiary Company namely M/s. Dhanuka Agri-Solutions Pvt. Ltd. incorporated in Bangladesh and its operations have not yet started. A Statement containing salient features of the Financial Statements of the subsidiary in Form AOC-1 is attached with Financial Statement of the Company. The Statement also provides details of performance and financial position of the Subsidiary. Pursuant to the provisions of Section 136 of the Act, the Company's Financial Statements, Consolidated Financial Statements, along with relevant documents and separate Audited Accounts in respect of the Subsidiary, are available on the website of the Company. The Company does not have any material Subsidiary in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Hence, Policy on Material Subsidiaries has not been formulated. There are no Associate Companies within the meaning of Section 2(6) of the Companies Act, 2013 ("the Act"). 5. Transfer to General Reserve Your Company proposes to transfer Rs. 1073 Lacs to the General Reserve. 6. Deposits from Public The Company has not accepted any Deposits from Public and hence, no principal or interest was outstanding as on the Balance Sheet date. 7. Future Prospects The Agriculture Sector has been given top most weight age by the Government of India while announcing Budget for the Financial Year 2016-17. The Govt. has announced financial aids, insurance policy for crops and other beneficial policies & schemes for farmers and strengthening the Infrastructure of Agriculture Sector. The Ministry of Agriculture & Farmers Welfare has been continuously launching effective programmes to educate farmers about the use of modern techniques & technology in agriculture, allocation and focus on irrigation including issuance of soil health card to every farmer. These initiatives and result oriented steps are going to change the entire framework of Agriculture Sector in India in terms of sustainable growth of agriculture produce and income of farmers in coming years. The Indian Metrological Department has predicted that year 2016 will be a La- Nina year which means above normal monsoon and good rainfall of more than 105%. The normal monsoon directly favours your Company resulting in increased sale of its products. Your Company has been consistent launching two to three innovative products u/s 9(3) and two to four products u/s 9 (4) of the Insecticides Act, 1968 every year. This practice has yielded better response from distributors and farmers and also led to increase in its market share. Your Company has already built adequate capacity at its new unit at Keshwana (Rajasthan) to cater to the growing demand of its products in near future. A thrust is also being given to expand the distributor base of the Company. Your Company's Management committed to use of high-tech machines & apparatus in the manufacturing operations of its products. All materials and chemicals are processed and stored with effective safety guidelines in all manufacturing units of the Company. Your Company expects to perform well amid all positive factors during the Financial Year 2016-17. Further, vision of the Hon'ble Prime Minister of doubling farmers' income can only be a success with improved productivity of farmland. Your Company is fully committed to the cause of farmers prosperity. 8. Measures for Energy Conservation, R&D and Technology Absorption and Details of Foreign Exchange Earnings and Outgo Information as required u/s 134(3)(m) of the Act is given in Annexure 'A' forming part of this Report. 9. Extract of Annual Return The extract of the Annual Return in form MGT-9 is given in Annexure 'B' forming part of this Report. 10. Meetings of the Board Six Meetings of the Board of Directors were held during the Financial Year 2015-16. The Corporate Governance Report covers detailed information on Meetings of the Board and its Committees. 11. Directors & Key Managerial Personnel In accordance with the provisions of the Act, Mr. Mahendra Kumar Dhanuka and Mr. Arun Kumar Dhanuka, will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The tenure of Mr. Mridul Dhanuka as a Whole time Director of the Company has been over on 22nd May, 2016 and being eligible, he has offered himself for reappointment as a Whole time Director of the Company. Your Board has recommended his re-appointment for a further period of 5 years based on the recommendation of Nomination and Remuneration Committee. The tenure of Mr. Rahul Dhanuka as a Whole time Director of the Company will be over on 1st May, 2017 and being eligible, he has offered himself for re-appointment as a Whole time Director of the Company. Your Board has recommended his re-appointment for a further period of 5 years based on the recommendation of Nomination and Remuneration Committee. It is informed that Mr. Sachin Kumar Bhartiya has resigned from the post of Nominee Director of 2020 Equity Investors Limited in view of termination of Share Subscription Agreement entered into between the Company and 2020 Equity Investors Limited w.e.f. 25thJanuary, 2016. In order to avail the qualitative guidance for investors, the Board of Directors has recommend the appointment of Mr. Sachin Kumar Bhartiya as Independent Director of the Company, in accordance with the provisions of the Companies Act, 2013 and Rules framed there under, for a period of five consecutive years with effect from 9thFebruary, 2016, based on the recommendation of the Nomination and Remuneration Committee. Mr. Kapil Garg was appointed as Additional/Executive Director & Company Secretary w.e.f. 09.02.2016 upto the date of forthcoming Annual General Meeting of the Company. Since he has not offered himself for appointment as a Director, your Board has not recommended his appointment as Executive Director of the Company. The details of familiarization programmers for Independent Directors are available on the Company's website (web link: <http://www.dhanuka.com/wp-content/uploads/2015/07/> Familiarization-Programmes-for-Independent-Directors.pdf). Pursuant to the provisions of Section 203 of the Act, Mr. Mahendra Kumar Dhanuka, Managing Director, Mr. Vinod Kumar Bansal, Chief Financial Oficer and Mr. Kapil Garg, Company Secretary have been designated as Key Managerial Personnel of the Company. 12. Directors' Responsibility Statement Pursuant to the provisions of Section 134(3)© of the Act with respect to Directors' Responsibility Statement, it is hereby confirmed that: 1. In the preparation of the Standalone and Consolidated Annual Accounts, the applicable Accounting Standards have been followed along with proper explanations relating to material departures; 2. The Directors have 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 at the end of Financial Year and of the Profit of the Company for that period; 3. The Directors have taken proper and sufficient care 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 frauds and other irregularities; 4. The Directors have prepared the Standalone and Consolidated Annual Accounts on a going - concern basis; 5. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and 6. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 13. Corporate Governance Your Company maintains highest level of transparency, accountability and good management practices through the adoption and monitoring of corporate strategies, goals and procedures to comply with its legal and ethical responsibilities. As required by SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, a separate Report on Corporate Governance forms part of the Annual Report. A Certificate by the Statutory Auditors of the Company confirming compliance with Corporate Governance forms a part of this Report. 14. Corporate Social Responsibility (CSR) The Annual Report on CSR activities is given in Annexure 'C' forming part of this Report. 15. Internal Complaints Committee (ICC) Your Company has constituted Internal Complaints Committee (ICC), in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressed) Act, 2013 and Rules made thereunder. The ICC comprises of Mrs. Shubha Minz (Chairperson), Mr. Rajesh Sahni, Mr. Ankur Dhanuka and Mrs. Seema Salwan. The Company's Policy under this Act is available on the corporate website. ICC provides a mechanism for reporting and redressing complaints related to sexual harassment at workplace. 16. Committees of Board The details of the Committees of Board are provided in the Corporate Governance Report forming part of the Annual Report. 17. Whistle Blower Policy In compliance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Whistle Blower Policy has been implemented as a mechanism for employees to report concerns about unethical behaviour or actual or suspected fraud of all kinds, including alleged fraud by or against the Company, abuse of authority, whether made by a named complainant or anonymously. The Policy is a step towards better Corporate Governance and is available on the Company's website. 18. Management Discussion & Analysis The Management Discussion and Analysis is given separately and forms part of this Annual Report. 19. Insider Trading Regulations Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of Insider Trading was in force during last fiscal. 20. Material Changes and Commitments affecting the Company's Financial Position between the end of the Financial Year and Date of Report u/s 134 of the Companies Act, 2013 Except as disclosed elsewhere in the Report, there have been no material changes and commitments, which can affect the financial position of the Company between the end of the Financial Year till the date of this Report. 21. Comprehensive Scheme of Amalgamation The Hon'ble High Court of Delhi has approved the Comprehensive Scheme of Amalgamation between M/s. A.M. Bros. Fintrade Private Limited and M/s. Dhanuka Finvest Private Limited with M/s. Dhanuka Agritech Limited and their respective Shareholders and Creditors. The order of the High Court has been filed on 01.12.2015 with the Registrar of the Companies, NCT Delhi & Haryana. 22. Performance Evaluation In compliance with the requirement of Section 134(3)(p) and Schedule IV of the Companies Act, 2013 and Rules framed there under and Regulation 17(10) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company has evaluated and assessed the performance of the Company's Chairman, Individual Directors, Board as a whole and its Committees through a questionnaire based on emerging and leading practices and performance criteria such as strategic engagement, knowledge, diligence, ethics & values, oversight of the Financial Reporting Process, including Internal Controls and Composition and Quality of Board and Committees etc. 23. Policy on Appointment and Remuneration of the Directors, Key Managerial Personnel and Other Employees The Policy of the Company relating to the appointment and remuneration of the Directors, Key Managerial Personnel and other employees in accordance with SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 and Section 178(3) of the Companies Act, 2013, is given in the Corporate Governance Report forming part of the Annual Report. 24. Particulars of Loans, Guarantees or Investments The particulars of loans, guarantees and investments have been provided in the Notes to the Financial Statement. 25. Particulars of Contracts or Arrangements with Related Parties Particulars of contracts or arrangements with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is given in Annexure 'D' forming part of this Report. Notes to Accounts cover more information on Related Party Transactions entered into by the Company. In addition, the following contracts or arrangements with Related Parties were entered into by the Company during the Financial Year in terms of Section 188(2) of the Companies Act, 2013: a. Transactions for sale and/or purchase with M/s. Otsuka Chemicals (India) Private Limited for FY2015-16 approved in the Board Meeting held on 28th May, 2015 on recommendation of the Audit Committee. Transactions have been carried out at arm length basis in ordinary course of business. b. Transactions for sale and/or purchase with M/s. Dhanuka Laboratories Limited for FY 2015-16 approved in the Board Meeting held on 28th May, 2015 on recommendation of the Audit Committee. Transactions have been carried out at arm length basis in ordinary course of business. c. Promotion of Mr. Harsh Dhanuka was approved in the Board Meeting held on 28th May, 2015 from Senior General Manager (Marketing) to Vice President (Marketing) of the Company with salary of Rs. 3,00,000- 50,000- 5,00,000 p.m. with effect from 01.06.2015 with the approval of the Shareholders in the AGM held on 29.12.2015. d. Execution of Lease Agreement with M/s. Dhanuka Private Limited for taking on lease for Commercial Purpose at Hyderabad for operating Office-Cum-Godown for a period of four years starting from 1st October, 2015 to 30thSeptember, 2019 approved in the Board Meeting held on 12th August, 2015 on recommendation of the Audit Committee. Transaction has been carried out at arm length basis in ordinary course of business. e. Renewal of the Lease Agreement with Mridul Dhanuka (HUF), for taking on lease Office Premises at Kolkata for continuing Company's Office for a period of ive years starting from 20thJanuary, 2016 to 19thJanuary, 2021, approved in the Board Meeting held on 5th November, 2015 on recommendation of the Audit Committee. Transaction has been carried out at arm length basis in ordinary course of business. f. Grant of License to group Companies to use Company's Registered Office for the purpose of maintaining the registered office at a rental of Rs. 2000/- approved in the Board Meeting held on 2nd December, 2015 on recommendation of the Audit Committee. Transactions have not been carried out at arm length basis in ordinary course of business and approval of shareholders in this regard has been obtained in the 29th AGM held on 17th Sep. 2014. The Policy on Related Party Transactions has been approved by the Board of Directors and is available on the company's website (web link:<http://www.dhanuka.com/> wp-content/uploads/2015/05/Policy-on-Related-Party-Transactions.pdf). 26. Risk Management Policy and Internal Adequacy The Company considers on-going Risk Management to be a core function of the Company's Management and understands that the Company's ability to pro-actively identify, assess and minimize risk is critical in achieving its Corporate Objectives. The Company has implemented Risk Management Plan and drafted Risk Identification, Assessment & Mitigation Document to ensure appropriate and timely Risk Management, in compliance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. The Company's Internal Control systems are commensurate with the nature of its business and the size and complexity of its operations. 27. Internal Financial Control The Company has in place adequate Internal Financial controls with reference to Financial Statements. The same are periodically reviewed by the Internal, Statutory and Secretarial Auditors and by the Management, Board and Committees thereof. 28.Shares under Compulsory Dematerialization Your Company falls in the category in which delivery of Shares in dematerialized form is compulsory, if the same are traded on a Stock Exchange. As on 31st March, 2016, 98.41% Equity Shares were held in dematerialized form. 29. Statutory Auditors M/s. Dinesh Mehta & Co., Chartered Accountants, having Registered Office at 21, Daya Nand Road, Darya Ganj, New Delhi-110002, were appointed as Statutory Auditors of the Company in the 29th AGM to hold office until the conclusion of 32nd AGM, subject to the ratification of their appointment at each subsequent AGM. The Board recommends the ratiication of their appointment for Financial Year 201617. The Auditors Report does not contain any qualification, reservation or adverse remark. 30. Secretarial Auditors The Board of Directors, in compliance with the provisions of Section 204 of the Companies Act, 2013 and Rules framed There under, has appointed M/s R&D, Company Secretaries, having their Registered Office at 785, Pocket E, Mayur Vihar Phase-II, New Delhi-110 091, as Secretarial Auditors of the Company for the Financial Year 2015-16. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark and is given in Annexure 'E' forming part of this Report. 31. Cost Auditors The Board of Directors, in compliance with the provisions of the Companies Act, 2013, Rules and Notifications issued thereunder, has appointed M/s S. Chander & Associates, Cost Accountants, having their Registered Office at 212, 2nd Floor, Sarai Pipal Thala, G.T. Karnal Road, Adarsh Nagar, Delhi - 110 033, as Cost Auditors to conduct Audit of the Cost Accounts maintained by the Company for the Financial Year 2016-17. 32. Status of Listing Fees Your Company has been regularly paying listing fees to the BSE & NSE, Mumbai where its Equity Shares are listed. 33. Particulars of Employees Information in accordance with the provisions of Section 197 of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 i) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company, the percentage increase in remuneration of each Director, Chief Financial Oficer and Company Secretary and comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company, for FY 2015-16 are as under: ii) The percentage increase in the median remuneration of employees in the Financial Year: 15.33% iii) The number of permanent employees on the rolls of Company as on 31.3.2016: 1214 iv) The explanation on the relationship between average increase in remuneration and Company performance: The increase in remuneration is based on the company's performance amidst challenging drought affected fiscal and other attributes like employee's performance, professional and technical qualifications, experience, skill sets, growth of Industry & economy with future growth prospects etc. All these attributes are taken into consideration judiciously for revision of remuneration. v) Market Capitalization as on 31st March, 2016 was Rs. 2946 Crs. as against Rs. 3401 Crs. as on 31st March, 2015. Price Earnings Ratio of the Company was 27.46 as on 31st March, 2016 and was 32.06 as at 31st March, 2016. The closing price of the Equity Shares of the Company as on 31st March, 2016 was Rs. 585.00 and Rs. 589.05 on the BSE and NSE respectively, representing 292.50 times and 294.53 times increase over the IPO price of Rs. 10/ (the face value was split to Rs. 2/ in the year 2010) on BSE and NSE respectively, adjusted for the Stock splits to date. vi) Average percentile increase already made in the salaries of employees other than the Managerial Personnel in the last Financial Year i.e. FY 2015-16 and its comparison with the percentile increase in the Managerial Remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the Managerial Remuneration: Average percentile increase in salaries of employees other than Managerial Personnel in the last Financial Year i.e. FY 2015-16 was approx. 14%. Percentile increase in Managerial Remuneration was 11.5%. The increase in the managerial remuneration was based on the recommendation of the Nomination & Remuneration Committee and also within the salary range as pre-approved by the shareholders of the Company. vii) The key parameters for any variable component of remuneration availed by the Directors: Commission as percentage of net profit, calculated in accordance with Section 198 of the Companies Act, 2013, is the only variable component of remuneration paid to the Directors, as per approval accorded by the Shareholders of the Company on recommendation of the Board and Nomination and Remuneration Committee. viii) The Ratio of remuneration of the highest paid Director to that of the employees who are not Directors, but receive remuneration in excess of the highest paid Director during the year: No employee received remuneration in excess of the highest paid Director during the year. ix) The Company affirms that the remuneration is as per the Remuneration Policy of the Company. 34. Acknowledgement : Your Directors take this opportunity to record their deep sense of gratitude for the valuable support and co-operation extended to the Company by the Central Insecticides Board, Directorates of Agriculture, Haryana, Gujarat, J&K, Rajasthan, other Government Agencies, Bankers, Shareholders, Dealers, Distributors, Vendors, U.S. & Japanese MNCs and the farming community who have reposed their trust and confidence in the Company. Your Directors wish to place on record their appreciation for cordial industrial relations maintained by workmen and dedicated efforts put in by staff, for Company's continuous growth and success. For and on behalf of the Board Sd/- R.G. Agarwal Chairman DIN:00627386 Place: Gurgaon Date: 24th May, 2016 |