Directors’ Report Your Directors have pleasure in presenting their Report for the financial year ended 31st March, 2016. Performance Revenue from operations (net of excise) at Rs. 47,517.3 million, represents a marginal increase of 1% over the previous year. Despite the challenging year, your Company reported a profit after tax (after exceptional items) of Rs. 44.5 million for the year ended 31st March, 2016 as compared to a loss after tax (after exceptional items) of Rs. 669 million in the previous year. The performance of the Agricultural Solutions business of your Company was affected on account of advent of the second El Nino which resulted in a drought across significant parts of the country. The Performance Products segment which includes the performance chemicals, dispersion & pigments, care chemicals, nutrition & health products and paper chemicals businesses recorded good growth in sales during the year under review. The Chemicals segment of your Company comprising of the intermediates, petrochemicals & monomers businesses registered substantial increase in sales during the year mainly due to sales of monomer products manufactured at Dahej site. The Functional Material & Solutions segment of your Company which comprises of the coatings, construction chemicals, performance materials and process catalysts technologies businesses registered growth in sales in volume terms during the year as compared to the previous year. Exports sales (including sales to Nepal & Bhutan) stood at Rs. 5,595 million during the year under report. Restructuring of businesses Divestment of the textile chemicals business to Archroma In July, 2015, your Company sold its textile chemicals business to Archroma India Private Limited pursuant to the global divestment of the said business by BASF SE, after receipt of the requisite approvals. Effective 1st July, 2015, your Company has entered into a long-term supply agreement with Archroma India Private Limited to manufacture & supply textile chemicals products in India. Setting up of a new Global Business unit for all pigments businesses In July, 2015, BASF SE, Germany announced the setting up of the new global business unit combining all its pigments activities effective January, 2016. The new unit would fully concentrate on the pigments business and help to further strengthen the support to its customers worldwide. The Pigments business of the Company belongs to the operating division Dispersions & Pigments, which forms part of the Performance Products segment. The Pigments business serves a variety of industries including paints & coatings, printing & packaging and plastics. Sale of Industrial Coatings business to AkzoNobel Globally, BASF and AkzoNobel reached a general agreement for sale of its industrial coatings business, subject to receipt of the requisite approvals. In India, your Company's industrial coatings business forms part of the Functional Materials & Solutions segment and mainly caters to coatings for the wind energy segment. With the divestiture of this business by end of 2016, your Company will continue to emphasize on core automotive OEM, automotive refinish coatings and decorative paints businesses. Restructuring of Plant Biotechnology Research BASF SE, Germany has decided to refocus its global plant biotechnology research portfolio and restructure the global operations of its Plant Science subsidiary. In India, the Company has been engaged in a project to develop yield enhancing traits in rice on behalf of BASF Plant Science Company, GmbH, Germany. Consequent upon the global restructuring, the yield enhancement project in rice will be discontinued and the field testing sites in India will be closed by end of the year 2016, subject to receipt of requisite approvals. Divestment of Polyolefin Catalysts Business to W. R. Grace & Co. Globally, BASF SE, Germany announced the sale of its Polyolefin Catalysts business, to W.R. Grace & Co., subject to receipt of regulatory approvals. The Polyolefin Catalysts is part of the Process Catalysts business, which forms part of the Functional Materials & Solutions segment of the Company and caters to the petroleum refining, petrochemicals and downstream base and fine chemicals industries. With the divestment of this business by the second quarter of 2016, your Company will re-focus on key growth areas including its Chemical & Refinery Catalysts businesses. Inauguration of the new Agricultural Research Station in Pune In May, 2015, your Company inaugurated the new Agricultural Research Station in Pune. This new research & development center will focus on undertaking global research in the area of crop protection. Alteration of Memorandum & Articles of Association of the Company During the year, your Company adopted new Articles of Association, which are in conformity with the provisions of the Companies Act, 2013 and the Rules framed thereunder. The Company also modified the existing objects in the Memorandum of Association of the Company to align the same with the present business scenario and included new objects in line with your Company's long-term business strategy. Change of Registered Office of the Company The Registered Office of your Company is shifted from 3rd Floor, VIBGYOR Towers, Plot No. C-62, 'G'-Block, Bandra Kurla Complex, Mumbai-400 098 to Plot No. 37, Chandivali Farm Road, Chandivali, Andheri (East), Mumbai-400 072, with effect from 1st April, 2016. Corporate Social Responsibility As required under the provisions of the Companies Act, 2013, the Board of Directors of the Company constituted a Corporate Social Responsibility (CSR) Committee on 30th April, 2013. Mr. R. R. Nair and Mr. Arun Bewoor, Independent Directors along with Mr. N. J. Baliga are members of the CSR Committee. Mr. Pradeep Chandan, Director - Legal, General Counsel & Company Secretary is the Secretary of the CSR Committee. The CSR Committee has formulated the CSR Policy and has recommended the activities to be undertaken by the Company as specified under the revised Schedule VII of the Companies Act, 2013. On account of the challenging year, which impacted the overall performance of the Company, the Board of Directors of the Company approved an amount of Rs. 6.5 million towards CSR activities under the provisions of the Companies Act, 2013 and the Rules framed thereunder. Your Company continued its efforts to drive sustainability and focused on activities of water, health, education, environment and resource efficiency. Based on the above, your Company undertook CSR projects mainly in the area of community drinking water supply, waste management, sanitation facilities, education and hygiene and has spent an amount of Rs. 6.2 million as direct expenditure for projects or programs and Rs. 0.4 million on overheads aggregating to Rs. 6.6 million in the financial year 2015-2016, details of which are provided in the prescribed format forming part of this Report in Annexure I. Dividend In view of the difficult year which impacted the overall performance of the Company, your Directors have recommended a dividend of Re. 1/- per equity share of Rs. 10/- each (i.e 10%) for the financial year ended 31st March, 2016, subject to the approval of the Members at the forthcoming 72nd Annual General Meeting of the Company to be held on 11th August, 2016. The dividend will absorb Rs. 43.3 million. The dividend distribution tax to be borne by the Company would amount to Rs. 8.8 million. Finance & Accounts Your Company continued to optimise borrowings during the year by focusing on cash flows and working capital management. By availing of alternate funding options such as Commercial Papers, efficiency in borrowing costs was ensured. Your Company follows a prudent financing policy and aims to maintain optimum financial gearing at all times. Your Company's debt equity ratio was 1.16 as at 31st March, 2016. Capital Expenditure Capital expenditure incurred during the year aggregated to Rs. 1,655.8 million. Credit Rating Your Company's credit rating is "AAA/ Negative/ A1+" as awarded by CRISIL on its long term & short term programs respectively. Fixed Deposits During the year, your Company has not invited, accepted or renewed any fixed deposits from the public as at 31st March, 2016 and accordingly, there is no principal or interest outstanding in respect thereof. Management Discussion and Analysis Report In terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report is appended to this Report. Corporate Governance Your Company is committed to maintaining the highest standards of Corporate Governance and has complied with the Corporate Governance requirements as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A separate report on Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with a Certificate of Compliance from the Statutory Auditors, forms part of this report. Vigil Mechanism The Company has established a vigil mechanism for Directors, employees and third parties to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report. This policy is available on the Company's website and can be accessed at: <http://on.basf.com/28LPlls> Directors' Responsibility Statement Your Directors confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) they 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 the financial year ended 31st March, 2016 and of the profit of the Company for that period; and (iii) they have 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; and (iv) they have prepared the annual accounts on a going concern basis; and (v) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and (vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: Information pursuant to Section 134(3)(m) of the Companies Act, 2013 read with sub-rule 3 of Rule 8 of the Companies (Accounts) Rules 2014, forms part of this Report as Annexure II. Directors In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Dr. Rainer Diercks retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of the Director seeking re-appointment at the ensuing Annual General Meeting is provided on page no 44 in the Corporate Governance Report, forming part of this Annual Report. Performance Evaluation of the Board Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has devised a policy containing criteria for evaluating the performance of the Executive, Non-Executive and Independent Directors, Board and its Committees based on the recommendation of the Nomination & Remuneration Committee. Feedback was sought by way of a structured questionnaire 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 manner in which the evaluation has been carried out has been explained on page no. 41 in the Corporate Governance Report, forming part of this Annual Report. Policy on Directors' appointment and remuneration The policy on Directors' appointment and remuneration including the criteria for determining the qualifications, positive attributes, independence of a Director and other matters provided under Section 178(3) of the Companies Act, 2013, forms part of the Nomination & Remuneration Committee policy of the Company. This policy is available on the Company's website and can be accessed at: <http://on.basf.com/28MYFX6> Auditors M/s. B S R & Co. LLP, Chartered Accountants (Registration No. 101248W/W-100022), Mumbai, hold office until the conclusion of the Annual General Meeting to be held for the financial year 2016-17, subject to ratification of their appointment by the members at every Annual General Meeting. They have confirmed to the Company that their appointment, if ratified by the members at the ensuing 72nd Annual General Meeting, would be within the limits prescribed under Section 141 of the Companies Act, 2013 and that they are not disqualified from appointment within the meaning of the said Act. 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 had appointed Mr. Hemant S. Shetye of M/s. H. S. Associates, Practising Company Secretaries, Mumbai, having CP No. 1483, to conduct the Secretarial Audit of the Company for the financial year 2015-16 and to furnish the report to the Board. The Secretarial Audit Report dated 3rd May, 2016 forms part of this Report as Annexure III. Auditors' Report & Secretarial Audit Report There are no qualifications/reservations/emphasis of matter placed by the Statutory Auditors and the Secretarial Auditors in their respective reports for the financial year ended 31st March, 2016. Cost Audit The Board of Directors, in pursuance to the Orders issued by the Central Government under Section 148 of the Companies Act, 2013, have appointed M/s. R. Nanabhoy & Co., Cost Accountants, Mumbai, having Registration No. 000010, for conducting the audit of the cost accounting records maintained by the Company for the financial year 2016-17. The Cost Auditors have certified that their appointment is within the limits of Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified from appointment within the meaning of the said Act. Composition of the Audit Committee As required under Section 177(8) read with Section 134(3) of the Companies Act, 2013 and the Rules framed thereunder, the composition of the Audit Committee is in line with the provisions of the Companies Act, 2013, details of which are provided on page nos. 38 and 39 in the Corporate Governance Report, forming part of this Annual Report. Related Party Transactions All related party transactions that were entered into by the Company during the financial year were on arms' length basis. There are no materially significant related party transactions entered into by the Company with its Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large. All related party transactions are placed before the Audit Committee for its approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature. Such transactions are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on Related Party Transactions, as approved by the Board, is available on the Company's website and can be accessed at: <http://on.basf.com/28LPrte> The Company does not have contracts or arrangements with its related parties under Section 188(1) of the Companies Act, 2013, which are not on arms' length basis and hence the details are not disclosed in Form AOC-2 as prescribed under the Companies Act, 2013 and the rules framed thereunder. The Company has entered into material transactions with related parties viz., BASF SE, BASF South East Asia Pte Ltd & BASF Belgium Co-ordination Centre, on arms' length basis under Regulation 23 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and the same are within the maximum limits approved by the shareholders at the last Annual General Meeting of the Company. Your Directors draw the attention of the members to Note No. 25(17) of the financial statement which sets out related party disclosures under Accounting Standard 18. Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013 The Company has not provided any loan to any person or body corporate or given any guarantee or provided security in connection with such loan or made any investment in the securities of any body corporate pursuant to Section 186 of the Companies Act, 2013. The Company has given advance against salary to some employees in terms of the applicable policies of the Company. Particulars of Employees The particulars of employees required to be furnished pursuant to Section 197(12) of the Companies Act, 2013 read with sub-rules 2 and 3 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report. However, as per the provisions of Section 136 of the Companies Act, 2013, read with sub-rules 2 and 3 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Annual Report excluding the statement of particulars of employees, is being sent to all members of the Company. Any member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company. Prevention of Sexual Harassment at Workplace Your Company gives prime importance to the dignity and respect of its employees irrespective of their gender or hierarchy and expects responsible conduct and behaviour on the part of all the employees at all levels. Providing for a safe and congenial work environment to all employees is an integral part of the Company's Code of Conduct. The Company has an anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Your Company has also constituted an Internal Complaints Committee (ICC) and the names of the Committee members are displayed on the notice board in each office. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. Allegations of sexual harassment reported are expeditiously and discreetly investigated and disciplinary action, if required, is taken in accordance with the policy. The following is a summary of sexual harassment complaints received and disposed of during the year 2015-16: (a) Number of complaints of sexual harassment received during the year - NIL (b) Number of complaints disposed of during the year - NIL (c) Number of cases pending for more than 90 days - NIL Training programs on the policy are also conducted at regular intervals. During the year under report, your Company conducted 3 workshops/awareness programmes on the Policy for the employees. Risk Management The Company has in place a mechanism to inform the Board about the risk assessment and minimization procedures and periodical review to ensure that risk is controlled by means of a properly defined framework. In the Board's view, there are no material risks, which may threaten the existence of the Company. Internal Financial Control Systems and their Adequacy Your Company has policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. For more details, please refer to the Management Discussion and Analysis Report forming part of this Annual Report. Significant and material orders passed by the Regulators or Courts The relevant pending litigations with regulators or courts have been disclosed as Contingent Liabilities in note no. 25(10) of the notes to the financial statements for the year ended 31st March, 2016. Besides this, 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. Material changes and commitments affecting the financial position of the Company There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report. Board Meetings Seven Board Meetings were held during the financial year 2015-16 on the following dates:- (1) 6th April, 2015 (3) 28th July, 2015 (5) 20th October, 2015 (2) 7th May, 2015 (4) 20th August, 2015 (6) 19th January, 2016 (7) 30th March, 2016 Declaration of Independence The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Extract of Annual Return The details forming part of the extract of Annual Return in Form MGT-9 forms part of this Report as Annexure IV. Personnel and Welfare Your Directors place on record their sincere appreciation to the employees at all levels for their hard work, dedication and commitment. Industrial Relations at all our factories remained cordial. Acknowledgments The Board of Directors take this opportunity to thank BASF SE, Germany, customers, suppliers, bankers, business partners/associates, Central and State Governments, regulatory authorities and the society at large for their consistent support and co-operation to the Company. Your Directors thank the members and investors for their confidence in the Company. On behalf of the Board of Directors RAMAN RAMACHANDRAN, Ph.D. Chairman & Managing Director (DIN: 00200297) Mumbai Dated : 3rd May, 2016 |