DIRECTORS' REPORT TO THE SHAREHOLDERS Dear Shareholders, Your Directors present the 39th Annual Report together with the Audited Accounts of your Company for the financial year ended 31stMarch2015 DIVIDEND Your Directors are pleased to recommend a dividend @ 50% i.e. of Rs. 5/- per equity share (Rs. 1.50 per equity share in previous year) of Rs. 10/- each for the year ended 31st March 2015. There was no interim dividend declared or paid during the year ended 31st March 2015. The dividend will be paid on all 23386500 nos. of Equity Shares of Rs.10/- each and the total dividend outgo for the current year would be Rs. 14.07 crores (including dividend distribution tax of Rs. 2.38 crores) against Rs. 4.10 crores (including dividend distribution tax of Rs. 0.59 crores) in the previous year. During the year under review, the unclaimed dividend for the year 2006-07 was transferred to the Investor Education & Protection Fund CORPORATE DEVELOPMENT & CAPITAL EXPENDITURE Acquisition and Capital Expenditures We are pleased to inform you that during the year under review your Company has executed the Business transfer agreement for the acquisition of the Chlor-Alkali Division of Jayshree Chemicals Limited on a slump sale basis for a cash consideration of Rs 212 crores, subject to necessary approvals and formalities, which are under process. The Chlor-Alkali Division of Jayshree Chemicals Limited is an environmental friendly and energy efficient membrane cell facility located at Ganjam, Odisha, also has salt works in Andhra Pradesh. After this acquisition, the existing caustic soda capacity of the Company will increase by about 57000 tonnes per annum. The financing of this transaction will be arranged from internal accruals and borrowings. We are pleased to inform that your Company has successfully commissioned the Caustic Soda Project, having a capacity of 59400 tonnes per annum, at its Karwar unit in November 2014. Scheme of Amalgamation You are aware that the proposed Scheme of Amalgamation of our Company with Grasim Industries Ltd. (GIL) had been approved by Board of Directors of both of the Companies on 11th February 2015. In that scheme,, the swap ratio is 1 fully paid equity share of Rs. 10 each of GIL for every 16 fully paid equity share of Rs. 10 each of the Company. All of the required details of the proposal have already been shared through press release, stock exchanges and the website of the Company. We are pleased to inform you that both the Stock Exchanges BSE Ltd. and National Stock Exchange of India Ltd., where the shares of the Companies are listed, have issued No-Objection Letters to this Scheme. Petitions have been filed before the High Courts for approval of the Scheme accordingly. The Company and GIL have also filed Combination Application before the Competition Commission of India and this is under process. The shareholders of the Company will be informed accordingly in this matter. All the requisite details and documents are posted on the website of the Company. CORPORATE GOVERNANCE Your Directors reaffirm their continued commitment to good corporate governance practices. During the year under review, your Company was in compliance with the provisions of Clause 49 of the Listing Agreement with the stock exchanges relating to corporate governance. The report on Corporate Governance, as stipulated under the Listing Agreement forms an integral part of this Report. The Auditors' Certificate, confirming compliance with the condition of corporate governance is attached to the report on Corporate Governance. MANAGEMENT DISCUSSION AND ANALYSIS REPORT The Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges, is presented separately and forms part of the Annual Report. AWARDS AND RECOGNITIONS Your directors are pleased to share with you that during the year under review, your Company has received the "Green Tech Award" for excellence in CSR in Chemical sector by Green Tech Foundation and First prize in "National Energy Conservation Award" in Chlor Alkali Sector from Ministry of Power, New Delhi. HUMAN RESOURCES Your Company believes that Human Resources will play a significant role in its future growth. With its unswerving focus on nurturing and retaining talent, your Company provides avenues for learning and development through means such as functional, behavioral and leadership training programs, knowledge exchange conferences and providing communication channels for information sharing. The Group's Corporate Human Resources plays a critical role in your Company's talent management process. CORPORATE SOCIAL RESPONSIBILITY In terms of the provisions of Section 135 of the Companies Act, 2013 ('the Act") read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility ("CSR") Committee under the mentorship of Mrs. Rajashree Birla — Chairperson (Aditya Birla Centre for Community Initiatives and Rural Development). The CSR Committee is chaired by Independent Director Mr.J. C. Chopra. The other Members of the Committee are Mr. L. S. Naik, Director and Mr. K. C.Jhanwar, Managing Director of the Company. Dr. Pragnya Ram, Group Executive President - Corporate Communications & CSR is the permanent invitee on the CSR Committee. Your Company also has in place a CSR Policy and the same is available on your Company's website viz. www.adityabirlachemicalsindia.com The Committee recommends to the Board the activities to be undertaken during the year. Your Company is a caring corporate citizen and lays significant emphasis on development of the communities around which it operates. Your Company has identified several projects relating to social empowerment & welfare, infrastructure development, sustainable livelihood, health care & education during the year and initiated various activities in neighbouring villages around plant locations. During the year, the Company spent Rs. 1.58 crores (2.54% of the average net profit of the last 3 financial years as defined for the purpose of CSR) on CSR activities. The Annual Report on CSR activities of the Company for 2014-15is enclosed as Annexure 1 forming part of this report. SAFETY, HEALTH, ENVIRONMENT PROTECTION AND POLLUTION CONTROL Your Company is committed to the safety of its employees and has engaged all stakeholders', involved directly or indirectly, in activities related to safety. Your Company has taken various steps to promote safety, health and pollution control. In collaboration with DuPont Sustainable Solutions (DSS), your Company is continuing its efforts to implement best-in class safety practices. Cross-functional teams are working together to achieve world class safety standards and embed the safety culture throughout the organization. Our people at all levels are engaged in the safety journey, so that we achieve our goal of "Zero" incident/injuries. Recently we tied up with DSS for further work in the area of Process Safety Management (PSM) in addition to on-going workplace safety improvements. Your Company has installed the hardware to implement safety and pollution control standards and is continuously upgrading the plant's process safety through better instrumentation and control. Your Company's Research & Development (R&D) activities are continuously focused on providing innovative and environment friendly solutions to support the sustainable growth of business. In addition, your Company is putting all efforts to move towards sustainable operations. This would enable substantial reduction in natural resources consumption and reduction of the carbon foot-print in the years to come. Your Company's thrust is on conserving natural resources by reducing consumption of water and auxiliary power and this involves installation of rain water harvesting systems. Your Company has taken significant steps to protect the environment by maintaining a green belt inside the plants and planting trees around the plant sites. HOLDING AND SUBSIDIARY Your Company continues to be a Subsidiary of Hindalco Industries Ltd. The Company has formed a foreign subsidiary named as Aditya Birla Chemicals (Belgium) BVBA [ABCB] in Belgium, Europe on 24th December 2014 in the form of Private Limited Company by partial subscription of 6198 shares (out of total subscription of 18548 shares) of Euro 1 each. Shri L. S. Naik, Director and Shri K. C.Jhanwar, Managing Director of the Company have been nominated as Directors of ABCB and both of them have made a total subscription of 1 share of Euro 1 each in ABCB. Furthermore for commencement of business, the Company had provided counter Guarantee in favour of ABCB for availing of bank credit facilities. There was no business activity started in the subsidiary in 2014-15 and as such income and expenses thereof are nil. The investment by the Company in that subsidiary amounting to Rs. 4.80 lacs has been eliminated against the share capital thereof. The Company has availed exemption of not preparing and presenting consolidated financial statement pursuant to section 129(3) of the Companies Act, 2013 with its only overseas subsidiary in terms of MCA notification no. C.S.R 37 (E) dated 16thjanuary 2015. Pursuant to sub-section (3) of section 129 of the Act read with the Companies (Accounts) Rules, 2014, the statement containing the salient feature of the financial statement of subsidiary of the Company is given as Annexure 2 to this Report. The Company does not have any associate or joint venture company. The Policy for determining material subsidiaries as approved is posted on your Company's website www.adityabirlachemicalsindia.com FINANCE Your Company has adequate liquidity and a strong balance sheet. CARE has ascribed the "CARE AA-/ CARE A1+" rating for your Company's long term and short term bank facilities respectively. The details of the borrowings are given in the notes to the financial statements. During the year under review, the Company has not allotted any Equity Shares or Preference Shares or Debentures. The Company does not have any Employee Stock Option Scheme. As on 31st March, 2015, The Company did not raise/accepted funds by way of fixed deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 and, no amount of principal or interest was outstanding as on the balance sheet date. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS Details of Loans, Guarantees and Investments covered under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 are given in the notes to the financial statements. ENERGY, TECHNOLOGYAND FOREIGN EXCHANGE Information on conservation of energy, technology absorption and foreign exchange earnings and outgo, required to be disclosed pursuant to section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 is given in Annexure 3 to this Report. PARTICULARS OF EMPLOYEES In accordance with the provisions of Section 197(12) of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are to be set out in the Directors' Report, as an addendum thereto. However, in line with the provisions of Section 136(1) of the Act, the Report and Accounts as set out therein, are being sent to all Members of your Company excluding the aforesaid information about the employees. Any Member, who is interested in obtaining these particulars about employees, may write to the Company Secretary at the Registered Office of your Company. Disclosures pertaining to remuneration and other details as required under section 197(12) of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure 4. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES During the financial year, your Company entered into related party transactions which were on an arm's length basis and in the ordinary course of business. There are no material transactions with any related party as defined under Section 188 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014. All Related Party Transactions are approved by the Audit Committee and Board of your Company. The required details of material related party transactions with arm's length basis for the financial year 2014-15 are given in Annexure 5. The details of related party transactions for the financial year 2014-15 are given in the notes to the financial statement in terms of AS-18. The policy on Related Party Transactions, as approved by the Board, is uploaded on the Company's website www.adityabirlachemicalsindia.com None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. RISK MANAGEMENT The Company has a robust Business Risk Management framework - Enterprise Risk Management System (ERM) to identify, evaluate and mitigate the risks associated to the business of the Company. These risks are reviewed periodically by the Audit Committee and the Board of the Company. The Audit Committee and Board are informed about the risk assessment and minimization procedures, after which steps for framing, implementing and monitoring of the system are adopted by the Company. The Framework seeks to create transparency, minimize adverse impact on business objectives and enhance the Company's competitive advantage. The ERM defines the risk management approach across the Company at various levels including documentation and reporting. It incorporates different risk models which help in identifying risk trends, exposure and potential impact analysis at the Company level and product level. In today's challenging and competitive environment, strategies for mitigating the risks inherent in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: regulations, competition, business risk, technology obsolescence, investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes operational risks, safety, health and environmental risks, financial risks, political risks, fidelity risks, legal risks, etc. As a matter of policy, these risks are assessed on a continuous basis and steps are taken to mitigate the same. INTERNAL CONTROL SYSTEM AND THEIRADEQUACY Your Company has in place adequate internal control systems commensurate with the size of its operations. The internal control systems comprising of policies and procedures are designed to ensure sound management of operations, safekeeping of its assets, optimal utilization of resources, reliability of its financial information and compliance. Clearly defined roles and responsibilities have been institutionalized. The systems and procedures are periodically reviewed to keep pace with the growing size and complexity of your Company's operations. The Company has in place adequate internal financial controls with reference to the Financial Statements. During the year, such controls were tested and no report of material weakness in the design or operation was reportable. DIRECTORS' RESPONSIBILITY STATEMENT The audited accounts for the year under review are in conformity with the requirements of the Act and the Accounting Standards. The financial statements reflect fairly the form and substance of transactions carried out during the year under review and reasonably present your Company's financial condition and results of operations. Your Directors confirm that: i. in the preparation of the Annual Accounts, applicable accounting standards have been followed along with proper explanations relating to material departures, if any; ii. the accounting policies selected have been applied consistently and judgments and estimates are made that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at 31st March, 2015 and of the profit of your Company for the year ended on that date; iii. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting frauds and other irregularities; iv. the Annual Accounts of your Company have been prepared on a going concern basis; v. your Company had laid down internal financial controls and that such internal financial control are adequate and were operating effectively; vi. your Company has devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. DIRECTORS Changes in Board constitution Ms. Preeti Gupta (DIN: 07118798) has been appointed as Additional Director of the Company effective from 12.03.2015, in the capacity of non-independent, non-executive Director, to hold office up to the date of ensuing Annual General Meeting of the Company. A notice pursuant to Section 160 of the Act has been received from a Member proposing Ms. Preeti Gupta as Director of your Company. Mr. A. K. Agarwala, Director (DIN: 00023684), retires by rotation at the ensuing Annual General Meeting of the Company and being eligible, offers himself for re-appointment. The Board recommends these appointment /re-appointment. Items seeking your approval on the above are included in the Notice convening the Annual General Meeting. The required details of the Directors seeking appointment / re-appointment form part of the Notice of the ensuing Annual General Meeting. During the financial year 2014-15, Mr. K. C.Jhanwar, Managing Director has not received any commission/remuneration from your Company's holding as well as subsidiary company. Meetings of the Board The Board of Directors of your Company met 6 times during the year under review to deliberate on various matters. The meetings were held on 07.05.2014, 06.08.2014, 08.09.2014, 07.11.2014, 22.01.2015 and 11.02.2015. Further details on the Board of Directors are provided in the Corporate Governance Report forming part of this Annual Report. Independent Director's Statement Mr. Biswajit Choudhuri, Mr. G. M. Dave, Mr.J. C. Chopra and Mr. P. P. Sharma are Independent Directors on the Board of your Company. They have given declarations that they meet the criteria of Independence as provided in Section 149(6) of the Act and Clause 49 of the Listing Agreement. Formal Annual Evaluation The evaluation framework for assessing the performance of Directors of your Company comprises criteria such as contributions at the meetings and strategic perspective or inputs regarding the growth and performance of your Company, among others. Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Directors have carried out an annual performance evaluation of the Board, Independent Directors, Non-executive Directors, Executive Director and Committees of the Board. The manner of evaluation is provided in the Corporate Governance Report. The details of the programme for familiarization of Independent Directors of your Company are available on your Company's website viz. www.adityabirlachemicalsindia.com Policy on Appointment and Remuneration of Directors and Key Managerial Personnel and Remuneration Policy The Nomination and Remuneration Committee has formulated the Remuneration policy of your Company which is attached as Annexure 6 to this report. KEY MANAGERIAL PERSONNEL In terms of the provisions of Section 203 of the Act, Mr. K C.Jhanwar, Managing Director; Mr. H. K. Panda, Chief Financial Officer and Mr. Akash Mishra, Company Secretary are the Key Managerial Personnel of your Company. AUDIT COMMITTEE The Audit Committee comprises of Mr. Biswajit Choudhuri, Mr. G. M. Dave, Mr.J. C. Chopra and Mr. L. S. Naik. Mr. K. C. Jhanwar, Managing Director is the permanent invitee. All the recommendations of the Audit Committee made in 2014-15 had been duly accepted by the Board. Further details relating to the Audit Committee are provided in the Corporate Governance Report forming part of this Annual Report. VIGIL MECHANISM The Company has in place a vigil mechanism for directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of your Company's Code of Conduct. Adequate safeguards are provided against victimization to those who avail of the mechanism and direct access to the Chairman of the Audit Committee in exceptional cases is provided to them. The Vigil Mechanism is available on your Company's website viz. www.adityabirlachemicalsindia.com AUDITORS Statutory Auditors M/s. Khimji Kunvarji & Co., Chartered Accountants, Mumbai, Statutory Auditors of your Company, holds office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the limits prescribed under the Act and that they are not disqualified for re-appointment. The observations made in the Auditor's Report are self-explanatory and therefore, do not call for any further comments under Section 134(3)(f) of the Act. The Auditors' Report does not have any qualification, reservation or adverse remark. Cost Auditors In terms of the provisions of the Section 148 of the Act read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of Directors of your Company have on the recommendation of the Audit Committee, re-appointed M/s. R. Nanabhoy & Co., Cost Accountants, Mumbai, as Cost Auditors, to conduct the cost audit of your Company for the financial year ending 31st March, 2016, at a remuneration as mentioned in the Notice convening the Annual General Meeting. As required under the Act, the remuneration payable to the Cost Auditors is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members' ratification for the remuneration payable to the Cost Auditors forms part of the Notice of the ensuing Annual General Meeting. Secretarial Auditors In terms of the provision of the Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed M/s. A. K. Labh, Practicing Company Secretary, Kolkata, as Secretarial Auditors of the Company for conducting Secretarial Audit of your Company for the financial year ended 31st March, 2015. The report of the Secretarial Auditors is enclosed as Annexure 7 to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. EXTRACT OF ANNUAL RETURN In terms of the provisions of Section 92 (3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return of your Company for the financial year ended 31st March, 2015 is given in Annexure 8 to this report. OTHER DISCLOSURES • There are no material changes and commitments affecting the financial position of your Company between the end of financial year and the date of report. • 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. As already informed in respect of scheme of Amalgamation of the Company with Grasim Industries Ltd., Petitions have been filed by both Companies in their respective High Courts and also with the Competition Commission of India, which are sub-judice. • Your Company has not issued any shares with differential voting. • There was no revision in the financial statements. • Your Company has not issued any sweat equity shares. • During the year your Company has not received any complaints under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. ACKNOWLEDGEMENT Your Directors express their deep sense of gratitude to the banks, financial institutions, stakeholders, business associates, Central and State Governments for their co-operation and support and look forward to their continued support in the future. We very warmly thank all of our employees for their contribution to the Company's performance. We applaud them for their superior levels of competence, dedication and commitment to the Company. For and on behalf of the Board of Directors L. S. Naik Director (DIN : 02943588) K.C.Jhanwar Managing Director (DIN : 01743559) Place : Mumbai Dated:May13, 2015 |