DIRECTORS' REPORT TO THE MEMBERS The Directors take pleasure in presenting their 61st Annual Report on the business and operations of the Company and the Audited Financial Statements for the year ended 31st March, 2015 2. DIVIDEND Your Directors have recommended a dividend of Rs. 5/- per equity share for FY 2014-15, to be paid, if declared by the members at the Annual General Meeting to be held on 11th August, 2015. 3. TRANSFER TO RESERVES During the current financial year, there were no transfers made to reserves. 4. STATE OF COMPANY'S AFFAIRS The gross sales and other income for the year under review were Rs. 20,266 lac as against Rs. 24,063 lac for the previous year, registering a decrease of 16.6%. The profit before tax was Rs. 1,578 lac (after interest and depreciation charges of Rs. 1,190 lac) and the profit after tax was Rs. 561 lac for the year under review as against Rs. 5,838 lac and Rs. 3,862 lac respectively, for the previous year, registering decrease of 73% and 85% respectively. The Company produced 72,089 MT of Hydrogen Peroxide, during the year under review, as compared to 83,931 MT during the previous year. The Company sold 75,773 MT of Hydrogen Peroxide during the year under review, as against 78,295 MT during the previous year, due to restricted sales from inventory during the expansion shutdown. In addition, the Company imported and sold Nil MT of Hydrogen Peroxide during the year, as compared to 1,680 MT for the previous year. The Company continues to maintain its prime position in the market and held 38% market share (period excluding quarter during which plant was shutdown) during the year. 2.90 Million Cubic Meters (MCM) of Hydrogen Gas were also sold during the year as against 4.07 MCM during the previous year. The sale of Hydrogen Gas was lower due to the shutdown for expansion. The crude oil prices dropped significantly leading to sharp decline in liquid fuels such as naphtha and furnace oil during the year. The Company has a long term gas contract with GAIL India Ltd. The said contract is based on 60 months average of crude oil prices with a cap and floor price. As a result the long term contract prices of natural gas were higher than the spot prices. The company's cost therefore has not come down inspite of lower crude oil prices. During the year under review, your Company completed its plant expansion activities to increase the capacity of the Hydrogen Peroxide Plant from 84,000 MTPA to 95,000 MTPA. The Kalyan plant was shut down from 28th April, 2014 to 29th June, 2014 at which point the trial runs commenced. The plant started commercial production from 29th September, 2014. The decline in sales volume during the year was partially due to the shutdown and sluggish market conditions. The decline in profit was due to lower sales realization arising from higher imports at lower prices and intense domestic competition. The Company views its future prospects with cautious optimism. Due to surplus in the neighbouring countries such as Pakistan, Bangladesh and in Thailand and domestic competition there is intense pressure on the domestic prices. One of the major consumers of Hydrogen Peroxide, namely, the paper industry has been facing problems of large scale imports of newsprint from Russia and writing and printing paper from China. As a result, the consumption of Hydrogen Peroxide has also been affected. The cost of natural gas is a major part of the Company's operating cost. The said cost is expected to come down at a slower pace during the coming year thereby not allowing the full benefit of lower oil prices to the Company. 5. CHANGE(S) IN THE NATURE OF BUSINESS, IF ANY There is no change in the nature of business carried on by the Company and of its subsidiary. The Company has not changed the class of business in which the Company has an interest. 6. MATERIAL CHANGES AND COMMITMENTS, IF ANY, 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 THE REPORT 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 the report. 8. SAFETY & ENVIRONMENT The Company continues to maintain a good safety and environmental record and has worked for 118 days without Lost Time Injury as on 31st March, 2015. 9. INSURANCE All the properties of the Company, including buildings, plant and machinery, stocks and materials have been adequately insured. The Company also has a public liability insurance policy as per the Public Liability Insurance Act, 1991. 10. FIXED DEPOSITS The Company does not accept fresh deposits at present and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. 11. DETAILS OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES The Company has one subsidiary, Naperol Investments Limited. It does not have any joint ventures and associate companies. Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of Naperol Investments Limited (in Form AOC-1) is forming part of the Consolidated Financial Statements. Pursuant to Section 136 of the Companies Act, 2013, the Company is exempted from attaching to its Annual Report, the Annual Report of the Subsidiary Company viz. Naperol Investments Limited. The financial statement of the subsidiary company is kept open for inspection by the shareholders at the Registered Office of the Company. The Company shall provide free of cost, the copy of the financial statements of its subsidiary company to the shareholders upon their request. The statements are also available on the website of the Company at www.naperol.com 12. PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARY COMPANY, NAPEROL INVESTMENTS LIMITED Naperol Investments Limited (Naperol) is a wholly owned subsidiary of National Peroxide Limited. Naperol, incorporated on 6th May, 1980, is a registered Non Banking Financial Company as provided by Section 45 - IA of the Reserve Bank of India Act, 1934. The Company is engaged in the business of long term investment. During the year under review, the Company earned a profit after tax of Rs. 44.02 lacs as against Rs. 132.48 lacs in 2013-14. 13. CONSOLIDATED FINANCIAL STATEMENT I n accordance with the Companies Act, 2013 and as per Accounting Standard (AS) - 21, 'Consolidated Financial Statements' issued by the Institute of Chartered Accountants of India, the Audited Consolidated Financial Statements together with Auditors' Report are annexed. The consolidated net profit of the Company and its subsidiary amounted to Rs. 604.94 lacs for the financial year ended on 31st March, 2015 as compared to Rs. 3,994.31 lacs on a standalone basis. 14. 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 BSE Ltd. is appended as Annexure I. 15. CORPORATE GOVERNANCE Your Company has taken adequate steps to ensure that all mandatory provisions of Corporate Governance in terms of Clause 49 of the Listing Agreement with BSE Ltd. have been complied with. A separate report on Corporate Governance is being incorporated as a part of the Annual Report along with a Certificate from a Practicing Company Secretary, regarding compliance of the conditions of Corporate Governance, which is appended as Annexure II. 16. CORPORATE SOCIAL RESPONSIBILITY The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013 and rules framed thereunder. The CSR Policy of the Company and the details about the development of CSR Policy and initiatives taken by the Company on Corporate Social Responsibility during the year as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 have been appended as Annexure III. 17. DETAILS OF BOARD MEETINGS During the year, five Board Meetings were held, details of which are provided in Corporate Governance Report. 18. ADEQUACY OF INTERNAL FINANCIAL CONTROLS I nternal Audit plays a key role in providing an assurance to the Board of Directors with respect to the Company having adequate Internal Control Systems. The Internal Control systems provide, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of Company's assets. The details about the adequacy of Internal Financial Controls are provided in the Management Discussion and Analysis Report. 19. SHARE CAPITAL The paid up Equity Share Capital as on 31st March, 2015 was Rs. 574.70 Lacs. During the year under review, there is no change in the Share Capital of the Company. 20. EXTRACT OF ANNUAL RETURN Pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return in Form MGT-9 is appended as Annexure IV. 21. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: 1. I n the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures. 2. they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period. 3. they 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 fraud and other irregularities; 4. they have prepared the Annual Accounts on a 'going concern' basis; 5. they have laid down internal financial controls to be followed by the Company and that such internal controls are adequate and were operating effectively; and 6. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2014-15. 22. STATUTORY AUDITORS M/s. S. B. Billimoria & Co., Chartered Accountants, (ICAI Registration No. 101496W), Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting (AGM) and are eligible for re-appointment from the conclusion of the ensuing AGM upto the conclusion of the following AGM. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the rules framed thereunder for re-appointment as Auditors of the Company. 23. AUDITORS' QUALIFICATIONS There are no qualifications, reservations or adverse remarks made in the Statutory Auditors' Report. 24. COST AUDIT As per the Cost Audit Orders, Cost Audit is applicable to the Company's organic & inorganic chemicals and industrial gases products/business of the Company for the FY 2015-16. In view of the same and in terms of the provisions of Section 148 and all other applicable provisions of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, M/s. N. I. Mehta & Co., Cost Accountants, (ICWA Registration No. 000023) have been appointed as Cost Auditors to conduct the audit of cost records of the Company for the financial year 2015-16. The remuneration of Rs. 3,00,000/- plus service tax, as applicable, and re-imbursement of travelling and out-of-pocket expenses incurred by them, which is proposed to be paid to them requires ratification of the shareholders of the Company. In view of this, your ratification for payment of remuneration to the Cost Auditors is being sought at the ensuing AGM. The Company has submitted its Cost Audit Report for 2013-14 with the Ministry of Corporate Affairs within the stipulated time period. 25. SECRETARIAL AUDIT REPORT I n terms of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Parikh & Associates, Practicing Company Secretaries, have been appointed as Secretarial Auditors of the Company to carry out Secretarial Audit. The report of the Secretarial Auditors is appended as Annexure V. 26. EXPLANATIONS OR COMMENTS ON EVERY QUALIFICATION, RESERVATION OR ADVERSE REMARK MADE BY THE COMPANY SECRETARY IN PRACTICE IN THE SECRETARIAL AUDIT REPORT There are no qualifications, reservations or adverse remarks made in the Report of the Secretarial Auditor. 27. LISTING OF SHARES The equity shares of the Company are listed on BSE Limited, situated at Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001. The Company has paid necessary listing fees to BSE Limited as prescribed in the listing agreement. 28. RELATED PARTY TRANSACTIONS The Company has formulated a policy on dealing with Related Party Transactions. The policy is disclosed on the website of the Company (weblink: <http://www.naperol.com/pdf/boardpolicies/RPT_Policy.pdf>). All transactions entered into with Related Parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on an arms length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. During the year, the Company had not entered into any contract/arrangement/transactions with related parties which could be considered as material. The related party transactions are disclosed under Note No. 30 of the Notes to Financial Statements for the year 2014-15. 29. AUDIT COMMITTEE The Audit Committee of the Company comprises of 3 Independent Directors. The details are provided in the Corporate Governance Report. Pursuant to the requirements of the Companies Act, 2013, the Company has established vigil mechanism through the Audit Committee for directors and employees to report genuine concerns about unethical behaviour, actual or suspended fraud or violation of the Company's Code of Conduct or ethics policy. The vigil mechanism provides for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairman of the Audit Committee in appropriate or exceptional cases. The details of establishment of such mechanism is also disclosed on the Company's website at www.naperol.com 30. RISK MANAGEMENT POLICY The Company has formulated a Risk Assessment & Management Policy. The details of the Risk Management are covered in the Corporate Governance Report. 31. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year, Mr. K. N. Suntook resigned as a Director of the Company with effect from 25th April, 2014. The Board places on record its appreciation of the valuable contribution and guidance provided by him. The Members of the Company at the 60th Annual General Meeting (AGM) held on 11th August, 2014 approved the appointment of Mr. Rajesh Batra, Mr. Nityanath Ghanekar and Mr. S. Ragothaman as Independent Directors of the Company to hold office for five consecutive years with effect from the date of the AGM held on 11th August, 2014 upto 10th August, 2019 with an option to retire from the office at any time during the term of appointment. The Company issued letter of appointment to all the Independent Directors as per Schedule IV to the Companies Act, 2013. The Board of Directors appointed Mrs. Hema Hattangady as an Additional Director, designated as Independent Director of the Company. The Directors commend her appointment as an Independent Director for a term of five years with effect from 11th August, 2015. In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Ness N. Wadia, Director, retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment. Necessary resolutions for the re-appointment / appointment of Mr. Ness N. Wadia and Mrs. Hema Hattangady, have been included in the Notice convening the ensuing AGM and requisite details have been provided in the explanatory statement of the Notice. Your Directors commend their re-appointment/appointment. All the Independent Directors have given a declaration under sub-section (7) of section 149 of the Companies Act, 2013 ("Act") that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement. KEY MANAGERIAL PERSONNEL Mr. Hanoz Chinoy resigned as Company Secretary with effect from 20th April, 2015 and Mr. Arun Naik is retiring as Chief Financial Officer with effect from 30th June, 2015. The Board of Directors had on the recommendation of the Nomination & Remuneration Committee appointed Mr. Sunil Londhe as Chief Financial Officer with effect from 1st July, 2015 and Ms. Seema Jagnani as Company Secretary with effect from 21st April, 2015. 32. NOMINATION AND REMUNERATION POLICY The Board has adopted, on the recommendation of the Nomination & Remuneration Committee, a policy for selection and appointment of Directors, Senior Management and their remuneration. A brief detail of the policy is given in the Corporate Governance Report and also posted on the website of the Company. (weblink: <http://www.naperol.com/pdf/boardpolicies/> Nomination_Remuneration_Policy.pdf). 33. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out annual performance evaluation of its own performance, the Directors individually as well the evaluation of the working of its Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility Committee and Stakeholders' Relationship Committee. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. 34. PARTICULARS OF EMPLOYEES The information in terms of provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, which forms part of this Report, is appended as Annexure VI. However, as per the provisions of Section 136 of the Act, the report and accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during the business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. 35. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Note no. 18 of the Notes to the Financial Statements. 36. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND THE COMPANY'S OPERATIONS IN FUTURE There have been no significant and material orders passed by the regulators, courts and tribunals impacting the going concern status of the Company's operations in future. 37. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under section 134(3) of the Companies Act, 2013 read with The Companies (Accounts) Rules, 2014, is annexed herewith as Annexure VII. 38. CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS The details on climate change and greenhouse gas emissions are annexed as Annexure VIII. 39. ACKNOWLEDGEMENTS Your Directors would like to express their sincere appreciation to the Customers, Vendors, Bankers, Shareholders, Central and State Governments and Regulatory Authorities for their continued co-operation and support. Your Directors also take this opportunity to acknowledge the dedicated efforts made by employees for their contribution to the success achieved by the Company. On behalf of the Board of Directors NESS N. WADIA Chairman Place : Mumbai, date : 26th May, 2015 |