DIRECTORS' REPORT TO, THE MEMBERS, EXCEL INDUSTRIES LIMITED Your Directors are pleased to present herewith the 55th Annual Report on the business and operations of your Company and the Audited Financial Statements of the Company for the year ended 31st March, 2016 together with the Auditors Report thereon. DIVIDEND Your Directors have recommended a dividend of Rs. 4.50 (90%) per equity share of Face Value of Rs. 5/- each as against the total dividend of Rs. 7.00 (140%) (Interim dividend Rs. 3/- and Final dividend Rs. 4/-) paid for the previous financial year 2014-15. The dividend payout is subject to the approval of the members at the ensuing Annual General Meeting. AMOUNT TRANSFERRED TO RESERVE Your Company proposes to transfer Rs. 20.00 crores to the general reserve, and an amount of Rs. 19.76 crores is proposed to be retained in the Statement of Profit and Loss Account. OPERATIONS During the year under review, the total net sales decreased from Rs. 476.25 crores to Rs. 443.09 crores, registering a decline of 6.96%. The export sales increased from Rs. 78.00 crores to Rs. 93.13 crores registering an increase of 19.40%. Further, the Company made a profit of Rs. 36.55 crores before taxation compared to Rs. 50.29 crores in the previous year. Net profit after tax amounted to Rs. 25.20 crores as compared to Rs. 40.56 crores in the previous year registering decline of 37.87%. NEW PROJECTS/EXPANSIONS/IMPROVEMENTS The Company is planning expansion of Organ ophosponates and Acetyl Chloride production capacity in the current year. At the Roha Plant, we are in the process of constructing a facility for production of an Organ phosphorous (OP) Insecticide on campaign basis. Also, at Roha Site, during the year 2016-17, we will be undertaking civil and structural work for a multi-purpose plant. For Lote Plant, we have plans to add a new API production facility. This will help in commercial launch of new APIs and expanding our API product range. OUTLOOK All the major weather forecasting agencies have predicted good monsoon during the current year. We are already seeing a pickup in demand from our customers for organophosphorous intermediates produced by us, in anticipation of a good monsoon. Further, after a prolonged period of depressed demand, some movement is seen in the Brazilian market (which is a major market for OP insecticides from India). This will mean an increased demand for OP Insecticide intermediates which is favourable for the company. We see continued price pressure on the Organophosphonate range of products. However, there is a possibility of increased demand at improved price realizations from the US market (because of the likelihood of imposition of anti-dumping duty on imports from China). The company has been able to establish its reputation as a serious player in the Pharma Intermediate and API business. Presently, the Company is the market leader in India for one of the APIs produced by it. It is planned to leverage this strength by further product introductions. HUMAN RESOURCES Your company believes that human talent is its fundamental strength. The Company nurtures competencies and skills through learning and development programmes and recognizes talent, and rewards it through performance management system. Performance management system ensures setting of KRAs in the beginning of the Financial Year and periodic and annual assessment of performance on the defined KRAs. For setting KRAs, Business Unit's KRAs are first established and then percolated down to the departmental and finally to individual KRAs. Your company has generally enjoyed cordial relations with its employees. Worker and staff employees are paid in accordance with the wage agreement established with trade unions. The employee strength of the Company as on 31st March, 2016 was 912. ENVIRONMENT, HEALTH AND SAFETY The company accords the highest importance to Environment, Health and Safety (EHS). Continuous investment in infrastructure, skill building and systems is done to ensure that the EHS of the company is maintained at the highest standards. QUALITY The Management of the Company is quality conscious and attaches utmost importance to the quality of the products. The Company continues to maintain industry-best standards in managing the quality of its products and services and has received appreciation and awards from its customers. INSURANCE The Company continues to carry adequate insurance cover for all its assets against foreseeable perils like fire, flood, earthquake, fidelity etc. The Company continues to maintain consequential Loss (Fire) Policy and the Liability Policy as per the provisions of Public Liability Act. The Company has also taken a policy for Directors and Officers Responsibility Policy. PUBLIC DEPOSITS Details of deposits, covered under Chapter V of the Act are as under: (a) The Company stopped accepting and renewing the fixed deposits with effect from 1st April, 2014, and it will refund all the existing fixed deposits as per their maturity dates. (b) The amount of existing deposits from the public and the shareholders of the Company at the end of the FY 2015-16 aggregates to Rs. 261.38 lacs. Total 64 Depositor holders did not claim their deposits after the date on which the deposits became due for payment. The amount due on such deposits and remaining unclaimed as on 31st March, 2016, was Rs. 22.22 lacs. (c) There has been no default in repayment of deposits or payment of interest thereon during the year under review. (d) All existing deposits of the Company are in compliance with the requirements of Chapter V of the Act. PREFERENTIAL ISSUE OF CONVERTIBLE WARRANTS The Company in the financial year 2013-14 had issued and allotted 20,00,000 fully convertible warrants of the face value of Rs. 69/- each on preferential basis aggregating to Rs. 1380 lacs to Utkarsh Global Holdings Private Limited, a promoter group company pursuant to special resolution passed in the Extraordinary General Meeting held on 15th March, 2014, in compliance with Section 81 (1A) of the Companies Act, 1956 and SEBI (ICDR) Regulations, 2009. Each such warrant was convertible at the option of the holder of the warrants into one equity share of Rs. 5/- each of the Company at a premium of Rs. 64/- per equity share. The Company had received Rs. 345 lacs being 25% of consideration of the warrant at the time of allotment on warrants and balance 75% i.e. Rs. 1035 lacs was received before each tranche of conversion of warrants. BUYBACK The Board of Directors at its meeting held on 28th March, 2016 had approved buyback of equity shares of Rs. 5/- each of the Company at a price not exceeding Rs. 275/- for each share. The maximum amount earmarked for buyback was Rs. 18 crores. Public Announcement for buyback was published in the newspapers on 6th April, 2016. The Company after receiving all necessary approvals commenced the Buyback of equity shares from 18th April, 2016, from open market through stock exchange route. The Company after utilizing more than 50% amount of Maximum Buyback Size closed the Buyback Offer on 30.05.2016 in compliance with Buyback Regulations. The Company bought back 3,34,938 equity shares utilizing Rs. 9,11,75,393.70 under the Buyback offer. As a result of the Buyback total equity shares of the Company has reduced from 1,29,05,630 to 1,25,70,692 and consequently, promoters' shareholding has increased from 51.02% to 52.38%. EXCEL CROP CARE LIMITED CEASES TO BE THE PROMOTER Excel Crop Care Limited, one of the promoter of the Company held 1,45,760 equity shares in the Company. Excel Crop Care Limited has sold entire 1,45,760 equity shares of the Company to another promoter Dipkanti Investments and Financing Private Limited on 2nd June, 2016, as a result Excel Crop Care Limited has ceased to be a promoter of the Company and is classified as non-promoter. EXECUTION OF SHARE PURCHASE AGREEMENT Promoters and Promoter Group of Excel Crop Care Limited (ECCL) hold 2720501 equity shares in aggregate in ECCL. The Company and its wholly owned subsidiary Kamaljyot Investments Limited are a part of the Promoters and Promoter Group of ECCL and hold 245760 shares and 218510 shares respectively in ECCL. The promoters of ECCL have decided to sell their stake in ECCL to Sumitomo Chemical Company, Limited, Japan. Pursuant to the resolutions passed by the Board of Directors of the Company and Kamaljyot Investments Limited in their meetings held on 5th June, 2016, the Company and Kamaljyot Investments Limited have executed the Share Purchase Agreement for the sale of the Equity Shares held by them in ECCL to Sumitomo Chemical Company, Limited, Japan, at a price of Rs. 1259.36 per share subject to specified adjustments at completion and fulfilment of certain conditions precedent specified therein PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS During the year, your Company made a loan of Rs. 3 crores to Kamljyot Investments Limited, a wholly owned subsidiary, at an interest of 12.5% p.a. which is repayable within a period of twelve months. Your Company has not provided any Guarantees or made any Investments during the financial year 2015-16. SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES The Company has two subsidiaries namely, Kamaljyot Investments Limited and Excel Bio Resource Limited. Also, the Company has one Associate company namely, MobiTrash Recycle Ventures Private Limited. The salient features of the financial statements of the subsidiaries and the Associate as required under Section 129(3) of the Companies Act, 2013 are furnished in Form AOC-I as Annexure I, forming part of this Report. The Policy for determining material subsidiaries as approved by the Board may be accessed on the Company's website at the link <http://excelind.co.in/companyPolicies.html>. The financial statements of the subsidiary companies are not attached with this Annual Report. The Company will make available the annual accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same in accordance with Section 136 of the Companies Act, 2013. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and are also available on the Company's website: <http://excelind.co.in/annualReports.html>. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies and its associate company. NUMBER OF MEETINGS OF THE BOARD During the FY 2015-16 seven meetings of the Board of Directors were held, details of the meetings held are provided in the Corporate Governance Report forming part of this annual report. APPOINTMENT AND RESIGNATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL In accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, Mr Ravi A Shroff, Director of the Company, will retire by rotation at the ensuing Annual General Meeting of the Company and, being eligible, offers himself for re-appointment. The brief resume of the Director and other related information is provided in the Corporate Governance Report forming part of this Annual Report. Your Director recommend his re-appointment as Director. NOMINATION AND REMUNERATION POLICY On recommendation of Nomination and Remuneration Committee, the Board of Directors at its Meeting held on Friday, 30th January, 2015 has approved a Nomination and Remuneration Policy for the appointment and remuneration of the directors, key managerial personnel (KMP) and other employees. The key objectives of the Policy are to lay down the criteria for appointment and remuneration of Directors, Key Managerial Personnel and Executives at Senior Management level and recommend to the Board their appointment, and also to formulate criteria for evaluation of performance of Independent Directors and the Board and to devise a policy on Board diversity. The Policy, inter-alia, includes criteria for determining qualifications, positive attributes, independence of a director, and expertise and experience required for appointment of Directors, KMP and Senior Management. As per the Policy, the remuneration/compensation to whole time Directors shall be recommended by the Nomination and Remuneration Committee to the Board for its approval. However, the remuneration/compensation to whole-time Directors shall be subject to the prior/post approval of the shareholders of the Company and Central Government, wherever required. Further, the Non-Executive Directors shall be entitled to the fees for attending meetings of Board and Committees, and also to the commission within the overall limit prescribed in the Companies Act, 2013. The Nomination and Remuneration Policy is available on the Company's website <http://excelind.co.in/companyPolicies.html>. Particulars of the Company's Remuneration Policy and information required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and particulars of remuneration required under Section 197 of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors/Employees of the Company are set out in Annexure II, forming part of this Report EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS The Nomination and Remuneration Committee has defined the evaluation criteria for the Performance Evaluation of the Board, its Committees and individual Directors. Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out a formal annual evaluation of its own performance and that of its Committees and individual Directors. The evaluation of each of the directors was done, inter-alia, on the basis of their advisory role and contribution in the decision making. Further, the evaluation of the Board as a whole and all the Committees of the Directors was done, inter-alia, on the basis of the overall directions and guidance provided to the senior executives and supervision over their performance. INDEPENDENT DIRECTOR (i) Declaration from Independent Directors The Board has received declaration from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. (ii) Criteria for Performance Evaluation Nomination and Remuneration Committee has laid down various criteria for performance evaluation of Independent Directors which, inter-alia, includes preparedness and attendance at the meetings, understanding of Company's operations and business and contribution at Board Meetings. (iii) Details of Familiarization Programme The details of programme for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link <http://excelind.co.in/companyPolicies.html> RELATED PARTY TRANSACTIONS All the Related Party Transactions entered into during the financial year 2015-16 were at an arm's length and in ordinary course of business. The details of material transactions with related party are provided in Form AOC 2 as Annexure III, forming part of this Report. All related party transactions as required under Accounting Standards 18 have been reported in the Notes to financial statements of the Company. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link <http://excelind.co.in/companyPolicies.html>. VIGIL MECHANISM/WHISTLE BLOWER POLICY FOR THE DIRECTORS AND EMPLOYEES Your Company believes in promoting a fair, transparent, ethical and professional work environment. The Board of Directors of the Company pursuant to the provisions of Section 177 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, has framed "Whistle Blower Policy" for Directors and employees of the Company for reporting the genuine concerns or grievances or cases of actual or suspected, fraud or violation of the Company's code of conduct and ethics policy. The Whistle Blower Policy of the Company is available on the Company's website <http://excelind.co.in/companyPolicies.html>. CORPORATE SOCIAL RESPONSIBILITY The Company firmly believes that the industry owes duty of welfare to the society at large and it shall pursue the commitment of Social Responsibility and carry out the social work directly and/or through other registered welfare organizations. The Company's policy on Corporate Social Responsibility (CSR) states various CSR activities that the Company could undertake to discharge its responsibilities towards the society. In the FY 2015-16, the Company has undertaken various CSR activities at Roha, Lote, Mumbai, Kutch and Thane. The CSR activities include water harvesting, rural development, promotion of education, animal welfare, women empowerment, entrepreneurship development, Swatchha Bharat/Sanitation programme and protection of environment. For the year ended 31st March, 2016, the Company has spent Rs. 69.83 Lacs on aforesaid CSR activities directly or through other registered welfare organizations like Shri Vivekanand Research & Training Institute, Samarth Gram Vikas Trust, Bhartiya Vidya Bhavan, etc. Details on CSR spending as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 are set out in Annexure IV, forming part of this Report. RISK MANAGEMENT Your Company has voluntarily constituted a Risk Management Committee to formulate a policy for risk management for implementing and monitoring the risk management plan of the Company. The risk management committee is composed of three Directors including two independent Directors and one senior executive of the Company. Your Company recognizes that the risk is an integral part of business and is committed to managing the risks in proactive and efficient manner. Your Company periodically assesses the risks in the internal and external environment along with the treating the risks and incorporates risk management plants in its strategy, business and operational plans. Your Company, through its risk management process strives to contain impact and likelihood of the risks within the risk appetite as agreed from time to time with the Board of Directors. There are no risks which in the opinion of the Board threaten the existence of the Company. However, some of the risks which may pose challenges are set out in the Management Discussion and Analysis which forms part of this Report. AUDIT COMMITTEE The Audit Committee of Directors comprises of Mr H N Motiwalla (Chairman of the Committee), Mr P S Jhaveri, Mr R N Bhogale and Mrs Usha A Shroff. All the recommendations made by the Audit Committee during the year were accepted by the Board of Directors of the Company. The terms of reference and other details of the Audit Committee are available in the Corporate Governance Report forming part of this annual report. STATUTORY AUDITORS M/s S R B C & CO. LLP Chartered Accountants, Mumbai, (ICAI Firm Registration No. 324982E/E300003) was appointed as the Statutory Auditors of the Company for a term of three consecutive years commencing from the conclusion of the 53rd Annual General Meeting of the Company till the conclusion of the 56th AGM subject to ratification by the Members at every Annual General Meeting. Necessary resolution for ratification of appointment of the Auditors is set out in the Notice of AGM for seeking approval of the members. SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT The Board has appointed, Mr. Prashant Diwan, Practising Company Secretary as the Secretarial Auditor of the Company for the year 2015-16 to conduct the Secretarial Audit of the Company. The Secretarial Audit Report of the Company issued by Mr. Prashant Diwan for the financial year ended 31st March, 2016 is attached with this Report as Annexure V. COST AUDITORS The Board of Directors at their meeting held on 30th July, 2015 has appointed M/s Kishore Bhatia & Associates (Firm Registration No. 00294), Practicing Cost Accountants, as the Cost Auditors of the Company for the financial year 2015-16 for all the applicable products of the Company. The Cost Audit Report for the year ended 31.03.2015 which was required to be filed with the Ministry of Corporate Affairs on or before 10.10.2015, was filed on 08.10.2015. CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. Your Company continues to follow the principles of good Corporate Governance and the Board of Directors lays strong emphasis on transparency, accountability and integrity. Your Company has complied with all the mandatory requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis and Corporate Governance Report together with Auditors' Certificate thereon forms part of this Report. EXTRACT OF ANNUAL RETURN Pursuant to provisions of Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, extract of Annual Return in Form MGT 9 is set out in Annexure VI, forming part of this Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The information on conservation of energy and technology absorption and foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is set out in Annexure VII, forming part of this Report. MATERIAL ORDERS PASSED BY THE REGULATORY AUTHORITIES OR COURT/MATERIAL CHANGES OR COMMITMENTS There are no significant material order passed by the regulators/courts which can impact the going concern status of the Company and its future operations. There are no material changes or commitments occurring after 31st March, 2016 which may affect the financial position of the Company. INTERNAL FINANCIAL CONTROLS The Company has adequate systems of internal financial controls to safeguard and protect its assets from unauthorized use or misappropriation. All the financial transactions are properly authorized, recorded and reported to the Management. The Company follows all the applicable Accounting Standards for proper maintenance of books of accounts for financial reporting. DIRECTORS RESPONSIBILITY STATEMENT In terms of Section 134(5) of the Companies Act, 2013, in relation to the audited financial statements of the Company for the year ended 31st March, 2016, the Board of Directors hereby confirms that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) t hey had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the Company for that period; (c) 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; (d) they have prepared the annual accounts on a going concern basis; and (e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively; (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. EXPLANATION OR COMMENTS BY THE BOARD ON EVERY QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE The reports of Statutory Auditor and Secretarial Auditor are free from any qualification, reservation or adverse remark or disclaimer. ACKNOWLEDGEMENTS Your Directors acknowledge with gratitude the support and co-operation received from the Shareholders, Government Authorities, Bankers, Investors, Customers and Suppliers. For and on behalf of the Board of Directors ASHWIN C. SHROFF Chairman & Managing Director DIN: 00019952 Date: 5th June, 2016 Place: Mumbai |