DIRECTORS' REPORT DEAR MEMBERS, Your directors take pleasure in presenting the 43rd annual report of your Company together with audited financial statements for the year ended on 31 March 2016 REVENUES The overall sales turnover of your Company increased to Rs. 1,798 crores from Rs. 1,645 crore in the previous period, at a growth rate of 9.30%. This was mainly due to increase in sales volume and pricing. Your Company's total income (including other income) was placed at Rs. 1,800 crore for the financial year 2015-16 registering a growth rate above 9%. PROFITS Your Company's profit before tax (PBT) increased by 11.54% to Rs. 58 crores compared to previous period PBT of Rs. 52 crores; whilst profit after tax (PAT) increased by 77% to Rs. 62 crores compared to the previous periods' PAT of Rs. 35 crores. The increase in the PAT was mainly due to the savings in tax expenses on availing the MAT credit which is on account of amalgamation of Styrolution India Private Limited with the Company. Your Company continues to be a market leader in ABS sales. DIVIDEND Considering the performance, and to appropriately reward the members while conserving resources to meet future financial requirements, the board of directors recommends a dividend of Rs. 4/- per equity share of Rs.10 each (40%). This dividend is subject to the approval of the members at the forthcoming annual general meeting. In the previous year the Company paid a dividend of Rs. 4/- per equity share of Rs.10/-each of the Company. The register of members and share transfer books shall remain closed on 6 August 2016. CHANGE OF NAME OF THE COMPANY In order to reflect the identity of the Company as an INEOS Group Company, the board of directors of the Company at their meeting held on 4 November 2015 approved the proposal for change of name of the Company to 'INEOS Styrolution India Limited' or any other name as may be approved by the Registrar of Companies, Gujarat. The Company after getting the requisite approval of stock exchanges and registrar of companies accorded the approval of the shareholders through postal ballot and e-voting for change of name of the Company. Thereafter on the application being made by the Company, the central covernment approved the change of name of the Company to "INEOS Styrolution India Limited" w.e.f 18 March 2016. SUBSIDIARY, ASSOCIATE COMPANIES AND JV COMPANIES At the beginning of the financial year, Styrolution India Private Limited was the wholly owned subsidiary of the Company, which was amalgamated with the Company during the year Significant and material orders passed by the regulators or courts Amalgamation of Styrolution India Private Limited (SIN) (wholly-owned subsidiary) with the company. The board of directors of your Company at its meeting held on 3 August 2015 had approved the proposal of amalgamation of SIN with the Company, (Appointed date: 1 April 2015) subject to the requisite approvals from the Members/Creditors and other statutory and regulatory authorities, with an intent of aligning the business operations undertaken by both the Companies enabling efficient utilisation of their resources, greater economies of scale, reduction in overheads and other expenses and improvement in various operating parameters. The same will also result, inter alia, advantages of integration of the operations of the said companies, including better resource management and reduction of working capital requirements and create better generation of synergies and further strengthen Styrolution's presence in the Indian market. Both companies are part of INEOS Group, the world's leading producer in Styrenics. Hon'ble High Court of Gujarat sanctioned the scheme of amalgamation (appointed date: 1 April 2015) of ' Styrolution India Private Limited' with 'the Company and their respective shareholders and creditors by passing an order on 26 February 2016. The said order has been registered with Registrar of Companies, Gujarat on 31 March 2016 and accordingly, the Scheme has become effective from 31 March 2016. Hence, the Company does not have any subsidiary, joint venture or associate Company incorporated in India, as on 31 March 2016. CHANGES IN DIRECTORATE AND KEY MANAGERIAL PERSONNEL Appointments/ Re-appointments At the 43rd annual general meeting (AGM) following appointments / re-appointments are being proposed: 1. On the recommendations of nomination and remuneration committee, the board appointed Mr. Sanjiv Vasudeva, executive and non-independent director, as an additional director, managing director and CEO of the Company and as a key managerial personnel of the Company effective from 1 March 2016. A brief resume of Mr. Vasudeva is given separately in the notice convening AGM. Your directors recommend his appointment for the members' approval. 2. Mr. Stephen Mark Harrington retires by rotation and being eligible, offers himself for re-appointment in terms of the Articles of Association of the Company. A brief resume of Mr. Harrington is given separately in the notice convening AGM. Your directors recommend his appointment for the members' approval. 3. On the recommendations of nomination and remuneration committee, Ms. Ryna Karani, non-executive and independent director, has been appointed by the board as an additional director with effect from 16 May 2016. A brief resume of Ms. Ryna Karani is given separately in the notice convening AGM. Your directors recommend her appointment as an independent director of the Company for the members' approval. 4. On the recommendations of nomination and remuneration committee, Mr. Bhupesh P. Porwal, chief financial officer, has been appointed as an additional director and whole-time director with effect from 16 May 2016. A brief resume of Mr. Porwal is given separately in the notice convening AGM. Your directors recommend his appointment for the members' approval. Retirement/ Resignations Following directors resigned / retired from their office of directorship in the Company: 1. Mr. Myung Suk Chi resigned from his office as managing director of the Company effective 1 March 2016. The board appreciated and thanked him for his efforts in driving delivery and quality excellence for the Company. 2. Dr. Anke Frankenberger resigned from her office as director of the Company effective 16 May 2016. The board of directors placed on record its appreciation for the services rendered by Dr. Frankenberger during her tenure with the Company. 3. Mr. Ravindra Kulkarni resigned as an independent director of the Company effective 16 May 2016. The board thanked him for providing valuable guidance to the Company during his tenure. Key Managerial Personnel Mr. Sanjiv Vasudeva, managing director and chief executive officer, Mr. Haresh Khilnani, company secretary , head - legal and compliance and Mr. Bhupesh P. Porwal, chief financial officer are the key managerial personnel of the Company as on 31 March 2016. MEETINGS OF BOARD OF DIRECTORS OF THE COMPANY During the financial year under review the board of directors duly met five times on 18 May 2015, 3 August 2015, 4 November 2015, 4 February 2016 and 16 March 2016. The details of the board meetings with regard to their dates and attendance of each of the directors thereat have been set out in the report on corporate governance DECLARATION BY INDEPENDENT DIRECTORS Mr. Jal Patel, Mr. Sharad Kulkarni and Mr. Ravindra Kulkarni were the independent directors of the company as on 31 March 2016 pursuant to the provisions of section 149(10) of the Act. The board of directors of the Company hereby confirms that all the independent directors duly appointed by the Company have given the declaration to the effect that they meet the criteria of independence as provided under section 149(6) of the Act . PERFORMANCE EVALUATION Pursuant to the provisions of the Act and Listing Regulations, the formal annual evaluation has been carried out by the board of its own performance and that of its committees and individual directors through collective feedback. Board members were requested to evaluate the effectiveness of the board dynamics and relationships, information flow, decision-making of the directors, relationship to stakeholders, company performance, company strategy, and the effectiveness of the whole board and its various committees. Independent directors were evaluated on the following performance indicators: • Ability to contribute to and monitor our corporate governance practices; • Ability to contribute by best practices to address top-management issues; • Ability to actively contribute toward positive growth of the organization; • Ability to create positive image of the company and help the company wherever possible; • Commitment to the fulfillment of a director's obligations and fiduciary responsibilities, these include participation in board and committee meetings Your directors have expressed their satisfaction of the evaluation process. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of section 134 (3) (c) of the Act, the board of directors of the Company confirms that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; 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 financial year and of the profit of the Company for that period; iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) They have prepared the annual accounts on a going concern basis; and v) They had laid down internal finance controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. vi) They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively. AUDIT COMMITTEE The audit committee consists of all independent directors with Mr. Sharad Kulkarni as Chairman and Mr. Jal Patel and Mr. Ravindra Kulkarni as members. The terms of reference of the audit committee, details of meetings held during the year and attendance of members are set out in the corporate governance report. DEPOSITS The Company has not accepted any deposit, within the meaning of section 73 and 74 of the Act read with The Companies (Acceptance of Deposits) Rules, 2014 during the year under review. TRANSFER TO GENERAL RESERVE A sum of Rs. 627.68 lakhs has been proposed to be transferred to general reserve of the Company. An amount of Rs. 40,432.69 lakhs is proposed to be retained in the surplus. TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND Pursuantto the provisions of section 124and 125 oftheAct, the unpaid and unclaimed dividend pertaining to the yearendedon31 December2008 amounting to Rs. 220,457.00ason31 March2016 which was lying in the Company's separate unpaid dividend accountand remaining unclaimed for a period of seven years, was transferred to the investor education and protection fund on 8 June 2016. CORPORATE GOVERNANCE Your Company observes high standards of corporate governance in all areas of its functioning with strong emphasis on transparency, integrity and accountability. As required under Listing Regulations, a detailed report on corporate governance along with the auditors' certificate thereon forms part of this report as Annexure -1. A detailed review of the operations, performance and future outlook of the Company and its businesses is given in the management discussion and analysis report, which forms part of this report. CORPORATE SOCIAL RESPONSIBILITY At INEOS Styrolution India Limited, we are committed to the group's mission of delivering the best solutions, which includes creating a more inclusive and resource-efficient India as a responsible corporate citizen. With our passion for results and entrepreneurial spirit we want to ensure that all our strategic corporate social responsibility (CSR) initiatives actively work towards a more sustainable future. INEOS focus has always been to contribute to the sustainable development of the society and environment. The strategies and CSR activities during the year 2015-16 were intended to support rural development; promoting education; providing sanitation and purification of water; creating livelihoods for people, especially those from disadvantaged sections of society, in rural and urban India; preserving and promoting social developmental activities that positively impacts the society at large with a minimal resource footprint. The details of such initiatives, CSR spend, CSR Policy, etc., have been provided as Annexure-II to this report, as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014. In compliance with requirements of section 135 oftheAct, your Company has laid down a CSR policy. The amount required to be spent on CSR activities during the year ended 31 March 2016 in accordance with the provisions of section 135 of the Act was Rs. 148.68 lakhs and your Company had spent Rs.85.43 lakhs. The said amount was spent on the CSR activities undertaken by your Company mostly in the vicinity of its plants at Nandesari and Dahej and as well as around Vadodara, where the registered office and corporate office of your Company are located. The shortfall of Rs. 63.25 lakhs in the amount spent on CSR activities during the year on 31 March 2016 was due to lack of proper and need worthy sources for allocation of the funds. REMUNERATION POLICY The details of the remuneration policy adopted by the board of directors of the Company are mentioned in the corporate governance report. RISK MANAGEMENT POLICY The details of the risk management policy adopted by the board of directors and details of the risk management committee of the Company are mentioned in the corporate governance report. PARTICULARS OF EMPLOYEES A statement of disclosure of remuneration pursuant to section 197 of the Act read with rule 5(1) and rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided as Annexure - III forming part of this report. EXTRACT OF ANNUAL RETURN The extracts of annual return in form MGT-9 as required under section 92(3) of the act read with rule 12 of the Companies (Management and Administration) Rules, 2014 forms part of this report as Annexure - VI PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Loans, guarantees and investments covered under section 186 of the Act, form part of the notes to the financial statements provided in this annual report. PARTICULARS OF CONTRACTS AND AGREEMENTS MADE WITH RELATED PARTIES TRANSACTION The particulars of contracts or arrangements with related parties referred to in section 188 (1) of the Act in the prescribed form AOC - 2, is provided as Annexure -IV forming part of this Report. REPORTING OF FRAUDS There have been no instances of fraud reported by the statutory auditors under section 143(12) of the Act and rules framed there under either to the Company or to the central government. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TILL THE DATE OF THE REPORT There have been no material changes which have occurred between the end of financial year till the date of this report affecting the financial position of the Company. BOARD DIVERSITY Your Company recognizes and embraces the importance of a diverse board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, regional and industry experience, age, ethnicity, race and gender, which will help us, retain our competitive advantage. The board of directors has adopted the 'Board Diversity Policy' which sets out the approach to diversity of the board. The board diversity policy is available on our website www.ineosstyrolutionindia.com INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an adequate system of internal controls in place. It has documented procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliances with regulations and for ensuring reliability of financial reporting. The Company has continued its efforts to align all its processes and controls with global best practices in these areas as well. Audit committee of the board of directors, comprising independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any. ENVIRONMENTAL HEALTH, SAFETY AND PROTECTION Your Company gives highest importance to safety, health and environment (SHE), and encourages and promotes safety awareness in true letter and spirit as an integral part of its work culture. Process safety management (PSM) is an integral part of all changes taking place in the process. Onsite emergency plans have been reviewed and updated by all divisions. Periodic mock drills are conducted at various divisions and reports indicate improved preparedness of employees. To further strengthen the safety of overall operations and to promote a positive safety culture and transparency, your Company has introduced site specific behavioral based safety (BBS) process at all its manufacturing locations and substantially invested for the improvement of process safety. Apart from employees, the contractors and workmen are also given exhaustive training on safety, first-aid and fire fighting. The Company has appointed and trained safety stewards to promote safety in all divisions. A Green Belt in and around all factory premises has been maintained to enhance eco-friendliness. POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE The Company has in place a policy on prevention of sexual harassment at workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules framed there under and complaints committee has also been set up to redress complaints received regarding sexual harassment. During the year, no complaint with allegations of sexual harassment was received by the Company. INSURANCE Your Company's assets are adequately insured against risk from fire, riot, earthquake, terrorism, loss of profits and other risks which are considered necessary by the management. As an additional coverage, a public liability insurance policy is also in place and it has been taken to cover public liability/ties, if any, arising out of any industrial accidents. INEOS group has covered also, the directors' and officers' liability under the Act to meet with any eventuality. STATUTORY AUDITORS The present auditors of the Company, Messrs B S R & Co. LLP, Chartered Accountants, have expressed their unwillingness to be re-appointed as auditors of the Company upon their retirement at the forthcoming annual general meeting. The board of directors, on recommendation of the audit committee, recommends the appointment Messrs Price Waterhouse Chartered Accountants LLP, Chartered Accountants, (Firm registration number: 012754N/N500016), as the statutory auditors of the Company from the conclusion of 43rd annual general meeting until the conclusion of 47th annual general meeting of the Company subject to ratification by the members every year at the annual general meeting. A certificate from them has been received to the effect that their appointment as statutory auditors of the Company, if made, would be according to the terms and conditions prescribed under section 139 and other applicable provisions of the Act and rules framed there under. AUDITORS' REPORT The observations made by the auditors in their report read with the relevant notes as given in the notes to the financial statement for the year ended 31 March 2016 are self-explanatory and are devoid of any reservation, qualification or adverse remarks. SECRETARIAL AUDITOR Messrs Devesh Vimal & Co., Practicing Company Secretaries, Vadodara were appointed to conduct the secretarial audit of the Company for the financial year 2015-16, required under section 204 of the Act and rules framed there under. The secretarial audit report pursuant to section 204 of the Act received from them is annexed as Annexure - VII. COST AUDITORS The board of directors, on recommendation of the audit committee, has appointed Messrs Kailash Sankhlecha and Associates, (Firm's registration no. 100221), Cost Accountants, as cost auditors of the Company, for the financial year 2016-17, for conducting the audit of the cost records maintained by the Company for the various products as mandated by the central government, subject to the approval of the members on the remuneration to be paid to the cost auditor. A certificate from them has been received to the effect that their appointment as cost auditors of the Company, if made, would be in accordance with the limits specified under of section 141 of the Act and rules framed there under. A resolution seeking member's ratification for the remuneration payable to the cost auditors for the financial year 2016-17 forms part of the notice of the 43rd annual general meeting of the Company and the same is recommended for your consideration and approval. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO A statement highlighting details of the conservation of energy, technology absorption, and foreign exchange earnings and outgo, in accordance with section 134(3)(m)of the Act read with the Companies (Accounts) Rules, 2014 is annexed hereto as Annexure - V and forms part of this report. QUALITY SYSTEMS AND ISO CERTIFICATION During the year, Company continued to observe all pre-requisites in maintaining the quality systems and standards and ISO audit methods as required under the guidelines of quality and environmental management systems for ISO certified by UL-DQS. CODE OF CONDUCT The Company has suitably laid down the code of conduct for all board members and senior management personnel of the Company. The declaration by CEO of the Company relating to the compliance of aforesaid code of conduct forms an integral part of this annual report. VIGIL MECHANSIM As per the provisions of section 177(9) of the Act the Company is required to establish an effective vigil mechanism for directors and employees to report genuine concerns. The Company has a policy for prevention, detection and investigation of frauds and protection of whistleblowers ("Whistleblower Policy") in place and the details of the whistleblower policy are provided in the report on corporate governance forming part of this report. HUMAN RESOURCE AND INDUSTRIAL RELATIONS Our employees are the most valuable assets of the Company. We encourage innovation, meritocracy and the pursuit of excellence. The human resource development function of the Company is guided by a spirit of corporate team building and dedication towards strengthening the Company's systems thereby improving efficiencies and registering growth. All personnel continue to have a healthy, cordial and harmonious approach in problem solving and enhancing Company value at all levels. Despite uncertain economic conditions, the enthusiasm and unstinting efforts of the employees has enabled the Company to maintain leadership in its business areas. The industrial relations during year remained cordial. The Company has drawn up a comprehensive human resource strategy (the "Human Resource" strategy) which addresses key aspects of human resource development such as: - Code of conduct and fair business practices. - A fair and objective performance management system linked to the performance of the businesses. - Creation of a common pool of talented managers across the organization with a view to increasing their mobility through inter-company job rotation. - Evolution of performance based compensation packages to attract and retain talent within the organization. - Development of comprehensive training programs to impart and continuously upgrade the industry/function specific skills, etc. EMPLOYEE BENEFIT MEASURES UNDERTAKEN DURING THE YEAR In order to achieve a highly streamlined and productive organization, a transparent and uniform HR policy with a well-defined reporting structure and clear roles and responsibilities will be put in place. An employee survey together with a top leadership workshop was also conducted to assess the current cultures of INEOS group Companies in India and to identify an ideal common culture across the two entities for better implementation of the respective strategic initiatives. Necessary training based on identified needs are being set-up across all functions by the respective heads of departments to enhance the knowledge and competencies of our employees. Other initiatives including an improvement of the working environment, the automation of HR processes including the outsourcing of the payroll processor and the installation of a new attendance system, are in progress. ACKNOWLEDGEMENTS We thank our customers, vendors, dealers, investors, business partners and bankers for their continued support during the year which made the Company grow successfully. We also place on record our appreciation of the contribution made by our employees at all levels. Our consistent growth was made possible by their hard work, solidarity, cooperation and support. For and on behalf of the Board Stephen Mark Harrington Chairman Date ; 13 June 2016 Place ; Vadodara |