DIRECTORS' REPORT (Including Management Discussion and Analysis Report) The Directors are pleased to present their Ninety Fourth Annual Report together with the accounts of the Company for the financial year ended 31st March, 2015. MANAGEMENT DISCUSSION & ANALYSIS REPORT (a) Overview of operations Chemicals The turnover of Commodity Chemicals during the current Financial Year ended 31st March, 2015 was higher at Rs. 39.88 crores as compared to the turnover of Rs. 30.03 crores during the previous Financial Year. The turnover of Specialty Chemicals during the current Financial Year ended 31st March, 2015 was Rs.74.46 crores as compared to Rs. 63.17 crores in the previous year. The Export turnover of the Company during the current Financial Year ended 31st March, 2015 was Rs. 51.76 crores as compared to Rs. 46.66 crores for the previous Financial Year. Fertilisers The Company's fertilizer business viz. Single Superphosphate (SSP) could not be continued on its own due to various economic considerations, and hence there is no turnover of SSP fertilizers during the current financial year ended 31st March, 2015. (b) Prospects in the Industry : Chemicals Your Company has planned to face competition as also the continuing scenario of short life-cycle of various Specialty and Commodity Chemicals, by improving the manufacturing efficiency of Commodity Chemicals and developing new Specialty and performance Chemicals. The Management of your Company is concentrating on continuing basis the in-house Research and Development and is also focusing on improvement in production process for its cost effectiveness and initiatives for development of new products. Increasing emphasis is being given on cost reduction, efficient operations and improvement in supply chain management as well as development of new commodity chemicals as well. The Management of your Company has also decided to lay emphasis on improving technical expertise in Sulphur and Ethanol chemistry. Efforts are being made to have long term alliance with key customers to develop tailor made processes/products to meet their specifications and expectations. Your Company has already set up flexible manufacturing facilities termed as " Multi-purpose plant " which can be utilised for manufacture of various Specialty Chemicals which are the future growth areas. Your management is therefore contemplating further investment in this segment. The Company has also set up a Solar Plant in Roha with an initial capacity of 500 KW which will gradually be increased over a period of time. The solar energy is expected to partially replace expensive grid power with cheaper green energy and reduce marginally the Company's energy cost. Fertilisers The SSP Fertiliser Industry in general continues under the stresses and strains of the huge working capital requirement arising mainly out of the delays in receipt of the subsidy amounts from the Central Government and other related procedural issues. Your Company however continues on moderate scale the brand licensing arrangement of Company 's "SHIP- Brand" of SSP Fertiliser. Cautionary Statement Statements in this "Management Discussion and Analysis Report" describing the Company's objectives, projections, estimates, expectations or predictions may be considered as "forward looking statements" within the meaning of applicable security laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of the future performance and outlook. ADEQUACY OF INTERNAL CONTROLS Your Company has well laid down policies, guidelines and procedures which form part of its internal control system. The Audit Committee of the Board periodically reviews reports of Internal Auditors, inter alia, on adherence by the operating Management of such policies and procedures and suggests changes/modifications and improvements on a continuous basis. The Company has an independent and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposal and the transactions are authorised, recorded and reported correctly. The internal control systems are supplemented by a programme of internal audit. HUMAN RESOURCE DEVELOPMENT As a part of ongoing exercise of the restructuring and re-organisation of the Company's business, the Company undertakes periodic comprehensive reviews of its HR policies and amends the same suitably from time to time, to meet the emerging business requirements. BOARD EVALUATION The board of directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Companies Act, 2013 (the Act) and the corporate governance requirements as prescribed by Securities and Exchange Board of India ( " SEBI " ) under Clause 49 of the Listing Agreement. The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc. The performance of the committees was also evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors were also discussed. NOMINATION AND REMUNERATION POLICY The Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and other employees has evolved and has been formulated in terms of the provisions of the Companies Act, 2013 and the listing agreement with a view to pay equitable and commensurate remuneration to the Directors, Key Managerial Personnel and other Employees of the Company. The Company had been passing through adverse financial condition which had an inevitable impact on the existing compensation and pay structure rather than the qualification, experience and the industry standards. The Chief Executive Officer ( CEO ) of the Company is being paid in accordance with the provisions of the Companies Act, 2013 prescribing a ceiling on the maximum permissible remuneration in respect of Companies having inadequate profits. Presently the maximum permissible remunerations limit is Rs. 42 lacs per annum as applicable to CEO of Your Company. This amount being the bench mark, the remunerations of the Other Senior Executives and the Management Staff are line with the same. In view of the inadequacy of profits, the Directors of the Company are not being paid any remuneration/commission etc. except the normal sitting fees. The Committee will therefore take in to consideration the various applicable factors such as qualification, experience, industry standards etc. and evolve an appropriate policy in course of time once the Company starts making adequate profits. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY During the financial year 2014-15, the Company has not provided any loan to any person or body corporate or given any guarantee or provided security in connection with such loan or made any investment in the securities of any body corporate pursuant to Section 186 of the Companies Act, 2013. The Company has given advance against salary to some employees in terms of the applicable policies of the Company . SEXUAL HARASSMENT During the year under review, there was not a single incident pursuant to the Sexual Harassment of Women at Workplace ( Prevention, Prohibition and Redressal ), Act, 2013. MEETINGS A calendar of Meetings is prepared and circulated in advance to the Directors. During the year five Board Meetings and four Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. AUDIT COMMITTEE The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report. DIRECTORS/KEY MANAGEMENT PERSONNEL Ms. Mitika Laxmikumar Goculdas (holding DIN 02879174), Director, is retiring by rotation in accordance with the requirements of the Act and under the Article 135 of the Articles of Association of the Company, and being eligible, offer herself for re-appointment. The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. Independent directors have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent director during the year. During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company . The Company continues its operations under the leadership of the Senior Corporate Management Team comprising of Shri Bimal Lalitsingh Goculdas, Chief Executive Officer, Shri D. T. Gokhale, Executive Vice President and Company Secretary and Shri D. K. Sundaram, Chief Finance Officer. WHISTLE BLOWER POLICY The Company has a whistle blower policy to report genuine concerns or grievances. The Whistle Blower policy has been posted on the website of the Company ( www.dmcc.com). RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. The Audit Committee and the Board of Directors at their meetings have reviewed and approved all the related party transactions undertaken by the Company during the Financial Year. The related party transactions entered into by the Company are disclosed in Note no. XIII 7(E) of the Notes to Accounts. Thus all Related Party Transactions are placed/routed through the Audit Committee and the Board of Directors. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company . The Policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. RISK MANAGEMENT POLICY The Company has formulated a Risk Management Policy which reflects the over all risk management philosophy, the Company's over all approach to risk management, risk assessment, risk mitigation mechanism and the roll and responsibilities for risk management. Risk management forms an integral part of the business planning and review cycle. The Company's Risk Management Policy is designed to provide reasonable assurance that objectives are met by integrating management control into the daily operations, by ensuring compliance with legal requirements and by safe guarding the integrity of the Company's financial reporting and its related disclosures. The identification and analysis of and putting in place the process for mitigation of these risks is an ongoing process. The Company has also laid down procedure to inform the Audit Committee and the Board about the risk assessment and minimization procedures. These procedures are periodically reviewed to ensure that executive management control risks by means of a properly defined frame work. The monthly review meetings of all the functional/departmental heads interalia discuss the relative risk management issues. ENVIRONMENT HEALTH AND SAFETY (EHS) In the Company, it has been our prime endeavor to achieve the environment health and safety. We thrive to achieve the objective by ensuring accident free work place. We have various EHS management processes and methodologies being deployed and implemented under the EHS system to ensure that our employees become more safety conscious and strive to improve the organisation's approach towards loss prevention. The Company has a system of in house EHS training for employees and workmen at the factory as also the practice of sending the employees/ workmen to various external EHS programme. All these EHS endevours help the Company in its efforts in preventing loss of life and property damage. AUDITORS Messers. K.S.Aiyar & Co., Chartered Accountants, holding ICAI Firm Registration Number 100186W, who are the Statutory Auditors of your Company , hold office until the conclusion of the 96th Annual General Meeting of the Company to be held in the year 2017( subject to ratification of their appointment at every AGM). It is proposed to ratify the appointment of Messers. K.S.Aiyar & Co., Chartered Accountants, holding ICAI Firm Registration Number 100186W as Statutory Auditors of the Company from the conclusion of this AGM till the conclusion of the 95th AGM . Messrs. K.S. Aiyar & Co., Chartered Accountants, holding ICAI Firm Registration Number 100186W has, under Section 141 of the Act, furnished a certificate of its eligibility for re-appointment. The Members year on year will be requested, to ratify their appointment as Statutory Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to item No.3 of the Notice. AUDITORS' OBSERVATIONS In respect of the Auditors' observation ( in quotes): "The Company had recognized net deferred tax asset in earlier years aggregating to Rs.2654.15 lacs till 31st March, 2009, considering unabsorbed loss upto 31st March, 2008 and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial periods, further net deferred tax asset has not been recognized in view of management's perceptions and reason detailed in Note No.V(c). We are not in a position to opine on the realisability of the said net deferred Tax Asset. Consequently, the Accumulated losses as at the end of the year would have been higher by Rs.2654.15 Lacs". The managements perception and reasons are detailed in Note no.V(c), and the same is reproduced here below: Deferred Tax Assets (Net) The Company's export business over the last three years has been steadily growing at an impressive rate. This has been possible due to appropriate marketing efforts coupled with quality consciousness on the part of the Company. The focused R & D activity to identify and develop relevant products meeting high quality standards has always remained vital to the Company's business and efforts are undertaken to spread this message across the customer base both abroad as well as domestic. The Company is confident of improving the current growth rate substantially in overseas business in addition to consolidating the domestic market both in Specialty and Bulk chemicals. In the near term, the Company expects to achieve this objective by making use of the available unutilized capacity as well as building up additional capacity. The marketing team is also being strengthened. Consequently, there is virtual certainty of realization of "Deferred Tax asset" mainly resulting from unabsorbed depreciation and carried forward losses. Accordingly, the recognized "Deferred Tax Asset" of Rs.2654.15 Lacs as at 31.03.2009, without any addition, is being carried forward. COST AUDITOR AND COST AUDIT REPORT The Board of Directors, on the recommendation of Audit Committee has appointed Shri S.S. Dongare, Cost Accountant, as Cost Auditor of your Company to audit the cost accounts of the Company for Financial Year 2015-16 at remuneration of Rs. 66,000/- ( Rupees Sixty Six Thousand Only) as also the payment of service tax as applicable and re-imbursement of actual out-of-pocket expenses incurred in connection with the aforesaid audit. As required under the Companies act, 2013, a resolution seeking member's approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting. In accordance with the requirement of the Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies ( Cost Records and Audit) Rules, 2014 as amended from time to time, your Company carries out an audit of cost records ( Sulphuric Acid) maintained by the Company every year. The cost Audit Report and the Compliance Report of your Company for the Financial Year ended 31st March, 2014, by Shri S.S. Dongare, Cost Accountant, which was due for filing with the Ministry of Corporate Affairs by 30th September, 2014, was duly filed on 29rd September, 2014. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)( m) of the Companies Act, 2013 read with Rule, 8 of the Companies ( Accounts) Rules, 2014, is annexed herewith as " Annexure I". CORPORATE SOCIAL RESPONSIBILITY COMMITTEE : A Corporate Social Responsibility Committee of the Directors was constituted, consisting of Shri L. N. Goculdas as Chairman, Shri H. T. Kapadia, Shri M. T. Ankleshwaria and Shri A. W. Ketkar as members of the Committee. The Committee met once during the year to finalise the Corporate Social Responsibility Policy and Accordingly CSR Policy has been framed and the same is annexed as Annexure-II' and forms a part of this Report to the Directors. Due to the average net profit of last three years being negative, your Company is not required to spend any amount towards Corporate Social Responsibility activities during the year under review. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under , the Company has appointed Shri A. D. Gupte, FCS No.300, C.P.No. 1210 to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure - III and forms integral part of this Report. There is no qualification in the report of Secretarial Auditor, for the year under review. PARTICULARS OF EMPLOYEES The particulars of employees as required under section 197 and rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have not been furnished as there are no employees falling within the purview of the provisions of said section and the said rule during the period under review.' PUBLIC DEPOSITS During the year 2014-15, your Company has not accepted/renewed any fixed deposit. Out of the unclaimed deposits of Rs.1,76,000/- as on 31st March, 2014, the Company has transferred/paid Rs.1,16,000/- (Rupees One Lac Sixteen Thousand only) to Investor Education and Protection Fund as required. Therefore only 5 deposits aggregating to Rs.60,000/- have remained unclaimed as on 31 March, 2015. DIRECTORS' RESPONSIBILITY STATEMENT To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)( c ) of the Companies Act, 2013: (i) that in the preparation of the Annual Accounts for the year ended March 31,2015, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any; (ii) 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 as at March 31, 2015 and of the profit of the Company for the year ended on that date; (iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the annual accounts have been prepared on a going concern basis; (v) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. CORPORATE GOVERNANCE Your Company has been practicing the principles of good Corporate Governance over the years and the Board of Directors lay strong emphasis on transparency, accountability and integrity. Your Company has adopted a Code of Conduct which is approved by the Board of Directors as required under the Listing Agreement with the Stock Exchange, Mumbai. The Directors and the Management Staff have confirmed their adherence to the provisions of the said code. A separate report on Corporate Governance is annexed as a part of the Annual Report, along with the Auditors' Certificate on its compliance. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure- IV and forms an integral part of this Report. ACKNOWLEDGEMENTS The Directors are thankful to your Company's shareholders, customers, suppliers, contractors, various departments of Central and State Governments and Banks for their continued valuable support. The relations between the employees and the management continue to be cordial. Your Directors place on record their appreciation of the sincere and devoted efforts of the employees at all levels and their continued co-operation, commitment, sense of understanding and the sacrifices made by them during the difficult and critical period which the Company is passing through. Management of your Company is confident that with the active co-operation from all the stake holder of the Company will be in a position to overcome this difficult phase. For and on behalf of the Board LAXMIKUMAR NAROTTAM GOCULDAS Chairman Register Office Prospect Chambers, 317/21, Dr. Dadabhoy Naoroji Road, Fort, Mumbai 400 001. Date : 12th August, 2015 |