DIRECTORS REPORT TO THE SHAREHOLDERS Your Directors have pleasure in presenting the fifty fifth Annual Report, along with the Audited Accounts of the Company for the year ended 31 st March 2015. The detailed information on the performance of your Company appears in the Annual Report. A discussion on the operations of the Company is given in the sections titled 'Year in Review' and 'New Frontiers'. Some of the statutory disclosures, however, appear in this Report. Read along with the other sections, this would provide a comprehensive overview of the Company's performance and plans. OVERVIEW Sluggish market conditions coupled with very high volatility in raw material prices affected the performance of the chemical manufacturing division. Profit margins were under pressure during the year. The prices of raw materials, however, are now more stable and the margins have improved. The solar power segment witnessed stable operations during the year under review. The first phase of production in the composite textile plant to manufacture denim fabrics in Ethiopia by the Company's subsidiary Kanoria Africa Textiles PLC has been delayed. The learning curve of doing business in an alien geography is proving to be longerthan anticipated. It is expected that the full plant shall become operational by August, 2015. The brownfield expansion of APAG Elektroniks.ro . in the Czech Republic was completed in record time and the state of the art plant has been operational since December, 2014. MATERIAL C HANGES AN D C OMMITMENTS No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. DIVIDEND The Board of Directors recommends, for consideration of shareholders at the Annual General Meeting, a Dividend @ 30% (Rs. 1.50 per share) on Equity Shares of Rs.5/- each forthe year ended 31 st March 2015. CREDIT RATINGS Credit Analysis & Research Limited (CARE) has reaffirmed CARE A1 + (A One Plus) rating forthe short term facilities of the Company. This is their highest rating forshortterm debt obligations and itsignifies very strong degree of safety fortimely payment of financial obligations and carries lowest credit risk. CARE has also reaffirmed CARE AA- (Double A Minus) rating forthe long term facilities of the Company. This rating signifies high degree of safetyfortimely servicing of financial obligations and carries very low credit risk. CONSOLIDATE D FINANCIAL STATEMENT As per the Companies Act, 2013 and the Listing Agreement with the Stock Exchanges, the audited Consolidated Financial Statement has been annexed with the Annual Report. DEPOSITS During the year under review, the Company has not accepted any deposits from the publicand that as at the end of the year there were no outstanding deposits in terms of the Companies (Acceptance of Deposit) Rules, 2014. INTERNAL F INANCIAL C ONTROL The Company has in place adequate internal financial controls with respectto financial statements. The policies and procedures adopted by the Company ensure prevention and detection of frauds and errors, accuracy and completeness of the records and timely preparation of reliable financial statements. No reportable material weakness in the design or operation was observed during the year. DIRECTORS AND KEY MANAGERIAL PERSONNEL Shri A. Vellayan (DIN: 00148891), Prof. S. L. Rao (DIN: 00005675), Shri G. Parthasarathy (DIN: 00068510), Shri Amitav Kothari (DIN: 01097705), Shri H. K. Khaitan (DIN: 00220049) and Shri Ravinder Nath (DIN: 00062186) were appointed in the last AGM as Independent Directors not liable to retire by rotation. Shri B. D. Sureka (DIN: 00049713) ceased to be a Director of the Company with effect from 5th September 2014, as on retirement by rotation at the last AGM, he did not seek re-appointment due to health reasons. Shri J. P Sonthalia (DIN: 01292249) resigned as a Directorof the Companywith effect from 1st November 2014, dueto pre-occupation and personal reasons. The Board puts on records its deep appreciation forthe valuable advice and contribution received by the Company from Shri B. D. Sureka and Shri J. P Sonthalia during theirtenure as Directors of the Company. On the recommendation of the Nomination and Remuneration Committee, the Board of Directors has re-appointed Shri R. V. Kanoria (DIN: 00003792) as the Managing Director of the Company for further three years with effect from 10th January 2015, subject to the approval of the shareholders of the Company. Shri T. D. Bahety (DIN: 00031572) retires by rotation at the ensuing Annual General Meeting (AGM), underthe applicable provisions of the Companies Act, 2013, and being eligible, offers himself forappointment as a Directorof the Company. On the recommendation of the Nomination and Remuneration Committee, Smt. Madhuvanti Kanoria (DIN: 00142146), spouse of Shri R. V. Kanoria, Managing Directorof the Company was appointed as an Additional Directorof the Company by the Board of Directors with effect from 11 th February 2015 and as such she will hold office only upto the ensuing Annual General Meeting. The Company has received a notice in writing from a Member along with the deposit of requisite amount under Section 160 of the Companies Act, 2013, proposing the candidature of Smt. Madhuvanti Kanoria forthe office of Directorof the Company atthe ensuing AGM. None of the Directors of the Company is disqualified for being appointed as a Director, as specified in Section 164(2) of the Companies Act, 2013. Additional information pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges in respect of Directors seeking appointment/re-appointment is given in the AGM Notice. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declaration from all the Independent Directors of the Company confirming that they meet the criteria of independence, as prescribed under the Companies Act, 2013 and the Clause 49 of the Listing Agreement with Stock Exchanges. On the basis of such declarations, the Board is of the opinion that they fulfill the conditions of Independent Directors, as specified in the Companies Act, 2013 and the Listing Agreement and that they are also independent of the Management. PERFORMANCE EVALUAT ION Pursuanttothe provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has framed the criteriafor performance evaluation of Independent Directors, the Board, the Board Committees and other individual Directors. Criteria for performance evaluation of the Chairman & Managing Director and Executive Director have also been framed. The criteria for evaluation of Directors among others includes factors such as preparation, participation, engagement, personality and conduct, value addition, strategic planning and vision, team spirit and consensus building, leadership quality understanding and focus on key business issues, independent thinking and judgment, quality of analysis, experience and business wisdom, management qualities, awareness, motivation, integrity ethics and receptivity. On the basis of the criteria framed, a process of evaluation was followed by the Board for evaluation of individual Directors, its own performance and its Committees. The Nomination and Remuneration Committee also evaluated the performance of every individual Director. The Independent Directors in their separate Meeting also carried out the performance evaluation of the Chairman & Managing Director and non-independent Director as well as the Board of the Company. FAMILIARISATION PROGRAMMES The details of programmes to familiarise the Independent Directors with the Company their roles, rights, responsibilities in the Company nature of the industry in which the Company operates, business model/procedures/processes of the Company etc. through various programmes are put on the website of the Company and can be accessed at the link: www.kanoriachem.com/images/Familiarisation%20Programme.pdf NUMBER OF MEETINGS OF BOARD OF DIRECTORS During the Financial Year 2014-15, the Company held four Meetings of the Board of Directors; on 17th May 2014,25th July 2014,1 st November 2014 and 11 th February 2015. The details of the Meetings are provided in the Report on Corporate Governance. AUDIT COMMITTEE The Audit Committee of the Company comprises of Shri Amitav Kothari, Shri H. K. Khaitan and Prof. S. L. Rao, Independent Directors, and Shri R. V. Kanoria, Chairman & Managing Directorof the Company. Shri Amitav Kothari is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report. The Stakeholders Relationship Committee of the Company comprises of Shri H. K. Khaitan, Shri Amitav Kothari, both Independent Directors, and Shri T. D. Bahety, Wholetime Director of the Company. Shri H. K. Khaitan is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee of the Company comprises of Prof. S. L. Rao, Shri H. K. Khaitan, Shri Ravinder Nath and Shri G. Parthasarathy, Independent Directors, and Shri R. V. Kanoria, Chairman & Managing Director of the Company. Prof. S. L. Rao is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report. Pursuant to provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board of Directors of the Company based on the recommendation of the Nomination and Remuneration Committee, has formulated the Nomination and Remuneration Policy which contains the matters with regard to criteria for appointment of Directors and determining Directors independence and policy on remuneration for Directors, Senior Managerial Personnel and other employees, and the same may be accessed at the Company's website at the link: www.kanoriachem.com/images/Nomination%20and%20Remuneration%20Policy.pdf CORPORATE SOCIAL RESPONSIBILITY COMMITTEE The Corporate Social Responsibility Committee of the Company comprises of Shri T. D. Bahety Wholetime Director, as the Chairman and Shri R. V. Kanoria, Managing Director and Shri H. K. Khaitan, an Independent Director, as its Members. CORPORATE SOCIAL RESPONSIBILITY The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company which has been approved by the Board. The Company act as a good Corporate Citizen and as its philosophy always strives to adopt socially inclusive and sustainable way of doing business. The Corporate Social Responsibility Policy of the Company would enable it to continue to make responsible contribution towards society The CSR Policy may be accessed on the Company's website at the link: www.kanoriachem.com/images/CSR%20Policy.pdf Initially the Company has identified the following focus areas of engagement: - Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation. - Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently abled and livelihood enhancement projects. - Rural Development activities/projects. - Empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities forseniorcitizens. - Ensuring environmental sustainability and ecological balance. The Company may also undertake other need based initiatives in compliance with Schedule VII to the Companies Act, 2013. During the year, the Company spent Rs. 0.96 million, which is around 1.90 % of the average net profits of the last three financial years, on CSR activities. This being the first year of structured implementation of CSR initiatives, considerable time was spent on identifying appropriate activities and putting systems in place to ensure effective implementation of CSR initiatives. The Annual Report on the CSR activities is provided as Annexure to this Report. MANAGEMENT DISCUSSION AND ANALYSIS Management Discussion and Analysis is a part of Annual Report. SUBSIDIARIES On acquisition of the balance 10% stake by the Company during the year in its subsidiary APAG Holding AG, Switzerland ("APAG"), it has become a wholly owned subsidiary of the Company. APAG Elektronik AG, the wholly owned subsidiary of APAG Holding AG and APAG Elektroniks.ro, the wholly owned subsidiary of APAG Elektronik AG are the step down subsidiaries of the Company. Consequent to acquisition of 100% stake in Cosyst Control Systems GmbH, Germany by APAG Holding AG during the year 2015-16, it has also become the step down subsidiary of the Company. Pipri Limited is the other wholly owned subsidiary of the Company. The status of Kanoria Africa Textiles Pic, Ethiopia ("KATP"), has changed from the wholly owned subsidiary of the Company to a subsidiary of the Company on acquisition of shares in KATP by a private equity investor A report on the performance and financial position of the subsidiaries of the Company as per the Companies Act, 2013, is provided in Note no. 32 of the Consolidated Financial Statements hence not repeated forthe sake of brevity. The Policy for determining Material Subsidiaries as approved by the Board may be accessed on the Company's website at the link: www.kanoriachem.com/images/Policy%20for%20determining%20Material%20Subsidiaries.pdf PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED Details of loans given, investments made, guarantees given and securities provided as covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Note No. 39 of the Standalone Financial Statements. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on arm's length basis. None of the transactions with any of the related parties were in conflict with the Company's interest. The Company had not entered into any transaction with related parties during the year which could be considered material, in terms of materiality threshold forthe related party transactions. The Policy on Related Party Transactions as approved by the Board may be accessed on the Company's website at the link: www.kanoriachem.com/images/Policy%20on%20Related%20Party%20Transactions.pdf VIGIL MECHANISM The Company promotes ethical behaviour in all its business activities and has put in place a mechanism of reporting illegal or unethical behaviour. In compliance with the provisions of Section 177(9) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has framed a Whistle Blower Policy for its Directors and Employees to report concerns about unethical behaviour, actual or suspected fraud or violation of applicable laws and regulations and the Company's Codes of Conduct. The reportable matters may be reported to the Audit Committee through the Nodal Officer and, in exceptional cases, may also be reported to the Chairman of the Audit Committee. The confidentiality of those reporting violations is maintained and they are not subjected to any discriminatory practice. During the year under review, no employee was denied access to the Audit Committee. The Whistle Blower Policy may be accessed on the Company's website at the link: www.kanoriachem.com/images/Whistle%20Blower%20Policy.pdf CORPORATE GOVERNANCE The Company adheres to good governance practices. Corporate Governance at KCI extends to all stakeholders and is embodied in every business decision. The Company places prime importance on reliable financial information, integrity transparency empowerment and compliance with the law in letter and spirit. The Management certifies its adherence to the Listing Agreement with the Stock Exchanges. While Management Discussion and Analysis Report that is an annexure to the Directors' Report, appears in the Section titled Year in Review in the Annual Report, the Corporate Governance Report and the Certificate from the Auditors of the Company confirming compliance of the conditions of Corporate Governance are annexed hereto and form a part of the Directors' Report. There is a conscious effort to ensure that the values enshrined in the Codes of Conduct for the Directors and Senior Management Personnel and the Employees respectively are followed in true spirit across all levels of the Company. EXTRACTOFANNUAL RETURN The extract of Annual Return of the Company as on the financial yearended 31 st March 2015 is given in the Annexure to this Report. MUUI I U RSAN DA UDITORS'REPORT Messrs Singhi & Co., Chartered Accountants, Statutory Auditors of the Company have confirmed their eligibility for being ratified as the Auditors of the Company at the ensuing AGM of the Company. The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. COST AUDITORS The Board had approved the appointment of M/s N. D. Birla & Co., Cost Accountants, Ahmedabad, for conducting the audit of the cost records of Company forthe financial year 2014-15 relating to Organic/Inorganic Chemicals, Industrial Alcohol and Solar Power The Cost Audit Report of the Company forthe financial year 2013-14 has been filed with the Ministry of Corporate Affairs within the stipulated time. The Board had appointed Vinod Kothari & Co., Practising Company Secretaries, to conduct Secretarial Auditforthe financial year 2014-15. The Secretarial Audit Report for the financial year 2014-15 is provided as Annexure to this Report. The Report is self-explanatory and does not call for any further comments. RISK MANAGEMENT The Company's management systems, organizational structures, processes, codes of conduct together form the basis of risk management system that governs and manages associated risks.The Risk Management Committee of the Company assesses the significant risks that might impact the achievement of the Company's objectives and develops risk management strategies to mitigate/minimise identified risks and designs appropriate risk management procedures. CONSERVAT ION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO As required under Section 134 of the Companies Act, 2013 and the rules framed thereunder, the statement containing necessary information in respect of conservation of energy technology absorption, foreign exchange earnings and outgo is provided as Annexure to this Report. REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided in the Annexure to this Report. PARTICULARS OF EMPLOYEES As required under Section 197(12) of the Companies Act, 2013, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees concerned are provided in the Annexure to this Report. During the year, the Company was awarded the prestigious ET (Economic Times) Bengal Corporate Award, 2015 in the category of "Fastest Growing Company" with turnover between ? 300 Crore and ? 1,000 Crore. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 During the year under review, no case was filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. SAFETY AND ENVIRONMENT The Company is committed to sustainable development and a safe workplace. Its approach to environment management is guided by the principle of provision of safe working environment through continuous up-gradation of technologies, prevention of pollution and conservation of resources and recycling waste. As a result of its sustained compliance to Health, Safety Environment and Quality standards, the Company's Alco Chemical Divisions at Ankleshwar and Vizag are ISO 9001,14001 and OHSAS 18001 certified. The Company has a documented Health & Safety Policy that is displayed and communicated to all employees at plant locations. With the view to achieve a 'Zero Accidents' status, the Company has developed health and safety procedures as well as safety targets and objectives. The Company also lays thrust on renewable energy sources such as bio-power, wind power and solar energy. HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS The Company's human resource development is founded on a strong set of values. The policies seek to instil spirit of trust, transparency and dignity among all employees. The Company continues to provide ongoing training to its employees at different levels. Industrial relations with the employees and workers across all locations of the Company continued to be cordial during the year. DIRECTORS'RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(5) of the Companies Act, 2013: a. that in the preparation of the annual financial statements forthe year ended 31 st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any: b. that such accounting policies as mentioned in Note no. 1 of the Notes to the Standalone Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March, 2015 and of the profit of the Company for the year ended on that date: c. that proper and sufficient care has been taken 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: d. that the annual financial statements have been prepared on agoing concern basis: e. that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; and f. that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. GENERAL Your Directors state that no disclosure or reporting is required in respect of the following matters as there were no reportable transactions/details on these items during the year under review: 1. Issue of Equity Shares with differential rights as to dividend, voting or otherwise. 2. Issue of shares (including sweat equity shares) to employees of the Company under any scheme. 3. Neither the Managing Director nor the Whole-time Director of the Company receives Commission from any of its subsidiaries. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. ACKNOWLEDGEMENTS Your Directors acknowledge with gratitude the commitment and dedication of the employees for their untiring personal efforts as well as their collective contributions at all levels that have led to the growth and success of the Company. The Directors would like to thank other stakeholders including lenders and business associates who have continued to provide support and encouragement. For and on behalf of the Board R.V. Kanoria Chairman & Managing Director (DIN: 00003792) Dated, the 27th day of May 2015 Registered Office : 'Park Plaza1 71, Park Street Kolkata - 700 016 |