DIRECTORS' REPORT TO THE MEMBERS Your Directors hereby present their Thirty Sixth Report along with the Audited Annual Financial Statements (including Audited Consolidated Financial Statements) of the Company for the Financial Year ended March 31, 2016. 2. DIVIDEND Your Directors are pleased to recommend Final Dividend of 55% on 10296062 Equity Shares (Rs.5.5 per share of Rs.10 each). The Dividend will absorb Rs. 6,81.57 Lakhs (Inclusive of Dividend Tax of Rs.1,15.28 Lakhs). With this, the total dividend for the year including interim dividend of 30% comes to 85%. 3. OPERATIONS Insoluble Sculpture Margins during the year improved over previous year resulting in better EBIDTA even though Net Sales during the year was lower due to correction in realization on account of lower input cost and downward trend in Euro: exchange rate. Export demand did not pick up as expected due to weak economic conditions globally resulting in lower than expected off take. However, Domestic Demand registered a double digit growth as expected. Sulphuric Acid &Oleum Sulphuric Acid and Oleum sales and production registered 12% growth over previous year due to better market conditions. Steam produced as a by product was supplied to Insoluble Sulphur Plants resulting in fuel savings. Realisation remained stable during the year. FUTURE PROSPECTS Insoluble Sulphur The international market demand growth rate is expected to be about 2-3% whereas the Domestic growth rate is expected to be in double digits. During the year under review, the international growth was muted due to slow down in big markets like Europe and China. China witnessed a muted growth as USA imposed anti-dumping duty on Chinese tyres and also due to its internal economic factors. However, the long term growth rate continues to be viable. Your Company's Geographical footprint is wide and encompasses all continents with presence now in North America and China as well, which are the biggest market for Insoluble Sulphur. This mitigates Geo-political risks of the business and should ensure that long term growth rates are achievable The first phase of capacity expansion of Insoluble Sulphur at its Mundra Plant is expected to be commissioned on scheduled in April 2017. The Company is confident of tying up the additional quantities in American and Chinese Market, where the Company has begun to establish its presence. Sulphuric Acid &Oleum The demand for Sulphuric Acid is expected to be good this year because of expected good Monsoon resulting in good production of fertilisers. 4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has in place an established internal control system including internal financial Controls designed to ensure proper recording of financial and operational information, compliance of various internal controls and other regulatory and statutory compliances. Self certification exercise is also conducted by which senior management certifies effectiveness of the internal control system of the Company. Internal Audit is conducted throughout the organization by qualified outside Internal Auditors. Findings of the internal Audit Report are reviewed by the top Management and by the Audit Committee of the Board and proper follow up action are ensured wherever required. The Statutory Auditors have evaluated the system of internal controls including internal financial control of the Company and have reported that the same are adequate and commensurate with the size of the Company and nature of its business. 5. CHANGE IN THE NATURE OF BUSINESS There was no change in the nature of the business of the Company during the year. The Company has only one subsidiary, namely Schrader Duncan Limited (SDL) and there was no change in the nature of the business of this Subsidiary. There were no significant and material orders passed by regulators or courts or tribunals impacting the going concern status and Company's operations in future. There were no material changes and commitments affecting the financial position of the Company occurring between March 31, 2016 and the date of this report. The Equity Shares of the Company get listed with National Stock Exchange of India and admitted to dealing in the said Exchange w.e.f. January 27, 2016. 6. RESEARCH & DEVELOPMENT Research & Development is fundamental to the Company's efforts to maintain the technical and quality edge for the product. A full in-house Research & Development team works on continuous basis to improve the quality of product and its properties. New Grades are also being developed to meet customers varied requirements. Research in the areas of reducing utility cost and process parameters improvement is also being done. Help of accredited independent laboratories is also taken as and when required for studying and evolving critical parameters. The Company's Research and Development facility is approved by Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. The R&D lab regularly augmented by acquiring state of the art analytical and process equipments to help in faster and detailed analysis. Further, pilot plants, as required, are being set up to validate the research findings. The details of some specific R&D activities carried out and benefits derived out of them have been annexed to this report. 7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO As required under Section 134(3) (m) of the Companies Act, 2013 read with Rule8 (3) of the Companies (Accounts) Rules, 2014, the information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo is annexed to this Report. 8. POLLUTION CONTROL Your Company's Plant has all the requisite Pollution Control Equipments and meets all the desired and statutory norms in this regard. The Insoluble Sulphur Units of the Company enjoys ISO-TS 16949:2009, EMS14001-2004 and OHSAS18001:2007 Certification. 9. STATUTORY AUDITORS AND AUDIT REPORT Messrs Singhi & Co., Chartered Accountants, were appointed as Auditors of the Company for tenure of three years i.e. from the conclusion of 34th Annual General Meeting till the conclusion of the 37thAnnual General Meeting of the Company. However, this appointment is subject to ratification by Members at every Annual General Meeting held after appointment during their tenure of office.The Auditors have confirmed their eligibility and qualification under Section 141 of Companies Act, 2013 and therefore, their ratification for appointment as Statutory Auditors for the year 201617 is being sought from the Members of the Company at the ensuing AGM. As regards the comments in the Auditors' Report, if any, the relevant notes in the Accounts are self explanatory and may be treated as information/ explanation submitted by the Board as contemplated under provisions of the Companies Act, 2013. 10. SECRETARIAL AUDIT In compliance with the provisions of Sec 204 and other applicable provisions of Companies Act 2013, a Secretarial Audit was conducted during the year by Secretarial Auditors M/s. S.Rath & Company. The Secretarial Auditor's Report is attached as annexure and form part of this report. There are no qualifications or observations or remarks made by the Secretarial Auditors in their Audit Report. The Company recognizes that an effective practice of CSR is required giving due consideration to the welfare of the community, environment and social structure that it operates in and that of the country including focus welfare areas identified by the Sate and Central Governments.The CSR Committee of the Company has laid down the policy to meet the Corporate Social Responsibility objectives of the Company. The CSR Policy includes any activity that may be prescribed as CSR activity as per the Rules of Companies Act, 2013.The main Focus areas taken in the policy are Education, Health care and family welfare, Environmental Safety, contribution to any relief fund setup by the Government of India and any State Government. Rs.103 Lakhs was spent on CSR activities and projects undertaken during the year the details of which is given in the annexure to this Reports. The detailed CSR policy of the Company is available on the website of the Company which is www.occlindia.com 17. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee has Mr. O.P Dubey as Chairman, Mr. B .B Tandon and Mr. K Raghuraman as members. The detail of terms of reference of this Committee, number and dates of meetings held attendance of the directors and remunerations paid to them and the brief outline of the Remuneration policy of the Company are given separately in the attached Corporate Governance Report. The approved Remuneration Policy of the company is also available on the website of the Company which is www. occlindia.com 18. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other Committees. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report. The Independent Directors are regularly updated on industry & market trends, plant process, and operational performance of the Company etc through presentations in this regard and periodic plant visits. They are also periodically kept aware of the latest developments in the Corporate Governance, their duties as Directors and relevant laws. 19. DIRECTORS Mr. H S Shashikumar retires by rotation at the forth coming Annual General Meeting and, being eligible, offer himself for appointment. Mr. O. P. Dubey, Mr. B. B. Tandon, Mr. S J Khaitan, Mr. K. Raghuraman, Mrs. Runa Mukherjee are Independent Directors of the Board of the Company. The Company has received declarations 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. 20. PARTICULARS OF EMPLOYEES AND KEY MANAGERIAL PERSONNEL (KMP) The following four persons are the Key Managerial Personnel of the Company as per the provisions of Sec 203 of the Companies Act, 2013. a) Mr. Arvind Goenka, Managing Director b) Mr. Akshat Goenka, Jt. Managing Director c) Mr. Anurag Jain, Chief Financial Officer d) Mr. Pranab Maity, Company Secretary Pursuant to Sec 134(3) (q) read with Rule 5 of Companies (appointment and Remuneration of Managerial Personnel) Rules 2014, The Remuneration and other details of Key Managerial Personnel and other Employees for the year ended March 2016 are annexed to this report. 21. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 22. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on arms' 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 Company at large. All related party transactions are placed before the Audit Committee and given in the notes annexed to and forming part of this Financial Statement. The approved policy on Related Party Transactions is also available on the website of the Company www.occlindia.com 23. SUBSIDIARY The Company has only one Subsidiary, namely Schrader Duncan Limited (SDL). A statement containing financial details of the Subsidiary is included in the Annual Report. In accordance with the provisions of Section 129(3) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Consolidated Financial Statements prepared by the Company in this Report include the financial results of the Subsidiary company duly audited by the Statutory Auditors. The said statements have been prepared in accordance with the relevant accounting standards as prescribed under the Companies Act, 2013. The Company does not have any material subsidiary in the immediately preceding accounting year. However, as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI has made it mandatory for all listed companies to formulate a policy for determining 'material' subsidiaries. Accordingly, a policy on 'material' subsidiaries was formulated by the Audit Committee of the Board of Directors and same is also posted on the website of the Company and may be accessed at the link <http://www.occlindia.com/policies.htm> 24. VIGIL MACHANISM POLICY The Company has a Vigil Mechanism Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism Policy is explained in the Corporate Governance Report and also posted on the website of the Company. 25. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in Form MGT 9 is annexed to this report. 26. RISK MANAGEMENT As a policy The Company has identified key risk concern/areas. The assessment of each risk area is done on quarterly basis. Following are the main concern/risk related to the Company: Market Related Risk: mainly demand, realisation and redundancy of the product. Production related Risk mainly availability of inputs, accident or break down in the plant and rejection of material by the customers. Human Resources Risk: includes the risk of labour unrest, high employee turnover ratio and lower productivity due to dissatisfaction of employees. Revenue Risk: adverse exchange rate movement.Govt Policies and duty rates Data and Records: data lost, fire Virus attack etc. The Board and the Audit Committee takes note of Risk management of the Company in every quarter. The Risk Assessment is also discussed in the Management Discussion and Analysis attached to this report. 27. NUMBER OF MEETINGS OF THE BOARD During the year four 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. 28. CORPORATE GOVERNANCE a) As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion & Analysis, a Report on Corporate Governance together with the Auditors' certificate regarding the Compliance of conditions of Corporate Governance forms part of the Annual Report. b) The Board of Directors of the Company has laid down a comprehensive Code of Conduct for all its Board members and senior management personnel which have also been posted on the website of the Company. A certificate by the Managing Director regarding compliance of the code of conduct of the Company is also included in the Annual report. 29. ACKNOWLEDGMENTS The Board places on record its appreciation of the support and assistance of various Banks, Government Agencies, Suppliers, valued Customers and the Shareholders in particular and looks forward to their continued support. Relations between your Company and its employees remain cordial and the Directors wish to express their appreciation for the co-operation and dedication of all employees of the Company. By Order of the Board Arvind Goenka Managing Chairman O.P. Dubey Director Date : 30th May, 2016 Place : New Delhi |