AFFLUENCE

34th ANNUAL REPORT OF THE BOARD OF DIRECTORS TO

THE MEMBERS OF THE COMPANY

1. Your Directors have pleasure in presenting to you their 34th Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March, 2016 and the Auditors' Report thereon.

2. DIVIDEND :

Your Directors recommend an increased dividend of Rs.10/- per share (i.e.) 100%. The same is in line with the financial strategy and policy of the company. This dividend if approved by you at the ensuing 34th Annual General Meeting will be paid to the Shareholders whose names appear in the Register of Members as on the date of said Meeting.

3. MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY AND BUSINESS OVERVIEW AND OPERATIONAL AND FINANCIAL PERFORMANCE:

Your Company sold 2668 Mln. Pcs. of Carbon Rod, as against 2303 Mln. Pcs., which is 116% of Sales of last year. The Domestic Sales Quantity and Value were 1079 Mln. Pcs. and Rs. 16.57 Crores respectively which works out to 99.72% and 100.66% of the Sales of last year. The decrease in Domestic Sales was on UM-1 and UM-3 Carbon Rods and increase on UM-4 when compared to last year.

The Export Sales Quantity and value were 1588Mln. Pcs. and Rs. 31.79 Crores respectively compared to last year's quantity of 1221Mln. Pcs. and Rs. 24.13 Crores which works out to 130% by quantity and 132% by value. As informed last year, your Company could stabilize the exports to Panasonic Group Battery Factories in Poland, Peru, Thailand, Indonesia, Brazil, Costa Rica and other African customers on regular basis. Though we could not get the orders from some of the African countries as planned due to political disturbances in those countries, we could get additional export orders from Panasonic group Companies.

During the year, though there is steep increase in electricity cost, the electricity consumption reduced by promoting energy conservation activities and by increasing the productivity. The fuel consumption in tunnel kiln reduced by 5% through usage of in-house made light weight bricks, modified and increased loading capacity refractory cars and stabilization of car loading pattern in tunnel kiln. The usage of alternate fuel in place of furnace oil for thermic fluid heaters resulted in significant reduction of fuel consumption cost. The increase in profitability for the current year is mainly due to additional orders from our Panasonic group companies, favorable furnace oil price, reduction of fuel and energy consumption, significant improvement in yield, productivity and the results of various cost reduction and control measures initiated.

OUTLOOK ON OPPORTUNITIES AND THREATS, RISKS AND CONCERNS:

The Company has increased the production capacity of R-6 and R-03 carbon rods by installing additional machineries to meet the increased demand in the Domestic and International Markets in the years to come.

Your Company is also hopeful in maintaining the Domestic Sales by maintaining the quality and timely supply. In the Export Front, the Company is depending on the Battery market trend of various countries. Based on the present indications, your Company is confident of maintaining the current year's levels of export quantities in the coming years and also initiating efforts for improving the same. The Directors assure that all steps are being taken by the Company to achieve growth in the coming years, in proportion to the growth of the Dry Battery Industry by giving due consideration to the adverse conditions, if any, in the Dry Battery Industry. There are no materially significant threats, risks or concerns to the Company.

4. SEGMENT-WISE PERFORMANCE:

The Company operates in only one Segment (i.e.) Carbon Rod as a component of Dry Cell Batteries.

By value, while Domestic Sales was 34%; Exports Sales was 66%.

5. FINANCIAL ARRANGEMENTS:

Your Company continues to be free from debts - both on Long Term and on Working Capital requirements. The surplus funds available with the Company are being invested with Banks in fixed deposits at regular intervals in line with the policy of the Company. This is reflected in increased deposits. Your Company had not accepted any Public Deposits under Chapter V of the Act.

6. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Directors had laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Audit Committee evaluates the internal financial control system periodically. A firm of experienced Chartered Accountants had carried Internal Audit throughout the year. Whenever it is required, the systems and procedures are upgraded.

7. HUMAN RESOURCES:

The relationship with Employees continues to be cordial. The Company always considers its human resources as its most valuable assets. Imparting adequate and specialized training to its employees is an on going exercise in the Company.

8. STATEMENT PURSUANT TO LISTING AGREEMENTS:

The Company's Securities are listed with BSE Ltd. The company confirms that it has paid the Annual Listing Fees to the said stock exchange for the financial year 2015-16 and there are no arrears.

9. TECHNOLOGY ABSORPTION, ENERGY CONSERVATION, FOREIGN EXCHANGE EARNINGS  AND OUTGO:

In compliance with section 134(3) (m) of the Act read with rule 8 of the companies (Accounts) Rules, 2014 the prescribed particulars of conservation of energy, foreign exchange and technology absorption including R&D have been attached as Annexure-1 to this report.

10. CODE OF CORPORATE GOVERNANCE:

Pursuant to the Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 a detailed report on Corporate Governance as updated with the particulars of this financial year, is annexed to this report as Annexure-2 together with Report of the Auditors on the compliance with the said Code.

11. EXPORT HOUSE STATUS:

The Company had obtained the Status of Export House Certificate from Government of India, Ministry of Commerce, Directorate General of Foreign Trade (DGFT) in recognition of good Export performance. The Company continues to enjoy the Export House Certificate status.

12. ENVIRONMENT:

Your Company has consistently emphasized and worked towards sustainable use of natural resources. In order to promote the Environment Awareness for everybody and everywhere with an objective to create awareness and boost the PCIN brand image on a global basis, your company had observed the June month as "Environment month" and organized the "ECO" relay event on 25th June, 2015 at the TADA Village where your factory is located. The Company had distributed T-Shirts and Caps with the slogan inscribed on ECO Activities to participants especially students from TADA School. The Company actively makes effort to increase awareness among the students about the global warming, waste reduce, reuse, recycle and energy saving tips to sustain the environment and environmental protection. The Company constantly evaluates the new initiatives that could reduce waste and emissions within the factories.

13. DIRECTORS:

Mr. Mitsutoshi Shigeta had resigned from the Board of your Company effective 1st January, 2016.

Mr. Kunal Jiwarajka had resigned from the Board of your Company effective 21st January, 2016.

The Board of Directors places on record their appreciation for the valuable contribution made by Mitsutoshi Shigeta and Kunal Jiwarajka for the growth of the Company during their tenure of Directorship.

Mr. Chiaki Kidani was appointed as an additional Director at the Board Meeting held on 12th February, 2016.

Mr. R. Senthil Kumar was re-appointed as Managing Director of the Company for a period of one year with effective from 22nd April, 2016.

Information about all the Directors proposed to be appointed/re-appointed is furnished in the Explanatory Statement under Section 102 of the Companies Act, 2013 under the heading "Information about the Directors proposed to be appointed/re-appointed" attached to the Notice of the ensuing Annual General Meeting for your consideration.

The Directors recommend that all the resolutions placed before the Members regarding the appointment of the Directors be approved.

14. MEETINGS OF THE BOARD:

Four meetings of the Board of Directors were held during the year. For details of the meetings of the Board, please refer to the Corporate Governance Report.

15. PERFORMANCE EVALUTION:

The Board evaluates the performance of Non­executive and Independent Directors every year. All the Non-executive and Independent Directors are eminent personalities having wide experience in the field of business, industry and administration. Their presence on the Board is advantageous and fruitful in taking business decisions.

16. REMUNERATION POLICY:

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and other employees.

The objective and broad framework of the Remuneration Policy is to consider and determine the remuneration, based on the fundamental principles of payment for performance, for potential, and for growth. The Remuneration Policy reflects on certain guiding principles of the Company such as aligning remuneration with the longer term interest of the Company and its shareholders. It also ensures the effective recognition of performance and encourages a focus on achieving superior operational results.

The Nomination and Remuneration Committee recommends the remuneration of execute Directors which is approved by the Board of Directors, subject to the approval of shareholders, whereever necessary. The level and composition of remuneration shall be reasonable and sufficient to attract, retain and motivate the directors, key managerial personnel and other employees of the quality required to run the Company successfully.

17. DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirements u/s 134(5) of the Companies Act, 2013 with respect to Directors' Responsibility Statement, your Directors confirm that they have:

1. followed in the preparation of financial Statements, the applicable Accounting Standards and given proper explanation relating to material departures , if any;

2. 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 Account of the Company for that period;

3. taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act so as to safeguard the Assets of the Company and to prevent and detect fraud and other irregularities;

4. prepared the Annual Accounts on a Going Concern basis;

5. laid down internal financial controls in the company and that are adequate and were operating effectively; and

6. devised proper systems to ensure compliance with the provisions of all

applicable laws and these are adequate and are operating effectively.

18. CORPORATE SOCIAL RESPONSIBILITY:

As part of its initiatives under "Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Education, Health Care, Drinking Water, Rural Development and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

With the applicability of Section 135 of the Act coming into force, the Company's initiatives towards Corporate Social Responsibility have been suitably focused. The brief outline of the CSR policy and the CSR initiatives undertaken by the Company during the financial year under review are provided in the Annual Report on Corporate Social Responsibility Activities 2015-16 forming part of this report as Annexure-3. The Policy adopted by the Company can be viewed at www.panasoniccarbo.co.in  

19. GREEN INITIATIVE:

During the year 2014-15, we started a sustainability initiative with the aim of going green and minimizing our impact on the environment. Like the previous year, this year too, we are publishing only the statutory disclosures in the print version of the Annual Report. Additional information is available on our website, www.panasoniccarbon.co.in

Electronic copies of the Annual Report 2015-16 and Notice of the 34th AGM are sent to all members whose email addresses are registered with the Company / Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 2015-16 and the Notice of the 34th

Annual General Meeting are sent in the permitted mode. Members requiring physical copies can send a request to the Company Secretary, M/s. Panasonic Carbon India Co. Limited.

The Company is providing evoting facility to all members to enable them to cast their votes electronically on all resolutions set forth in the Notice. This is pursuant to section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Rules, 2014. The instructions for evoting are provided in the Notice.

20. EXTRACT OF ANNUAL RETURN:

In compliance with section 134(3)(a) of the Act, an extract of the Annual Return in the prescribed format is appended to this report as Annexure-4.

21. SECRETARIAL AUDIT:

Pursuant to the provisions of Section 204 (1) of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. V. Nagarajan & Co, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed to this report as Annexure -5.

22. PARTICULARS OF EMPLOYEES:

The information required pursuant to section 197(12) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel), Rules, 2014 and Companies (Particulars of Employees), Rules 1975, in respect of employees of the company and Directors is furnished in Annexure-6.

23. DISCLOSURE UNDER THE SEXUAL HARASMENT OF WOMAN AT WORKPLACE (PREVENTION, PROHIBITION AND REDESSAL) ACT, 2013

The Company has in place an anti Sexual Harassment Policy in line with the requirement of the Prevention of Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

The Company has not received any complaint of sexual harassment during the year 2015-16 under review.

24. RELATED PARTY TRANSACTIONS:

All related party transactions that were entered in to by the company during the financial year were on an arm's length basis and in the ordinary course of business.

In compliance with the provisions of the Act and Regulation 23(2) of the SEBI Regulations, 2015 all related party transactions had been placed before the Audit Committee for prior approval. Pursuant to section 134(3) (h) of the Act read with Rule 8(2) of the Companies

(Accounts) Rules, 2014 information pertaining to related parties are given in Form AOC-2 as Annexure-7 of this report.

As per Regulation 34(3) of SEBI Regulation, 2015 the related party disclosure has been made part of this Annual Report.

As per requirements of Regulation 23(8) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (SEBI Regulation, 2015) all existing related party transactions which are considered as "Material" and entered into prior to the notification of the above regulation i.e. 2nd September, 2015 shall require approval of the shareholders in the first Annual General Meeting held subsequent to the notifications of these regulation.

As per the explanation to Regulation 23(1) a transaction with a related party shall be considered "Material" if the transaction(s) to be entered in to individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statement of the company.

The Company sells carbon rods to Battery manufacturers which are subsidiaries of parent company for the past so many years. All such transactions were on an arm's length basis and in the ordinary course of business.

Hence, resolution No.7 of the notice convening the Annual General Meeting is placed before the shareholders seeking their approval for the following related party transactions which are considered as "Material" and are existing as on 2nd September, 2015.

As per requirements of Regulation 23(4) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (SEBI Regulation, 2015) all prospective related party transactions which are considered as "Material" shall require approval of the shareholders.

Hence, it is proposed to secure shareholders approval on resolution No.8 of the notice convening the Annual General Meeting for approving the prospective material related party transactions for the period commencing from 1st April, 2016 upto the end of the financial year 2016-17 and each subsequent financial year till the termination of the said arrangement or any modification in the terms thereof.

25. WHISTLE BLOWER POLICY/VIGIL MECHANISIM

In compliance with provisions of Section 177 of the Act, the Board of Directors of the Company has adopted a Vigil Mechanism which comprises Whistle Blower Policy for Directors, employees and vendors of the Company. The Whistle Blower policy enables the Directors, employees and vendors to report concerns about unethical, actual or suspected fraud or violation of Company's code of conduct or ethics policy, thereby ensuring that the activities of the Company are conducted in a fair and transparent manner. The said policy is available at the Company's website at www.panasoniccarbon.co.in.

We further affirm that no employee has been denied access to the audit committee during year 2015-16.

26. STATUTORY AUDITORS:

The Statutory Auditors of the Company, M/s.Brahmayya & Co. (Firm Registration No. 000511S), Chartered Accountants, Chennai, retire at the ensuing Annual General Meeting of the Company. As per section 139 of the Companies Act, 2013 and rules made thereunder it is proposed to appoint M/s. Brahmayya & Co., Chartered Accountants, as the Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting to till the conclusion of the next Annual General Meeting of the Company.

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Act and that the appointment, if made, shall be in accordance with the applicable provisions of the Act and rules framed thereunder.

The re-appointment proposed is within the time frame for transition under the third proviso to sub-section (2) of Section 139 of the Companies Act, 2013.

The Report given by the Auditors on the financial statement of the Company is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report.

27. COST AUDITORS:

In terms of Section 148 of the Companies Act, 2013 read with Companies (Cost records and audits) Rules, 2014, as amended, Carbon Rod products manufactured by the Company and falling under the specified Central Excise Tariff Act heading, are not covered under the ambit of mandatory cost audit from the financial years commencing on or after 1st April, 2015.

28. INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each Independent Director of the Company under Section 149 (7) of the Companies Act, 2013 confirming that they meet with the criteria of Independence laid down in Section 149(6).

Whenever new Non-executive and Independent Directors are inducted in the Board they are introduced to our Company's culture through appropriate orientation session and they are also introduced to our organization structure, our business, constitution, board procedures, our major risks and management strategy. The appointment letters of Independent Directors has been placed on the Company's website.

The Independent Directors of the Company had met during the year on 12th February, 2016 to review the performance of non- Independent Directors, Chairperson of the Company and the Board as a whole. They had assessed the quality, quantity and timeliness of flow of information between the company management and the Board.

29. RISK MANAGEMENT :

The Board of Directors had constituted Risk Management Committee to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks. The Committee on timely basis informed members of Board of Directors about risk assessment and minimization procedures and in the opinion of the Committee there was no risk that may threaten the existence of the Company. The details of Risk Management Committee are included in the Corporate Governance Report.

30. DIRECTORS AND KEY MANANGERIAL PERSONNEL :

Pursuant to the provisions of section 203 of the Act Mr. R. Senthil Kumar, Managing Director & CEO, Mr. P. Venkateswara Rao, Chief Financial Officer and Mr. R. Manoranjan, Company Secretary of the Company are the Key Managerial Personnel (KMP) of the Company as on date of this report. The remuneration and other details of KMP for the FY 2015-16 are provided in Extract of the Annual Return which forms part of this Directors' report.

31. OTHER DISCLOSURES

No material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

There was no change in the nature of business during FY 2015-16.

The Company does not have any subsidiary, joint ventures or associates.

No significant material orders were passed by the regulators or court during the financial year which would have impacted the going concern status of the Company's operation in the future.

32. ACKNOWLEDGEMENT:

Your Directors wish to record their sincere appreciation for the support, co-operation, guidance and assistance provided by the Foreign Collaborators, M/s. Panasonic Corporation, Japan. Your Directors thank the valued Customers for their patronage, the Suppliers for their timely and quality supply, the Shareholders for the confidence reposed and the Bankers, State and Central Governments for extending their invaluable support.

Your Directors place on record their appreciation of the dedicated services of the employees of the Company at all levels for the growth of the Company.

Your Directors are especially thankful to the esteemed Shareholders for their continued encouragement and support.

By Order of the Board of Directors

For Panasonic Caron India Co. Limited

V.R. GUPTE DIRECTOR

R. SENTHIL KUMAR MANAGING DIRECTOR

Place : Chennai

Date: 25th May, 2016