Report of the Directors & Management Discussion and Analysis Report Your Directors have pleasure in presenting the Annual Report for the year ended 31st December 2015. ECONOMIC ENVIRONMENT The Global economy growth in 2015 had not been as good as was expected. Even though growth was noticed in United States and United Kingdom, Euro Area and Japan lagged behind. China is on a path of gradual deceleration. Amongst all these, India with GDP growth of 7.4% in the July-September quarter went ahead of China where growth was 6.9% for the corresponding period, firmly cementing its position as the world's fastest growing major economy in 2015. The growth of Indian economy has to be seen in the backdrop of negative export growth during the year due to stagnation in global economic growth and another bad monsoon. The GDP growth in 2015 was mainly fuelled by falling crude prices which was the lowest in the decade and also other commodity prices. This helped check the balance of payment from going awry. This was because crude is one of the largest import baskets and the lower price helped raise the economy. The low crude prices helped improving corporate performances overall and your Company, with petro based products being one of the major inputs, was no exception and accordingly reaped the benefit of the price drop. However, the devaluation of the Chinese yuan contributed to the fall in Indian rupee which to some extent set off the benefit achieved from lower crude price. As inflation eased, the Reserve Bank of India (RBI) cut interest rates four times this year to reduce the cost of borrowing and help stimulate growth. Amongst major factors which is considered to revolutionize the Indian business scenario, expectations remains high that key reforms, in particular a long-delayed goods and services tax (GST) bill would be passed shortly. India's GDP growth is expected to be stable at 7.5% in 2016-17 as it is more dependent on its inherent strength and is less exposed to external factors, including slowdown in China and global capital flows. PERFORMANCE REVIEW Your Company recorded a turnover of Rs.7460.62 million as against Rs.7186.95 million in the previous year registering an increase of 5 % in terms of value as well as volume. Coupled with a fall in input prices and adopting various strategies, the Company went from a Loss (before tax) of Rs.392.23 million in the previous year to profit before tax of Rs 402.97 million. Similarly, profit after tax was Rs 297.12 million as against a negative profit after tax of Rs.308.90 million. The Company operates in two segments - printing inks and lamination adhesives. While the Company registered an increase of 2.68% in the turnover of printing inks at Rs 6933.26 million (previous year Rs 6752.14 million), it registered an increase of 19.64% in the turnover of lamination adhesives which increased from Rs 469.85 million in the previous year to Rs 562.14 million during the year under review. The profit from the ink segment and lamination adhesives were Rs 536.86 million (previous year loss of Rs 211.12 million) and Rs 27.59 million (previous year loss of Rs 11.79 million) respectively. The Board in its meeting held on 23rd March 2015 had appointed Mr. Shailendra Hari Singh as the Managing Director and CEO with effect from 23rd March 2015 for the period of five years. To ensure that the Company is able to maintain its profitability, your management has taken several steps like cost effectiveness, rationalization of expenditures, improving operational efficiencies and induction of new technology. The Management expects that the Company would be able to repeat its performances in the future also. OPPORTUNITIES, THREATS, RISKS AND CONCERNS Your company actively seeks out opportunities available in the market and works on converting the opportunities into viable market. The primary threat comes from the fact that the opportunities are equally visible to your Company's competitors who are also trying to exploit the opportunity to their benefit. A combination of product innovations, consistent quality delivery and continuous enhancement of capability and efficiency of distribution pipeline will help your Company address the threat. The growth of the Company is linked to the overall economic growth. Primary risk to the business will be on account of adverse changes to the economy. Volatility in raw material prices like crude, resin etc is a concern. The Management monitors raw material demand and supply, prices and acts pro-actively to minimize the risk. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT 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. CHANGES IN THE NATURE OF BUSINESS There has been no change in the nature of business of the Company during the financial year ended 31st December 2015. OUTLOOK The printing ink industry comprise of publication and commercial, packaging and others. Amongst them, the packaging application segment is the main growth driver in the printing ink industry led by growth in demand for flexible packaging and other packaging materials in various industries. As per surveys, the global printing inks market is poised to sustain a healthy compounded annual growth rate (CAGR) of 5.0% from 2014 through 2020. India being amongst the fastest growing economy is no exception and would replicate the growth. TRANSFER TO RESERVES The Company proposes to transfer a sum of Rs. 1,000,000 to Reserve during the financial year ended 31st December 2015. DIVIDEND Your Board recommends the rate of dividend declared to be Rs 4.00 per share (FY2014 Rs.Nil per share), subject to approval of shareholders at the ensuing Annual General Meeting. CHANGE IN SHARE CAPITAL The paid up share capital of the Company as on 31st December 2015 was Rs 91.98 million and there has been no change in the capital structure of the Company. PUBLIC DEPOSITS The Company has not accepted any deposits during the year under review. BOARD MEETINGS The Board evaluates all the decisions on a collective consensus basis amongst the Directors. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. During the financial year ended 31st December 2015, 8 (eight) Meetings of the Board of Directors of the Company were held. The details of the Board Meetings held during the F.Y. 2015 have been furnished under Clause I(2)(D) in the Corporate Governance Report forming a part of this Annual Report. DECLARATION BY INDEPENDENT DIRECTORS All the Independent Directors have given declaration to the Company stating their independence pursuant to Section 149(6) of the Companies Act, 2013 and the same have been placed and noted by the Board in its meeting held on 4th February 2015. REMUNERATION POLICY A Nomination and Remuneration Policy has been formulated pursuant to the provisions of Section 178 and other applicable provisions of the Companies Act, 2013 and Rules thereto stating therein the Companies policy on Directors' appointment and remuneration by the Nomination and Remuneration Committee and approved by the Board of Directors at its meeting held on 5th December 2014. The said policy may be referred to, at the Company's official website at the weblink, http://www.dicindialtd.co/corpgov- nrp.html. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has not given any loan, guarantees or made any investments exceeding sixty per cent of its paid-up share capital, free reserves and securities premium account or one hundred per cent of its free reserves and securities premium account, whichever is more, as prescribed in Section 186 of the Companies Act, 2013. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES A Related Party Policy has been devised by the Board of Directors at its meeting held on 5th December 2014 for determining the materiality of transactions with related parties and dealings with them. The said policy may be referred to, at the Company's official website at the weblink, http://www.dicindialtd.co/corp-gov-rptp.html. The Audit Committee reviews all related party transactions quarterly. Further the members may note that the Company has not entered into the following kinds of related party transactions: – Contracts/arrangement/transactions which are not at arm's length basis – Any Material contracts/arrangement/transactions EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 forms part of this report and is annexed herewith and marked as Annexure C. ANNUAL EVALUATION OF BOARD'S PERFORMANCE According to Regulation of 25(3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a meeting of the Independent Directors is required to be held to evaluate the performance of the Non-Independent Directors. Accordingly, a meeting of Independent Directors was held on 4th August 2015 wherein the performance of the non-independent directors, including the Chairman was evaluated. The Nomination and Remuneration Committee at its meeting held on 4th February 2015 established the relevant criteria. Based on the said criteria, the Board at its meeting held on 5th February 2016 critically adjudged the performance of the Independent Directors. CAPITAL EXPENDITURE Capital Expenditure during the year, towards tangible & intangible assets, amounted to Rs. 56.77 million, a major part of which was spent on building and plant & machinery. ENERGY, TECHNOLOGY & FOREIGN EXCHANGE As required under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the information relating to Conservation of Energy, Technology Absorption and Foreign Exchange earnings & outgo is annexed and forms a part of this Report. SUBSIDIARY/ASSOCIATES/JOINT VENTURE COMPANIES The Company does not have any subsidiary/associate/joint venture company for the year ended 31st December 2015. HUMAN RESOURCES Your Company believes that the competence and commitment of the people are the principle drivers of competitive advantage that enable the enterprise to create and deliver value. The industrial relations climate of your Company continues to remain harmonious with focus on improving productivity, quality and safety. Efforts are being made to strengthen organizational culture in order to attract and retain the best talent in the industry. Training needs are identified in a systematic manner and regular training programmes are organised, both in-house and external where employees are nominated to participate. The Board records its appreciation of the commitment and support of the employees and looks forward to their continued support. As on 31st December 2015, the Company had 846 employees (including contractual and third party) on its pay roll. Information in accordance with the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, forms part of this Report marked as Annexure B. As per the provisions of Section 136(1) of the Companies Act, 2013, the Annual report excluding the information on employee's particulars is being sent to the members which is, however, available for inspection at the Registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee and free of cost. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT 2013 No complaint has been brought to the notice of the Management during the year ended 31st December 2015. WEBSITE OF THE COMPANY The Company maintains a website www.dicindialtd.co where detailed information of the Company and its products are provided. WHISTLE BLOWER MECHANISM The Company has a Whistle Blower Policy in place for vigil mechanism. The said policy has been amended keeping in view of the amendments in the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The said policy may be referred to, at the Company's official website at the weblink, http://www.dicindialtd.co/investers-wbp.html. INTERNAL CONTROL SYSTEMS Your Company has an adequate system of internal control procedures which is commensurate with the size and nature of business. Detailed procedural manuals are in place to ensure that all the assets are safeguarded, protected against loss and all transactions are authorized, recorded and reported correctly. The internal control systems of the Company are monitored and evaluated by internal auditors and their audit reports are periodically reviewed by the Audit Committee of the Board of Directors. The observations and comments of the Audit Committee are placed before the Board. LISTING WITH STOCK EXCHANGES Your Company is listed with The Calcutta Stock Exchange Limited, BSE Limited and National Stock Exchange of India Limited and the Company has paid the listing fees to each of the Exchanges. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There were no significant material orders passed by the Regulators / Courts / Tribunals which would impact the going concern status of the Company and its future operations. AUDIT COMMITTEE The composition and terms of reference of the Audit Committee has been furnished under Clause I(3) in the Corporate Governance Report forming a part of this Annual Report. There had been no instances where the Board has not accepted the recommendations of the Audit Committee. CORPORATE SOCIAL RESPONSIBILITY (CSR) The said policy may be referred to, at the Company's official website at the weblink, http://www.dicindialtd.co/corpgov- csr.html. As the members would be aware, the company had a loss of Rs 392.23 million during the year ended 31st December 2014 and as such, in view of the loss, the Management decided not to engage in CSR activity till the position of the Company was consolidated. Accordingly, no expenditure was incurred on the CSR front for the year ended on 31st December 2015. For the financial year ended 31st December 2015, the Company has a profit after tax of Rs. 402.97 million. Pursuant to the provisions of Sec 135 of the Companies Act, 2013 and applicable Rules, the Company has a corpus of Rs 2.85 million in its CSR funds to be expended towards fulfilling its responsibility towards the society. The Management of the Company held detailed discussion internally and it was decided that the company at present did not have the infrastructure to implement and regulate CSR activities on its own. Considering the same, detailed discussions were held with various eligible NGO's registered with the governing body, Indian Institute of Corporate Affairs, for exploring the best avenue open to the Company. Your management is pleased to inform that the Company has decided to focus on child education as its core CSR activity and has accordingly executed MOU with Child Relief and You (CRY) to fund its Vikramshila Project in Monteswar block of Burdwan district in West Bengal which is expected to collectively benefit approx 5000 students between the age of 0-18 years who due to various reasons like lack of infrastructure, have no access to proper education. To ensure accountability, CRY will be asked to define "collective benefits" and payment will be phased in tune with the time frame, activities and measurable outcomes and timely reporting with indicators of achievement. The CSR Report is attached marked as Annexure A. The Company wishes to inform the members that it is well aware of its responsibility towards fulfilling its social responsibility. The Company would take necessary action over the next two years to fulfill its CSR obligations. CORPORATE GOVERNANCE Your Company attaches considerable significance to good Corporate Governance as an important step towards building investor confidence, improving investors' protection and maximizing long-term shareholders value. The certificate of the Auditors, M/s Lovelock & Lewes, confirming compliance of conditions of Corporate Governance as stipulated under Schedule V(E) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 of the Stock Exchanges is annexed. SAFETY AND ENVIRONMENT Highest priority is accorded to environment, occupational health and safety by your Company. Your Company's factories at Kolkata, Noida and Ahmedabad are all ISO certified by BVQI. Kolkata and Noida plant are ISO 9001:2008, ISO 14001:2004 and BS OHSAS 18001:2007 certified while Ahmedabad plant is ISO 9001:2008 certified. Your Directors, through the Company's Safety, Health and Environment Department, oversee and review the integrated Environment, Occupational Health and Safety Audits which ensure comprehensive coverage of all Company locations. Various proactive measures have been adopted and implemented which inter-alia include adoption of cleaner technology, conservation of resources through waste reduction, recycling and reuse of waste materials and ongoing training of employees. Your Company's focus on sustainable development will continue to be reinforced by improving standards of safety and environmental protection and further strengthened by the association with DIC Corporation, Japan which accords vital importance to these aspects. INFORMATION SYSTEM In a business where information is critical, Information Technology plays a vital role, facilitating informed decision making to grow the business. Over the years, the Company has invested extensively in infrastructure, people and processes with the objective to capture, protect and transmit information with speed and accuracy. To align with the DIC Group requirement, the Company has installed SAP ERP suite for a reliable, high end, comprehensive, disciplined and integrated business solution. DIRECTORS Pursuant to the recommendation of the Nomination & Remuneration Committee who in its meeting held on 4th February 2015 had recommended the same, the Board in its meeting held on 23rd March 2015 had appointed Mr Shailendra Hari Singh as the Managing Director & CEO of the Company with effect from 23rd March 2015 for a period of 5 years. Mr. Shailendra Hari Singh, born on 12th May 1964, graduated from Institute of Chemical Technology (formerly University Department of Chemical Technology, Mumbai) in 1985. He has around 30 years of experience in the chemical industry. Prior to his appointment in DIC India Ltd., Mr Singh was the Asia Pacific Coatings Industry Manager of Eastman Chemical Company based in Singapore where he was responsible for integrating & aligning marketing, sales & technology functions, defining key growth platforms and executing business strategy by defining key milestones, organisation development & resource requirement. In the present leadership role, Mr. Shailendra Hari Singh is responsible for leading the development and execution of the Group and Company's long term strategy and continuously generating and growing shareholder's value through sound business strategies and drive strong business growth. The members through Postal Ballot, results of which was declared on 26th June 2015, has approved the appointment of Mr Shailendra Hari Singh as the Managing Director & Chief Executive Officer. In terms of Articles of Association of the Company, Dr. P K Dutt retire from the Board by rotation and being eligible, offer himself for re-appointment. The appointment of Dr. Dutt form part of the Notice of Annual General Meeting and the Resolutions are recommended for your approval. The profile of Dr Dutt is given in the Notice of the Annual General Meeting. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(5) of the Act, the Directors state that: i. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any; ii. The Directors had 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 of the company for that period; iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. The Directors had prepared the annual accounts on a going concern basis; and v. The Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. COST AUDIT In accordance with the provisions of Section 148 of the Companies Act, 2013 and the Companies (Audit & Auditors) Rules, 2014, the Company is required to appoint a cost auditor to audit the cost records of the applicable products of the Company relating to the business of manufacturing printing inks. Accordingly, M/s. Sinha Chaudhuri & Associates, Cost Accountants (Firm regn No. 000057) were appointed as the Cost Auditors for auditing the Company's cost accounts for the year ended 31st December 2016. STATUTORY AUDITORS Messrs Lovelock & Lewes, Chartered Accountants (FRN 301056E), retiring Auditors, being eligible, offer themselves for re-appointment. STATUTORY AUDITORS' OBSERVATIONS The notes on financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report is a Un-modified report and does not contain any qualification, reservation, adverse remark or disclaimer. SECRETARIAL AUDITOR The provisions of Section 204 read with Section 134(3) of the Companies Act, 2013 mandates Secretarial Audit of the Company to be done from the financial year commencing on or after 1st April 2014 by a Company Secretary in Practice. The Board in its meeting held on 5th February 2016 ratified the appointment of Mr. Tarun Chatterjee, Practising Company Secretary (Certificate of Practice No. 6935) as the Secretarial Auditor for the financial year ending 31st December 2015. The Secretarial Auditors' Report for the financial year ending 31st December 2015 is annexed to the Boards' Report. TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND The Company has transferred a total sum of Rs.0.14 million during the financial year 2015 to the Investor Education & Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. RESEARCH & DEVELOPMENT The Company has obtained approval for In-house R&D facilities u/s 35(2AB) of Income Tax Act, 1961 for its units at Kolkata, Bengaluru and Noida from Government of India, Ministry of Science and Technology, New Delhi. This approval is valid till 31st March 2018. The Company will make suitable applications for renewal of approval for the above facilities in due course. RISKS & MITIGATING STEPS The Company has identified various risks faced by the Company from different areas. As required under Regulation 17 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has adopted a risk management policy whereby a proper framework is set up. Appropriate structures are present so that risks are inherently monitored and controlled. A combination of policies and procedures attempts to counter risk as and when they evolve. The Company has also formed a Risk management Committee which monitors the various functions and regions to establish any risk existing in the operational functions of the Company. The constitution and terms of reference are set out in details in the Corporate Governance Report. The risks and its mitigating factors are discussed by the Committee and subsequently placed before the Board for their opinion and advice. The current risk management report was discussed by the Board in its meeting held on 11th December 2015. ACKNOWLEDGEMENT Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business partners/associates, financial institutions, Reserve Bank of India, Securities and Exchange Board of India and Central and State Governments for their consistent support and encouragement to the Company. I am sure you will join our Directors in conveying our sincere appreciation to all employees of the Company and Associates for their hard work and commitment. Their dedication and competence has ensured that the Company continues to be a significant and leading player in the printing ink industry. On behalf of the Board Dr. Prabir Kumar Dutt Chairman Shailendra Hari Singh Managing Director & CEO Place: Kolkata Date: 5th February 2016 Cautionary Statement: Statement in the Directors' Report and Management Discussion & Analysis Report describing the Company's expectations may be forward-looking within the meaning of applicable securities laws & regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operation include global and domestic demands and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their costs, changes in government policies and tax laws, economic development of the country and such other factors which are material to the business of the Company. |