DIRECTORS' REPORT Dear Members Your Directors have pleasure in presenting the Thirty - third Annual Report of the Company together with the Audited Statement of Accounts for the Financial Year ended March 31, 2015. OPERATIONAL PERFORMANCE • Revenue from operations on a standalone basis increases by 23% to Rs. 72,981.94 lakhs. • Earnings before Interest, Depreciation, Tax & Amortization on a standalone basis decreased by 4% to Rs. 2,748.12 lakhs. • Net Profit on a standalone basis decreased by 11% to Rs. 1,375.87 lakhs. • The consolidated revenue from operations of the Company for the year ended March 31, 2015 was Rs. 80,530.79 lakhs an increase of 27% on a Year on Year basis. • Net Profit on a consolidated basis decreased by 4% to Rs. 1,771.23 lakhs The consolidated net profit of the Company for year ended March 31, 2015 was down by 4 % to Rs. 1,771.23 lakhs. The decline in profit reflects a sharp fall in crude oil prices during the second half of the year. Though the Company was able to capitalize on the market conditions through its operational excellence, higher efficiency and well executed strategies which led to increase in consolidated revenue from operations of the Company by 27% to Rs. 80,530.79 lakhs. MANAGEMENT DISCUSSION & ANALYSIS The detailed Management Discussion & Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement is presented in a separate section forming part of the Annual Report. DIVIDEND Your Board of Directors is pleased to recommend a dividend of 100% i.e. Rs. 2/- per share of Rs. 2 each for the year ended March 2015 as against Rs. 6/- per share of Rs. 10 each (60%) in the previous year, considering the promising future prospects of the Company. The dividend will be paid to the members, whose names appear in the Register of Members of the Company as on September 9, 2015. In respect of shares held in the electronic form, the dividend will be payable on the basis of beneficial ownership furnished by National Securities Depository Limited and Central Depository Services (India) Limited for this purpose. Dividend will be paid within two weeks from the date of declaration of dividend. The total outflow towards dividend on Equity Shares for the year would be Rs. 975.36 lakhs (including dividend tax). TRANSFER TO RESERVES Your Company proposes to transfer Rs. 137.59 lakhs to the general reserve out of the amount available for appropriation and an amount of Rs. 262.92 lakhs is proposed to be retained in the statement of Profit and Loss. CREDIT RATING We are glad to announce that your Company got credit rating from one of the leading credit rating agencies CARE and is assigned a "CARE A" rating to the Long Term Facilities and "CARE A1" rating to the Short Term Facilities. SUB-DIVISION OF EQUITY SHARES In order to facilitate affordability of the Company's shares for investors at large and to enhance the liquidity of the Company's equity shares in the stock market, the shareholders in their meeting held on September 4, 2014 approved the sub-division of one equity share of the Company having a face value of Rs. 10 each into five equity shares of face value of Rs. 2 each. The record date of September 22, 2014, was fixed to determine the Members eligible to receive equity shares of face value of Rs. 2/- each in lieu of equity shares of face value of Rs. 10/- each and equity shares of face value Rs. 2/- each were accordingly issued to all the Members who were holding equity shares of Rs. 10/- each on September 22, 2014. Pursuant to the Sub-division of equity shares, ratio between the GDRs and the underlying Equity Shares has been revised to that 'one GDR representing five underlying Equity Share of the Company' to 'one GDR representing twenty five underlying Equity Shares of the Company'. SHARE CAPITAL The paid up Equity Share Capital as on March 31, 2015 was Rs. 806.57 lakhs. During the year under review, the Company has not issued any shares. The Company has not issued shares with differential voting rights. It has neither issued employee stock options nor sweat equity shares and does not have any scheme to fund its employees to purchase the shares of the Company. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS As on March 31, 2015 your Company has only one subsidiary, Panol Industries RMC FZE. The Consolidated Financial Statements of the Company and its subsidiary, prepared in accordance with Accounting Standard 21 issued by the Institute of Chartered Accountants of India, form part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company. The Company has adopted a Policy for determining Material Subsidiaries in terms of Clause 49 of the Listing Agreement. The Policy, as approved by the Board, is uploaded on the Company's website at the web link: <http://www.panamapetro.com/Subsidiary%020Policy.pdf>%0 <http://www.panamapetro.com/Subsidiary%020Policy.pdf>20Policy.pdf PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has given guarantees for its wholly owned subsidiary, Panol Industries RMC FZE., amounting to Rs. 2,816.59 lakhs during the year. The Company has not made an investment and given any loan during the year. PERFORMANCE AND FINANCIAL POSITION OF PANOL INDUSTRIES RMC FZE Net sales of Panol Industries RMC FZE has increased from Rs. 4,365.26 lakhs in the previous year to Rs. 7,548.85 lakhs during 2014-15. Net profit during the period is Rs. 395.36 lakhs , as compared to a net profit of Rs. 299.24 crores in the previous year. Panol Industries RMC FZE, UAE, a wholly owned subsidiary of the Company. The Company has built a brand new manufacturing facility in Ras Al Khaimah. The plant is having a total production capacity of 30,000 MT/ year. At this new facility the Company will manufacture petroleum specialty products to cater to the GCC & MENA regions. The plant enjoys logistic advantage since it is situated on the port and has direct dedicated pipelines to receive and discharge raw material and finished products directly to bulk vessels. During the year under review, no Company has become or ceased to be a subsidiary of the Company. The Company does not have any associate or joint venture Companies. A statement containing the salient features of the financial position of the subsidiary companies in Form AOC.1 is annexed as Annexure A. RELATED PARTY TRANSACTIONS All Related Party Transactions that were entered into during the financial year were on an arm's length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 ('the Acf) and the Listing Agreement. There were no materially significant Related Party Transactions made by the Company during the year. All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature. A statement of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis, specifying the nature, value and terms and conditions of the transactions RISK MANAGEMENT Your Company has adopted a Risk Management Policy/ Plan in accordance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. It establishes various levels of accountability and overview within the Company, while vesting identified managers with responsibility for each significant risk. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment and management procedures and status. This risk management process covers risk identification, assessment, analysis and mitigation. Incorporating sustainability in the process also helps to align potential exposures with the risk appetite and highlights risks associated with chosen strategies. DIRECTORS Your Company's Board comprises of 7 Directors with considerable experience in their respective fields. Of these 3 are Executive Directors and 4 Non Executive (Independent) Directors. The Chairman of the Board is an Executive Director. APPOINTMENT OF DIRECTORS In accordance with the provisions of the Companies Act, 2013 and the Company's Articles of Association, Mr. Samir Rayani, Director retires by rotation and being eligible offer himself for re-appointment. Directors recommend his re-appointment. At the Annual General Meeting of the Company held on September 4, 2014, the Members had approved the appointment of Mr. Mukesh Mehta, Mr. Dilip Sobhag Phatarphekar and Mr. Madan Mohan Jain as Independent Directors for a term of five years. The members have also re-appointed Mr. Amirali E. Rayani as a whole-time director designated as Chairman, and Mr. Samir Rayani as a Whole-time Directors designated as Executive Director and Mr. Amin A. Rayani as a Managing Director & CEO. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of Independence as prescribed both under sub-section(6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the Rules made there under and are independent of the management. No Director has retired or resigned during the year. WOMAN DIRECTOR In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a company shall have at least one Woman Director on the Board of the Company. Your Company has appointed Ms. Nargis Mirza Kabani as an Additional Director on the Board w.e.f February 13, 2015, who holds office till the date of this AGM ,in respect of whom the Company has received a notice in writing under Section 160 of the Companies Act, 2013 from a member proposing her candidature for the office of Director. Accordingly, the approval of shareholders is being sought for her appointment as an Independent Director of the Company. APPOINTMENTS/RESIGNATIONS OF THE KEY MANAGERIAL PERSONNEL Mr. Amin A. Rayani, Managing Director & CEO; Mr. Pramod Maheshwari, Chief Financial Officer and Ms. Gayatri Sharma, Company Secretary of the Company are Key Managerial Personnel. Apart from re-appointment of Mr. Amin A. Rayani as a Managing Director & CEO none of the Key Managerial Personnel has resigned or appointed during the year under review. BOARD AND COMMITTEE MEETINGS Your Company's Board of Directors met four times during the financial year under review. A calendar of Meetings is prepared and circulated in advance to your Directors. Audit Committee of the Company as constituted by the Board is headed by Mr. Madan Mohan Jain with Mr. Samir Rayani and Mr. Mukesh Mehta as Members. There have not been any instances during the year when recommendations of the Audit Committee were not accepted by the Board. All the recommendations made by the Audit Committee were accepted by the Board. Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act and the Listing Agreement. CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES AND INDEPENDENCE OF A DIRECTOR: The Nomination and Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement. Independence: In accordance with the above criteria, a Director will be considered as an 'Independent Director' if he/ she meets with the criteria for 'Independent Director' as laid down in the Companies Act, 2013 and Clause 49 of the Listing Agreement. Qualifications: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the Nomination and Remuneration Committee considers the manner in which the function and domain expertise of the individual will contribute to the overall skill-domain mix of the Board. Positive Attributes: In addition to the duties as prescribed under the Companies Act, 2013 the Directors on the Board of the Company are also expected to demonstrate high standards of ethical behavior, strong interpersonal skills and soundness of judgment. Independent Directors are also expected to abide by the 'Code for Independent Directors' as outlined in Schedule IV to the Act. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND OF DIRECTORS: Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board had carried out evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees. The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board, its Committees and Directors. The Board's functioning was evaluated on various aspects, including inter alia degree of fulfillment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning. Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/ support to the management outside Board/ Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including setting the strategic agenda of the Board, encouraging active engagement by all Board members and motivating and providing guidance to the Managing Director & CEO. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board, its Committees and of the Directors. The Chairman of the Board provided feedback to the Directors on an individual basis, as appropriate. Significant highlights, learning and action points with respect to the evaluation were presented to the Board. REMUNERATION POLICY Your Company has adopted a Remuneration Policy for the Directors, Key Managerial Personnel and Senior Management , pursuant to the provisions of the Act and Clause 49 of the Listing Agreement. The philosophy for remuneration of Directors, Key Managerial Personnel of the Company is based on the commitment of fostering a culture of leadership with trust. The Remuneration Policy of the Company is aligned to this philosophy. The Nomination and Remuneration Committee has considered the following factors while formulating the Policy: (i) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; (ii) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and (iii) Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. Details of the Remuneration Policy are given in the Corporate Governance Report. LISTING OF SHARES Your Company's shares are listed on the BSE Limited and National Stock Exchange of India Limited. The Company has paid the listing fees for the year 2014-2015. The GDRs of the Company are listed on Luxembourg Stock Exchange. CORPORATE GOVERNANCE Your Company has implemented all the mandatory requirements pursuant to Clause 49 of the Listing Agreement. A separate report on Corporate Governance is given as a part of the Annual Report along with the certificate received from the Practicing Company Secretary, M/s. Milind Nirkhe & Associates, Company Secretaries, confirming the compliance. PUBLIC DEPOSITS During the year under report, your Company did not accept any deposits from the public. INSURANCE Your Company has taken adequate insurance cover for all its assets. INTERNAL FINANCIAL CONTROLS Your Company has in place adequate internal financial controls with reference to financial statements. Your Company has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the 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 disclosures. CORPORATE SOCIAL RESPONSIBILITY As a socially responsible Company, your Company has a strong sense of community responsibility. As its operations have expanded, your Company has retained a collective focus on the various areas of corporate sustainability that impact people, environment and the society at large. Founded on the philosophy that society is not just another stakeholder in its business, but the prime purpose of it, the Company, across its various operations is committed to making a positive contribution. The Board has constituted a Corporate Social Responsibility Committee headed by Mr. Mukesh Mehta as Chairman, with Mr. Amin A. Rayani and Mr. Amirali E. Rayani as Members. The Company has adopted a Corporate Social Responsibility (CSR) Policy in compliance with the provisions of the Companies Act ,2013. As part of its CSR initiatives, the Company has undertaken projects in the areas of promoting health care, promoting education and setting up old age homes. The above projects are in accordance with Schedule VII of the Act. The Company has spent Rs. 57.78 lakhs towards the CSR projects during the current Financial Year 2014-15. The average Net Profit of the Company made during the three immediately preceding financial years is Rs.2,426.85 lakhs. Thus, the Company requires to spend not less than Rs. 48.54 lakhs being the 2% of the amount. The Annual Report on CSR activities is annexed as Annexure B. POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The Company has not received any complaint of sexual harassment during the financial year 2014-15. TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF) Pursuant to the provisions of Section 205C of the Companies Act, 1956, the amounts of dividend remaining unpaid or unclaimed for a period of seven years from the date of its transfer to the unpaid dividend account of the Company are required to be transferred to the Investor Education and Protection Fund (IEPF) set up by the Government of India. Consequently no claim shall lie against the Company in respect of any such amounts. The amount of unpaid / unclaimed dividend up to the financial year 2006-2007 has been transferred to IEPF. Members who have not yet encashed their warrant (s) for any subsequent years are requested to make their claims to the Company without any delay. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS AUDITORS • STATUTORY AUDITOR M/s Bhuta Shah & Co., Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and being eligible to offer themselves for re-appointment. M/s Bhuta Shah & Co., have furnished a certificate, confirming that if re-appointed, their re-appointment will be in accordance with Section 139 read with Section 141 of the Act. Pursuant to the provisions of the Act and the Rules made there under, it is proposed to appoint M/s Bhuta Shah & Co; as the statutory auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the 38th AGM to be held in the year 2020, subject to ratification at every subsequent Annual General Meeting held after this Annual General Meeting. Members are requested to consider the re-appointment of M/s Bhuta Shah & Co. and authorize the Board of Directors to fix their remuneration. • COST AUDITOR Based on the Audit Committee recommendation at its meeting held on May 30, 2015, Mr. Girikrishna S. Maniar, Cost Accountant (Membership No. 8202) was re-appointed by the Board as the Cost Auditor of the Company for conducting an audit of the cost accounting records of the Company for financial year commencing from April 1, 2015 to March 31, 2016. Cost Audit Report for the financial year 2014-2015 will be submitted by Cost Auditor to the Central Government within the stipulated time period. The Cost Audit Report for the financial year 2013-2014 was submitted to the Central Government within the stipulated time. Pursuant to the provisions of Section 148 of the Act read with The Companies (Audit and Auditors) Rules, 2014, Members are requested to consider the ratification of the remuneration payable to Mr. Girikrishna S. Maniar. • SECRETARIAL AUDITORS Pursuant to the provisions of Section 204 of the Act and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed CS. Milind Nirkhe , Practicing Company Secretary (Proprietor), Practicing under the name & style M/S Milind Nirkhe & Associates, CP No: 2312 to undertake the Secretarial Audit of the Company for the year ended March 31, 2015. The Secretarial Audit Report is annexed as Annexure C. The Auditors' Report and the Secretarial Audit Report for the financial year ended March 31 , 2015 do not contain any qualification, reservation, adverse remark or disclaimer. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO A. Conservation of Energy: The Company is aware of energy consumption and environmental issues related to it and is continuously making sincere efforts towards conservation of energy. The Company is in fact engaged in the continuous process of further energy conservation through improved operational and maintenance practices. The Company has taken adequate actions to conserve the energy as Process time reduction by technically improved mixing system. (i) Steps Taken or Impact on Conservation of Energy: In the past few years, the Company has tried to improve energy efficiency significantly by various measures. Steps taken to conserve energy include: 1. At its Plants, the Company has carried out various actions to optimize energy consumption and reduce losses. 2. Energy efficient motors are being installed in order to optimize use of power. 3. In its Plants and Offices, the Company has replaced conventional light fixtures with energy efficient fixtures. (ii) Steps taken by the Company for utilizing alternate sources of Energy: In addition to various initiatives around energy efficiencies, the Company has also focused on renewable sources of energy. Various steps taken for utilizing alternate sources of energy. (iii) Capital Investment on Energy Conservation Equipments: During the year, the Company has invested in various energy conservation equipments. The equipment in which investment was made included, various energy efficient motors. The Company has also installed power efficient material handling and flowing system which has played role in energy saving. The Company has technically improved its thermo packs to get better fuel efficiency and lower emission stack. B. Technology Absorption: (i) Efforts made towards Technology Absorption: Technology is a key enabler and core facilitator as one of the strategic pillars of the Company. Since inception your Company has been at the forefront of leveraging technology to provide better products and services to its customer. The Company has an updated R & D Center at its Ankleshwar Plant. It is the technical centre of the Company and has been the backbone for most of our major product breakthroughs. This Centre at Ankleshwar is fully equipped with modern testing & analytical equipments. The Centre is operated by the team of well qualified technocrats, as a result, the in - house R& D unit of Panama has been recognized by the Ministry of Science & Technology & the Department of Scientific and Industrial Research (DSIR). With this recognition Company will spend more on R& D activities and get more new products which will be of better quality. It will also assist in research for import substitution, energy conservation and control of pollution. The in-house R& D facility has enabled us to develop new products which have resulted in the evolution of the Dahej Plant. (ii) Benefits derived like product improvement, cost reduction, product development or import substitution: Technology has responded by being true strategic partner with business. The Company has derived many benefits from R& D and technology absorption which includes product development, product improvement & effective cost management, technology has also played a major role in ensuring high level of service delivery. (iii) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year): (a) the details of technology imported: The Company has not imported any technology during the last three financial years. (b) the year of import: Not Applicable (c) whether the technology has been fully absorbed Not Applicable PARTICULARS OF EMPLOYEES During the financial year under review, none of the Company's employees was in receipt of remuneration as prescribed under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules. Hence, no particulars are required to be disclosed in this Report. The information required under Section 197 (12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure D. EXTRACT OF ANNUAL RETURN Pursuant to Section 92 (3) of the Act and Rule 12 (1) of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in form MGT.9 is annexed as Annexure E. AUDITORS' REPORT Comments made by the Statutory Auditors in the Auditors' Report are self- explanatory and do not require any further clarification. DIRECTORS' RESPONSIBILITY STATEMENT In terms of the provisions of Section 134 (3) (c) and 134 (5) of the Companies Act, 2013, and to the best of their knowledge and belief and according to the information and explanations obtained by them and same as mentioned elsewhere in this Report, the attached Annual Accounts and the Auditors' Report thereon, your Directors confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; (ii) they have 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 of the Company for that period; (iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) they have prepared the annual accounts on a going concern basis; (v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; (vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. ACKNOWLEDGEMENT We thank our Clients, Investors, Dealers, Suppliers and Bankers for their continued support during the year. We place on record our appreciation for the contributions made by employees at all levels. Our consistent growth was made possible by their hard work, solidarity, co-operation and support. By Order of the Board of Directors For Panama Petrochem Ltd Amirali E Rayani Chairman Date : July 30, 2015 Place : Mumbai |