AFFLUENCE

DIRECTORS REPORT

To,

The Members,

The board is pleased to present 23rd Annual Report on the business and operations of the Company together with The Audited Financial Statements (Standalone and Consolidated) for the financial year ended 31st March 2019.

1.        COMPANY OVERVIEW:

Your company is a vertically integrated Chemical company having presence in multiple speciality, Company is manufacturing whole range of Phase Transfer Catalyst (PTC) includes Quaternary Ammonium Compounds and Quaternary phosphonium Compounds. Company is having manufacturing facilities at Ankleshwar and Dahej and R&D center at Vadodara. Products are having wide range of application e.g. pharmaceutical intermediate, agro industries, surface active agent, cosmetics etc.

2.        FINANCIAL RESULTS:

A summary of the Company's financial results for the Financial Year 2018-19 is as under:

 ( ? in Lacs)

Exchange Rate as on 31/03/2018 1 USD = 65.0441 INR

Exchange Rate as on 31/03/2019 1 USD = 69.1713 INR

3.        DIVIDEND:

The Board of Directors of your Company after considering holistically the relevant circumstances has decided that it would be prudent, not to recommend any divided for the year under review.

4.        TRANSFER TO RESERVES:

The Board has decided to retain the entire amount of profits in the profit and loss account for the year under review

5.        REVIEW OF BUSINESS ORERATIONS AND FUTURE PROSPECTS[A1] :

Your Directors wish to present the details of Business Operations done during the year under review as under Pprofit before tax increased by 28.77% from Rs.1,838.26  lakhs in FY 2017-18 to Rs. 2,367.12 lakhs in FY 2018-19 due to efficient operations at Phase I and II at Dahej Unit-I..

Export Sales increased by 66.00% from Rs. 8399.31 lakhs during FY 2017-18 to Rs. 13943.10 lakhs during FY 2018-19. Domestic Sales increased by 29.69% over previous year from Rs. 4543.81 Lakhs to Rs. 5,892.98 Lakhs during the year under review.

To reduce cost of Export Freight and Insurance and to expedite Export Deliveries, your company arranged warehouse facility in Netherlands and promoted wholly-owned subsidiary in USA under the name and style of TATVA CHINTAN USA, Inc. during FY 2016-17. Sales achieved from Netherlands warehouse amounted to Rs. 726.36 Lakhs during FY 2018-19 and by USA subsidiary amounted to Rs. 4470.02 Lakhs during FY 2018.

The Export share in "Revenue from Operations" is 71.03% during FY 2018-19. The business continued to experience headwinds in demand generation from both global and domestic majors. The efforts on creating a diversified portfolio of innovative products, winning new customers and penetration into new markets is ongoing. The key emphasis of this business has been on investing in research and development, towards building a strong product portfolio in Quaternary, Hydroxides and Specialty chemicals.

In order to widen market in Europe, wholly owned subsidiary has been established in the name and style of Tatva Chintan Europe B.V. in March, 2019.

During the year the costs of key raw materials moved in mixed directions. The Company continued its strategy of importing raw materials from diverse sources and achieve in maintaining a steady price during the year. Some raw materials experienced strong inflationary trends exerting stress on the margins across product lines.

FY 2018-19 saw volatility in USD-INR, ranging from Rs. 64.90 and Rs. 74.10, and averaging at 70.07. There was also significant volatility in exchange rates of emerging markets' currencies. Towards the end of the current fiscal it was around Rs. 69.1713. The exchange loss of Rs. 177 Lakhs is reported in Profit and Loss account during the year, which is on account of timing difference of foreign exchange revenue transactions and their realization and/or re-statement. Also, we have capitalized exchange loss of Rs. 39 Lakhs.

Phase III of Unit I at Dahej SEZ. is currently under process and is expected to be completed in last quarter of FY 2019-20.The new capacity is expected to come on stream by last quarter of FY 2019-20. The expanded capacity will be utilized for the Company's growing export market. The investment in expansion of the capacity is based on customer inquiries and discussions and in anticipation of future research pipelines. The new capacity addition will be similar to the Company's existing multi-product plant configuration with multistage batch and products processing capabilities. The Company has reached out to markets in the US, Europe and Japan by having direct representations in those geographies, in addition to the strong presence of Tatva Chintan (USA) Inc. in USA.

Through the year, the technology teams worked relentlessly to improve productivity, quality and costs of various products to offer a competitive marketing edge to the businesses on one hand and flexibility of sourcing to the supply chain team on the other. Continuous focus on improving operating efficiencies across manufacturing and supply chain applications, during the year, have helped the Company improve its margins and secure deeper penetration in the market. The top-line growth coupled with higher capacity utilization, helped in better absorption of overheads, contributing to improvements in the operating margins. Slack in high-margin products during second half resulted into reduction in overall operating margins for the fiscal.

During the year a conservative inventory policy was followed in order to remain closer to the market prices of all the raw materials and access the resultant movement in the finished product prices.

The receivables and inventories management have been an area of key management attention and are in line with the scope and scale of operations and the levels were well within acceptable industry norms.

The Company is fully committed to its responsibilities in health, safety and environment (HSE) management and has continued to make sizeable investments in HSE during the year.

6.        PERFORMANCE AND FINANCIAL POSITION OF EACH SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES :

The Consolidated Financial Statements of the Company are prepared in accordance with relevant Accounting Standards issued by the Institute of Chartered Accountants of India and forms an integral part of this Report.

During the period under review, Tatva Chintan Europe B.V. was incorporated, which is yet to commence its business. A statement containing the salient features of financial statements of each of the subsidiaries, associates and joint venture companies in terms of provisions of Section 129(3) of the Companies Act, 2013 in the prescribed Form AOC- 1 is annexed ( Annexure -I) to this report and hence not repeated here for the sake of brevity.

 CHANGE IN NATURE OF BUSINESS, IF ANY:

There is no change in the nature of business of the Company during the financial year under review.

7.        MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year i.e. March 31, 2019 and the date of Directors' Report i.e. September 21,2019

8.        DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

No significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future during the financial year and/or subsequent to the close of the financial year of the Company to which the balance sheet relates and the date of the report.

9.        EXTRACT OF ANNUAL RETURN:

Pursuant to sub-section (3) of Section 92 of theCompanies Act 2013, read with Rule 12 of the Companies(Management and Administration) Rules, 2014 the extractof the Annual Return as at March 31, 2019 forms part ofthis report as Annexure: IV.

As required under Section 134(3)(a)of the Act, the Annual Return (Form MGT-7) shall be put up on the Company's website and can be accessed at www.tatvachintan.com.

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

The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earning and Outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 and amendment thereof is furnished in Annexure II  and is attached to this report.

11.    DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS APPLICABILTY OF INTERNAL AUDIT:

Internal Financial Controls are an integrated part of therisk management process, addressing financial risksand financial reporting risks. The Board has adoptedpolicies and procedures for ensuring the orderly andefficient conduct of its business, including adherence tothe Company's policies, the safeguarding of its assets,the prevention and detection of frauds and errors, theaccuracy and completeness of the accounting records,and the timely preparation of reliable financial disclosures.Assurance on the effectiveness of internal financialcontrols is obtained through management reviews,continuous monitoring by functional experts and testingof the internal financial control systems by the internalauditors during the course of their audits. We believethat these systems provide reasonable assurance thatour internal financial controls are designed effectivelyconsidering the nature of our industry and are operatingas intended.

From the financial statement 2018-19, it is informed that the turnover of the Company is ? 202,73,71,367/-. According to Section 138 of the Companies Act, 2013 and Rule 13 of Companies Accounts Rule, 2014 Board of Director of your company is required to appoint internal auditor. In the context of above provisions Board of Directors will appoint suitable internal auditor for your company.

12.    STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY:

Risk is an important element of corporate functioning and governance. Your Company has established the process and framed a policy of identifying, analyzing and treating risks, which could prevent the Company from effectively achieving its objectives. It ensures that all the risks are timely defined and mitigated in accordance with the well-structured risk management Process.

Global slowdown and recession is always a risk attached with the industry, and your company is taking necessary actions to protect the interest of the company against such market risks from time to time.

13.    DETAILS OF POLICY DEVELOPED AND IMPEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES:

Your Company has formed the CSR Committee asper the requirement of the Companies Act, 2013. Onrecommendation of CSR Committee, the Board ofDirectors' of your Company has approved the CSR Policywhich is available on the website of your Company atwww.tatvachintan.com. The brief outline of theCorporate Social Responsibility (CSR) Policy of yourCompany and the initiatives undertaken on CSR activitiesduring the year are set out in Annexure III of this report inthe format prescribed in the Companies (Corporate SocialResponsibility Policy) Rules, 2014.

14.    PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Particulars of loans given and of the investments made by the Company as at March 31, 2019 are given in the Notes forming part of the Financial Statements. (Refer Note No.18 of Standalone financial Statement)

15.    PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All related party transactions that were entered into during the year under review were on an arm's length basis and in the ordinary course of business.Further there are no material related party transaction during the year under review. Thus disclosure in Form AOC-2 in terms of Section 134 of the Companies Act, 2013 is not required. Attention of Members is drawnto the disclosure of transactions with related parties setout in Note No. 28 of Standalone Financial Statements, forming part of the Annual Report

16.    EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN HIS SECRETSRIAL AUDIT REPORT:

There was no qualifications, reservations or adverse remarks or disclaimers made by the Auditors in their report on the Financial Statements of the Companyfor the financial year ended on March 31, 2019.Further Section 204 of the Companies Act, 2013 regarding Secretarial Audit is not applicable to Company.

17.    COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES:

The provisions of Section 178(1) relating to constitution of Nomination and Remuneration Committee are not applicable to the Company.

18.    MANAGERIAL REMUNERATION:

The Company being private limited company, provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are not applicable.

19.    NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW:

During the year from April 1, 2018 to March 31, 2019 the Board of Directors met Eleven times on the following dates:

CSR COMMITTEE MEETINGS

20.    DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its responsibility statement -

(a)    In the preparation of the annual accounts for the year ended March 31,2019, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b)   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;

(c)    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.

(d)   The directors had prepared the annual accounts on a going concern basis

(e)    As company is not  listed This clause is not applicable

(f)    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.

21.    DEPOSITS:

Your Company has not accepted any fixed deposits from the public as per the provisions of Section 73 to 76 of the Companies Act, 2013. Hence, the disclosures required as per Rule 8 (5) (v) & (vi) of the Companies (Accounts) Rules, 2014, are not applicable to your Company.

22.    DIRECTORS / KMP AND OTHER AUDIT DETAILS:

�  Directors:

There was no change (Appointment /Resignation) in directors during the year under review.

�  Change in Chief Financial Officer :

 Board of Directors of your Company has appointed Mr. Sudip Sanat Ray as Chief Financial Officer of the Company on 15/10/2018. And he ceased to be Chief Financial Officer of the Company w.e.f.close of working hours of 25/02/2019. Further Board of Directors of your company has appointed Mr. Vishnu Swarnakar as Chief Financial officer of the company with effect from 05/09/2019.

�  Change in  Company Secretary:

Ms. Hiral Gediya whole time Company Secretary ceased to be Company Secretary of Company w.e.f.close of working hours of 20/04/2019. The Board of Directors of your Company has appointed Ms. Mansi Ashar as whole time Company Secretary with effect from 22/07/2019.

�  DECLARATION OF INDEPENDENT DIRECTORS

The provisions of Section 149 pertaining to the appointment of Independent Directors do not apply to our Company.

�  STATUTORY AUDITORS

M/s.NDJ & Co.(Firm Registration No. 136345W), Chartered Accountants,Surat have been appointed as Statutory Auditors of the Company at the 22nd Annual General Meeting held on September 29, 2018 to hold office from the conclusion of 22nd Annual General Meeting (AGM) till the conclusion of the 27th Annual General Meeting of the Company, subject to compliance of the various provisions of Companies Act, 2013.The Auditors have confirmed that they are not disqualified from continuing asAuditors of the Company

�  SECRETARIAL AUDIT REPORT

The Secretarial Audit pursuant to Section 204(1) of the Companies Act, 2013 is not applicable to your Company.

�  COST AUDITORS

The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013 and the Company has maintained cost records pursuant to the Companies (Cost Records and Audit) Rules, 2014 as prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013

Pursuant to the provisions of Section 148 of the CompaniesAct, 2013 read with Rule 14 of the Companies (Auditand Auditors) Rules, 2014 the Board has appointed M/s. Y.S. Thakar & Co., Cost Accountants(Firm Registration No.:000318) as the Cost Auditors of the Company for FY 2019-20, The remuneration payable to the Cost Auditors is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a resolution for seeking Members' ratification for the remuneration payable toM/s. Y.S. Thakar & Co., Cost Accountants(Firm Registration No.:000318)is included at Item No. 2 of the Notice convening the Annual General Meeting.

�  DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The provisions of Section 177(1) of the Companies Act, 2013 read with Rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2013 regarding constitution of Audit Committee is not applicable to the Company.

Further provisions of Section 177 (9) of the Companies Act, 2013 read with Rule 7(b) of Companies (Meeting of Board and its Power) Rules, 2014 regarding establishment of Vigil Mechanism is applicable to Company. The Company promotes ethical behavior in all its business activities and has put in place a mechanism for reporting illegal or unethical behavior. The Company has a Vigil Mechanism and Whistle-blower policy under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. Board of directors has nominated Mr. Ajay Patel (DIN:00183745) to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.

Details of establishment of Vigil Mechanism and Whistle-blower policy is put up on the Company's websitewww.tatvachintan.com.

�  INTERNAL CONTROLS

The internal control systems of the Company are effective and adequate for business processes with regards to efficiency of the operations, compliance with applicable laws and regulations, financial reporting, etc. which commensurate with the size and complexities of the operations.

All the Company's major business processes are currently run on SAP B1. The Company has established appropriate Internal Control framework in its operations and Financial Accounting and Reporting practices to ensure due adherence to the Internal Financial Control over Financial Reporting (IFCFR), under Section 143(3)(i) of the Companies Act, 2013.

The Company has established appropriate Internal Control framework in its operations and Financial Accounting and Reporting practices to ensure due adherence to the Internal Financial Control with reference to financial statements under Section 143(3)(i) of the Companies Act, 2013.

23.    CORPORATE GOVERNANCE REPORT

The Company, being private limited company, provisions of Corporate Governance Report is not applicable.

24.    SHARES

a)        BUY BACK OF SECURITIES

The Company has not bought back any of is securities during the year under review.

b)        SWEAT EQUITY

The Company has not issued any Sweat Equity Shares during the year under review.

c)        BONUS SHARES

No Bonus Shares were issued during the year under review.

d)        EMPLOYEES STOCK OPTION PLAN

The Company has not provided any Stock Option Scheme to the employees.

25.    DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The SexualHarassment Policy provides for protection against sexualharassment of women at workplace and for preventionand redressal of such complaints. Your Company has complied with provisions relatingto the constitution of Internal Complaints Committeeunder the Sexual Harassment of Women at Workplace(Prevention, Prohibition and Redressal) Act, 2013. Therewere no complaints pending as on the beginning of thefinancial year and no new complaints were filed duringthe financial year under review.

26.    APPRECIATION:

Your Directors place on record their sincere thanks to bankers, business associates, consultants and various Government Authorities for their continued support extended to your Company's activities during the year under review.  Your Directors also acknowledges gratefully the shareholders for their support and confidence reposed on your Company.

ANNEXURE -I

FORM NO. AOC-1

(Pursuant to first proviso to sub-section (3) of section129 read with rule 5 of Companies (Accounts) Rules, 2014)Statement containing salient features of the financial statement of subsidiary

Part- A Subsidiaries

(Information in respect of each subsidiary to be presented with amounts in ?.)

Notes: The following information shall be furnished at the end of the statement:

1.         Names of subsidiaries which are yet to commence operations:

Tatva Chintan Europe BV (Date of Incorporation: 01-03-2019) 

2.         Names of subsidiaries which have been liquidated or sold during the year.:     None

CONSERVATION OF ENERGY                                                  ANNEXURE II

(Pursuant to clause (m) of Section 134(3) read with Rule 8(3) of the Companies (Accounts) Rules, 2014)

C. FOREIGN EXCHANGE EARNING AND OUTGO :

(Amt in ?)

:                                  

ANNEXURE III

THE ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES

1.        A brief outline of the Company's CSR policy, including overview of projects or programs proposed to beundertaken and a reference to the web-link to the CSR policy and projects or programs:

Tatva Chintan Pharma Chem Private  Limited ('the Company') is committed to upholding the highest standards of CSR.  The Company believes in positively impacting the environment and supporting the communities it operates in, focusing on sustainability of our programs and empowerment of our communities. The contents of CSR policy can be accessed through the web link https://www.tatvachintan.com/csr-policy.html and details on projects and programmes undertaken are forming part of this Annual Report. Further Company is proposed to undertake activities in the area of  healthcare programmes, Education and other activities as per its CSR Policy.

2.        The Composition of the CSR Committee :

 Mr. Ajay M. Patel - Chairman

Mr. Chintan Shah - Member

Mr. Shekhar Somani- Member

3.        Average Net Profit of the Company for last three years -? 19,15,53,122.87/-

4.        Prescribed CSR Expenditure (two percent of the amount as in item 3 above) - ? 38,31,062.45/-

5.        Details of CSR spend during the financial year:

(a) Total amount to be spent for the financial year:  ?38,31,062.45/-

(b) Amount unspent, if any: ? 64,99,819.44/- (This amount includes previous years CSR unspent figures    too.)

(c) Manner in which the amount spent during the financial year is detailed below:

6.        In case the Company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board Report:

The CSR Committee of the Company is on lookout for other relevant projects or programmes in vicinity of Companies factories/locations as permissible under Schedule VII of the Companies Act, 2013.

7.        A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy,is in compliance with CSR objectives and Policy of the Company.

The CSR Committee confirms that the implementation and monitoring of the CSR Policy, is in compliance with CSR objectives and Policy of the Company.

ANNEXURE IV

FORM NO. MGT 9

EXTRACT OF ANNUAL RETURN AS ON FINANCIAL YEAR ENDED ON 31-03-2019

Pursuant to Section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014.

I.  REGISTRATION AND OTHER DETAILS:

II.PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY:

(All the business activities contributing 10 % or more of the total turnover of the company shall be stated)

III.    PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES:

*Tatva Chintan Europe BV - A wholly owned subsidiary with authorised share capital of Euro 120 was incorporated on March 01,2019 . The remittance towards subscription of share capital has not been made up to March, 31,2019.

Note: The Company has no holding company.

IV. SHARE HOLDING PATTERN (Equity Share Capital Break-up as percentage of Total Equity)

(i)                 Category-wise Share Holding

(ii)               SHAREHOLDING OF PROMOTERS :

(iii) CHANGE IN PROMOTER'S SHAREHOLDING (Please specify, if there is no change)

Note: There is no change in the total shareholding of promoters between 01.04.2018 to 31.03.2019.

(iv) SHAREHOLDING PATTERN OF TOP TEN SHAREHOLDERS

(Other than Directors, Promoters and Holders of GDRS and ADRS)

There are Total Nine shareholders who falls under this category. Except below others are directors and promoter's shareholders.

(v)SHAREHOLDING OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Note: Key Managerial Personnel do not hold any shares of the Company during the year under review.

V.INDEBTEDNESS :

Indebtedness of the Company including interest outstanding/accrued but not due for payment

(? in Lacs)

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A.Remuneration to Managing Director, Whole-time Directors and/or Manager:(?. In Crores)

B.REMUNERATION TO OTHER DIRECTORS:

                                                                                                                                    (?. In Lacs)

C.REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

(?. In Lacs)

Note:

*Mr. Sudip Sanat Ray has been appointed as Chief Financial Officer of the Company on 05/10/2018 and his employment ceased as a Chief Financial Officer of the Company w.e.f.close of working hours of 25/02/2019.

VII. PENALTIES/PUNISHMENT/COMPOUNDING OF OFFENCES: