DIRECTORS' REPORT TO THE MEMBERS, Your Directors take pleasure in presenting the 41st Annual Report on the business and operations of your Company together with the Audited Financial Statements for the year ended 31st March, 2016. Performance Highlights During the year under review, revenue from operations of your Company’s products and services was Rs. 21,563.77 lakhs compared with Rs. 21,674.90 lakhs in FY 2014-15. The Profit after Taxes was Rs. 15,122.59 lakhs compared with Rs. 558.33 lakhs in FY 2014-2015. Dividend During the financial year 2015-16, the Board of Directors had declared first interim dividend of Rs. 6/- per share and second interim dividend of Rs. 3/- per share on the equity shares of the Company in November, 2015 and March, 2016 respectively. In view of two interim dividends declared during the year, the Board of Directors of the Company has not recommended final dividend for the financial year ended 31st March 2016. Transfer to Reserves Your Company does not propose to transfer any amount from the current year's profits to the General Reserve. (Previous year Rs. 50 Lakhs) Deposits The Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and rules framed there under. Directors and Key Managerial Personnel The Board, in its meeting held on 21st May, 2015 appointed Dr. Prakash D. Trivedi (DIN: 00231288) as an Additional (Independent) Director of the Company. The shareholders of the Company at the 40th Annual General Meeting appointed him as an Independent Director for a period of five years from 21st May, 2015 up to 21st May, 2020. Mr. Jay Mistry was appointed as Company Secretary & Compliance Officer of the Company by the Board in its meeting held on 6th February, 2016. Mr. Varadvinayak Khambete resigned as a Company Secretary with effect from 23rd December, 2015. The Board in its meeting held on 24th March, 2015 has appointed Mrs. Saraswati Sankar as an Additional (Independent) Director of the Company. Mrs. Sankar was appointed as an Independent Director of the Company by the shareholders at the 40th Annual General Meeting held on 8th August, 2015 for a term of five years from 24th March, 2015 upto 24th March, 2020. Inter-se relationship between Directors Mr. Sameer V. Shah, Chairman and Managing Director and Mr. Nirmal V. Shah, Vice Chairman and Managing Director are brothers. Number of Board Meetings Seven (7) board meetings were convened and held during the year. Details of these meetings of the board are included in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Performance evaluation and its criteria The Directors on the Board carried out an annual evaluation of the Board itself, its Committees and individual Directors. The entire Board carried out performance evaluation of each Independent Director excluding the Independent Director being evaluated. Nomination and Remuneration Committee also carried out evaluation of every Director's performance. A structured questionnaire was prepared after taking into consideration inputs received from the Directors, setting out parameters of evaluation. Evaluation parameters of the Board and Committees were mainly based on Disclosure of Information, Key functions of the Board and Committees, responsibilities of the Board and Committees, Corporate Governance Norms etc. Evaluation parameters of individual directors including the Chairman of the Board and Independent Directors were based on knowledge to perform the role, time and level of participation, performance of duties and level of oversight and professional conduct etc. Independent Directors in their separate meeting have also evaluated the performance of Non- Independent Directors, Chairman of the Board and the Board as a whole. Disclosures by the Directors The Directors on the Board have submitted notice of interest under Section 184(1), intimation under Section 164(2) and declaration as to compliance with the Code of Conduct of the Company. All Independent Directors have also given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 (the "Act") and Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Directors' Responsibility Statement Pursuant to Section 134 of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: (a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no 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) 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; and (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. Auditors The Statutory Auditors of your Company, M/s. Kastury & Talati, were appointed to hold office until the conclusion of the ensuing Annual General Meeting. The Company has received the certificate from them to the effect that their re-appointment, if made, would be in compliance of the Companies Act, 2013. The Company has appointed Mr. R. S. Raghavan, Practising Cost Accountant, as Cost Auditor of the Company for the financial year 2016-17. The Company has appointed Mr. Virendra Bhatt, Practising Company Secretary, as Secretarial Auditor for the financial year 201516. The report of Secretarial Auditor is attached as Annexure-1. Audit Committee Please refer the details given in the Corporate Governance Report. Subsidiary, Joint Venture or Associate Companies During the year, two Companies have become your Company's subsidiaries i.e. Chembond Enzyme Company Limited & Chembond Calvatis Industrial Hygiene Systems Limited (formerly known as Chembond Bioengineering Company Limited) and one company has ceased to be your Company's Joint Venture i.e. Henkel Chembond Surface Technologies Limited. A separate statement containing salient features of financial statements of your Company's subsidiaries in Form AOC-1 is attached as Annexure-2. The report on the performance and financial position of the subsidiaries, associates, and joint venture companies forms a part of the Management Discussion & Analysis. During the year, your Company has entered into an agreement with I-Chem Solution Sdn Bhd, Malaysia for forming a joint venture Company in Malaysia to do the business of selling and servicing water treatment chemicals for industries in Malaysia. h) Average percentile increase made in the salaries of employees other than key managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: Average increase made in the salaries of employees other than key managerial personnel during the year is 3%. Pursuant to the provisions of Section 149 196, 197 and 203 of the Companies Act, 2013, there was revision in the remuneration of Mr. Sameer V. Shah and Mr. Nirmal V. Shah, Managing Directors of the Company w.e.f. 1st April, 2015 till the remaining period of tenure i.e. upto 31st July, 2016 which was approved by the shareholders of the Company at the 40th Annual General Meeting. On that account, average increase in the managerial remuneration in the year is 32.92%. There are no other exceptional circumstances for increase in the remuneration of key managerial personnel and increase in remuneration has been in accordance with the Company's policies. The increment given to each individual employee is based on the employees' potential, experience as also their performance and contribution to the Company's progress over a period of time. i) Key parameters for any variable component of remuneration availed by the directors. - N.A. j) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year. : N.A. k) The Company affirms that the remuneration is as per the Remuneration Policy of the Company. Disclosure under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is not applicable to any of the employees of the Company. Remuneration to Managing Director from subsidiary During the financial year 2015-16, Mr. Nirmal V. Shah, Vice Chairman and Managing Director, received remuneration of Rs. 4,478,263 (excluding contribution to LIC under Group Gratuity Scheme & Superannuation Scheme) from Chembond Solenis Water Technologies Limited, subsidiary Company. Pecuniary relationships with Non-Executive Directors The Company paid sitting fees to Non-Executive Directors (NEDs) for attending the meetings. Criteria of making payments to NEDs is available on Company's website at <http://www.chembondindia.com/investors>. The number of shares held by NEDs as on 31st March, 2016 is as follows: Employees Stock Option Scheme Pursuant to the approval accorded by the shareholders at the thirty sixth Annual General Meeting of the Company held on 10th September, 2011 for issue of 3,18,000 Options, the Compensation Committee had formulated the Chembond Chemicals Employees Stock Option Plan 2012 and approved a grant of 232,781 options to the employees of the Company and its subsidiaries under the said Scheme. As required under the Securities and Exchange Board of India (Employees Stock Option and Employees Stock Purchase Scheme) Guidelines, 1999 (SEBI Guidelines), the following details of this scheme as on 31st March, 2016 are being provided: Policies and Disclosure Requirements In terms of provisions of the Act and provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has adopted all the applicable policies. The policies are available on Company's website - www.chembondindia com and the web link is <http://www.chembondindia.com/investors> It is confirmed that all Directors and Senior Management Personnel have affirmed their adherence to the provisions of the Code of Conduct during the financial year 2015-16. The Company's policy on Directors' appointment, remuneration and other matters provided in Section 178(3) of the Act forms part of Nomination and Remuneration Policy and has been disclosed in the Corporate Governance report. Risk Management The Board of Directors has formed a Risk Management Committee. The details of Committee are set out in the Corporate Governance Report forming part of the Directors' Report. The Company has its Risk Management Plan & Policy in place which is also displayed on the website of the Company. In the opinion of the Board, during the financial year 2015-16, the Board has not noticed any elements of risk which may threaten the existence of the Company. Internal Financial Controls For the year ended 31st March, 2016, the Board is of the opinion that the Company has sound Internal Financial Controls commensurate with the nature and size of its business operations wherein controls are in place and operating effectively and no material weaknesses have been noticed. The Company has a process in place to continuously monitor the existing controls and identify gaps, if any, and implement new and /or improved controls wherever the effect of such gaps would have a material effect on the Company's operation. Corporate Social Responsibility The criteria prescribed under Section 135 of the Act with respect to constituting CSR committee, adopting CSR policy and spending amount on CSR activities in accordance with the Act do not apply to the Company. However Company has voluntarily framed CSR Policy and constituted CSR Committee, as good corporate governance practice. The CSR Committee composition is as follows: Related Party Transactions All transactions entered into with Related Parties during the financial year were in the ordinary course of business and on arm's length basis and do not attract the provisions of Section 188(1) of the Companies Act, 2013. For material transactions with related parties, the Company has obtained members' approval by way of voting through postal ballot including e-voting results of which have been declared on 19th March, 2015. Suitable disclosures as required by the Accounting Standards (AS18) have been made in the notes to the Financial Statements. The Board has approved a policy for related party transactions which has been uploaded on the Company's website. Necessary disclosures in Form AOC-2 are attached as Annexure 4. The Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The related information is provided in Annexure 5, which is attached to this report. Particulars of Loans, Guarantees and Investments Details of Loans, Guarantees and Investments have been disclosed in the Financial Statements. Extract of the Annual Return An extract of the annual return in Form MGT-9 is provided herewith as Annexure 6. Management Discussion and Analysis Report Management Discussion and Analysis Report is separately provided in this Annual Report. Corporate Governance Report A separate report on Corporate Governance is attached as a part of this Annual Report along with the Auditor's Certificate on its compliance. Prevention, Prohibition and Redressal of Sexual Harassment of Women The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaint has been received during the year under review. Significant and Material Orders Passed No significant and material order has been passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future. Acknowledgements Your Board takes this opportunity to express its deep thanks to the customers, vendors, shareholders and bankers for the faith they have reposed in the Company. Your Directors also place on record their sincere appreciation of the contribution of its employees for their competence, hard work and cooperation. On behalf of the Board Sameer V. Shah Chairman & Managing Director Nirmal V. Shah Vice Chairman & Managing Director Place : Mumbai Date : 28th May, 2016 |