DIRECTORS' REPORT Dear Members, Your Directors are pleased to submit their 28th Annual Report and Audited Accounts for the year ended 31stMarch2015: MAJOR PLANT SHUDOWN: For long-term sustainable site in India at Solvay Global Standards A major Plant Shutdown was undertaken for up gradation of platform period of 103 days beginning with 15th December 2014 and ending on 28th March 2015. During the shutdown period, the Company had taken up major CAPEX Plan of Rs. 40.17 crores - a rise of about 113% from Rs. 36.71 crores in 2013-14 to Rs. 78.31 crores in 2014-15. In view of the above, performance of current year could not see an upward trend compared to previous year. However, the upgradation after the Shutdown has achieved the following long-term strengths: • Solvay Global Standards of Safety with respect to storage and handling of Ethylene Oxide and other related products. • Higher capacity of Electrical Transformer makes the site further expandable. • Change from Manual Control System to Distributed Control System - Automation. • Higher storage capacity of Ethylene Oxide Condensates (EOC) products. • Improved quality control and development laboratories. 3. DIVIDEND In view of losses, the Board of Directors does not recommend any dividend for the year ended 31stMarch2015. 4. SHARE CAPITAL The paid up Equity Share Capital as on 31st March, 2015 was Rs. 7.35 Crores. During the year under review, the Company has not issued newshares. 5. MANAGEMENT'S DISCUSSION AND ANALYSIS : F.Y. 2014-2015 (Pursuant to Clause 49 of the Listing Agreement with BSE Limited) The Company is operating only in one Segment, namely 'Specialty Chemicals'. I. Industry Structure & Development :- Your Company manufactures a wide range of specially formulated and customized products for various Industrial applications. Company's customers are well recognized and located not only in India but all over the World especially in the America, Europe, and Far-East. Our customers represent a wide range of Industries such as Wire Insulation Enamel, PVC stabilizers, Inks, Colours, Coatings, Textiles, Agro Chemicals, Polymers, Plastics, Rubber, Latex, Tyre and tubes, Conveyor belts, Lubricants, Additives, Home care, Cosmetic, soaps detergents, Fertilizers and many more. Customers are always expanding and they want to upgrade their products and all these improvements need Company's R&D and niche formulation and application knowledge & experience. Solvay represents this worldwide knowledge base in specialty chemicals supporting the Sunshield team. Company's main products belong to: a. Specialty Surfactant applications, which are predominantly Ethylene Oxide (EO) based products. The technologies developed involve surfactants, Esters, Amides, and other complementary processes. b. Specialty Anti-Oxidants for Lubricants, Polymers, Rubber, Tyre & Latex and other Industries involving Aminic& Phenolic technologies and c. Other Non-EO technologies & customized blends for various applications. A number of Surfactants and specialty chemicals formulated by the Company depend on EO, which is currently commercially produced and sold in India by only one Supplier. However the supplier has 3 independent production sites viz., at Nagothane, Baroda and Dahej. This multi-location option, gives a reasonable dependability of EO supplies for the Company. Managing logistics of EO procurement is a key factor of operations. In recent up gradation at our factory, the storage capacity of EO is increased by over 40%. In addition, the site has been upgraded to Solvay global standards of Environment, Health, safety and efficiency. Solvay is actively involved in planning and implementing the current CAPEX through its worldwide professional teams for Products and Project development. The Company now has its Rasal production site upgraded to Solvay standards of safety and efficiency for a multi-product niche specialty product range. The Sales in Value terms went down by 11%. Export Sales went down by 16% from Rs. 7786 Lacs to Rs. 6509 Lacs and domestic Sales went down by 1%from Rs. 6128 Lacs in 2013-14 to Rs. 6077 Lacs in 2014-15. EBIDTA was down by 75% at Rs. 285 Lacs in the year 2014-15 against EBIDTA of Rs. 1126 Lacs in the previous year. Finance Cost came down from Rs. 357 Lacs in 2013-14 to Rs. 349 Lacs in 2014-15, a drop of 2% over that of previous year. Cash profit (Profit before Tax & Depreciation) went down by 108% from Rs. 769 Lacs in the year 2013-14 to loss of Rs. 64 Lacs in the year 2014-15. The above adverse performance is mainly on account of major shutdown of 103 days as detailed earlier. III. Outlook The Company's products continue to be well received by World's leading users of specialty chemicals for a diverse range of industrial applications. The Company has been recognized as a reputable and dependable supplier to many Indian and global consumers of specialty products developed in-house. Now that Sunshield is a Solvay group Company with access to management, goodwill and global customer base, it is accepted as efficient and dependable global supplier and provides service worldwide. With the implementation of Capex plan of Rs. 40.17 crores during 2014-15, the Company has a very positive out-look for growth in exports as also domestic. IV. Risks and Concerns i. Slowdown in world economies, affect demand from user industry specifically in Europe. ii. Lower overall demand, can bring pressures all over and the aggressive pricing can cause concerns about margins. V. Internal Control System and its adequacy During the year, no significant internal control issue was identified. Internal checks and controls appropriate to growing size of the Company's business, is being put in place. VI. Human Resources Employee relationships at all levels continued to be satisfactory. The management would like to record its appreciation of dedicated and strong support provided to your Company, by its employees at all levels. The number of employees on rolls as on 31st March 2015 is 106. (The statementin this report including Management's Discussions & Analysis Report reflects Company's projections, estimates, expectations or predictions. These may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied, since your Company's operations are influenced by many external and internal factors beyond the control of the Company.) 6. BOARD MEETINGS The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board met four times in the financial year 2014-15 i.e on 23rd May 2014,12th August2014,14th November 2014and13th February2015. 7. BOARD COMMITTEES During the year, in accordance with the Companies Act, 2013, the Board re-constituted some of its Committees and also formed Corporate Social Responsibility Commi ttee, Ri sk Managem ent Committee and Committee for issue of Duplicate Share Certificates. There are currently six Committees of the Board, as follows: • Audit Committee • Nomination and Remuneration Committee • Stakeholders' Relationship Committee • Corporate Social Responsibility Committee • Risk Management Committee • Committee for Issue of Duplicate Share Certificates Details of all the Committees are provided in the "Report on Corporate Governance", a part of this Annual Report. 8. DIRECTORS' RESPONSIBILITYSTATEMENT In pursuance of section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that: (a) in the preparation of the annual accounts, 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; and (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. (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 9. FRAUDREPORTINGBYAUDITORS As required under Section 134(3)(ca)of the Companies Act, 2013, there are no instances of Fraud being reported by the Auditors. 10. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6). 11. DIRECTORSAND KEYMANANGERIAL PERSONNEL In accordance with the provision of the Companies Act, 2013 Mr. Manoj Khullar and Mr. Satish Kelkar, Directors of the Company, retire by rotation and being eligible, offer themselves, for re-appointment. The profiles of the Directors seeking re-appointment form part of the Annexure to the Notice. Mr. Michel Ybert, Mr. Suresh Talwar resigned as Directors with effect from 14th November 2014 and 16th February 2015 respectively. Your Directors place on record their sincere appreciation of the valuable contribution made by them during their tenure as Directors of the Company. The Board of Directors appointed Ms. Sze Wee Ong and Mr. Arun Roy as Additional Directors with effect from 14th November, 2014 and 1st July 2015 respectively. The Board of Directors appointed Mr. Ranjal Laxmana Shenoy as an Additional Director to hold office as an Independent Director of the Company with effect from 20th March 2015. Ms. Ong, Mr. Roy and Mr. Shenoy hold office of Director upto the date of the forthcoming Annual general meeting of the Company. The Company has received a notice in writing from a member along with the deposit of requisite amount under Section 160 of the Act proposing the candidature each of Ms. Ong, Mr. Roy and Mr. Shenoy for the office of Director of the Company. During the year, Mr. Guo Lin ceased to be Alternate Director to Mr. Michel Ybert with effect from 14th November, 2014. He was appointed as an Alternate Director to Ms. Sze Wee Ong under the Companies Act, 2013 with effectfrom the same date. Details of the proposal for appointment of Ms. Sze Wee Ong, Mr. Ranjal Laxmana Shenoy, Mr. Arun Roy and Mr. Manoj Khullar are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 28th Annual General Meeting. The Board of Directors in their meeting held on 23rd May 2015, accepted the resignation of Mr. Shrirang Belgaonkar, Wholetime Director with effect from 30th June 2015. Your Directors place on record their sincere appreciation of the contribution made by him during histenure asa member of the Board. The Board of Directors of the Company on the recommendation of Nomination and Remuneration Committee at their meeting held on 23rd May 2015 have, soughttoappointMr. Manoj Khullar as Managing Director, for a period of 3 (Three) years, effective from 1st July 2015. The Board seeks members' approval for appointment of Mr. Manoj Khullar as Managing Director of the Company. None of the Directors is disqualified from being appointed as Directors as specified in Section 164(2) of the Companies Act, 2013. The Company has recognized Mr. Manoj Khullar, Managing Director, Mr. Rajeev Gupte Chief Financial Officer and Mr. Amit Kumashi Company Secretary of the Company as Key Managerial Personnel as required un der Section 203 of the Companies Act, 2013. 12. ANNUALEVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually, as well as the evaluation of the working of its Comittees. 13. COMPANY'S POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION In accordance with Section 178 of the Companies Act, 2013 the Nomination and Remuneration Committee has formulated Remuneration Policy ("the policy"). The objective of the policy is to ensure that Executive Directors and other employees are sufficiently compensated for their performance. The Policy seeks to provide criteria for determining qualifications, positive attributes and independence of a director. REMUNERATION POLICY Directors Nomination and Remuneration Committee shall recommend the remuneration, including the commission based on the net profits of the Company for the Non-Executive Directors and Wholetime Director and other Executive Directors. This will be then approved by the Board and shareholders. Prior approval of shareholders will be obtained wherever applicable in case of remuneration to non-executive directors. The Company pays remuneration by way of salary, perquisites and allowances (fixed component) and variable pay to Wholetime Director. Salary is paid within the range approved by the Shareholders. Annual increments effective 1st January each year, as recommended by the Nomination and Remuneration Committee, and is approved by the Board. Within the prescribed ceiling, the perquisites package is approved by the Remuneration Committee. The remuneration paid to Executive Directors is determined keeping in view the industry benchmark and the relative performance of the Company to the industry performance. Perquisites and retirement benefits are paid according to the Company policy as applicable to all employees Independent Non-Executive Directors are appointed for their professional expertise in their individual capacity as independent professionals / Business Executives. Independent Non-Executive Directors receive sitting fees for attending the meeting of the Board and Board Committees and commission as approved by the Board and shareholders. The remuneration by way of commission paid to the Independent Non-Executive directors is determined periodically & reviewed based on the industry benchmarks. Key Managerial Personnel and Other Employees The remuneration of employees largely consists of basic salary, perquisites, allowances and performance incentives. Perquisites and retirement benefits are paid according to the Company policy, subject to prescribed statutory ceiling. The components of the total remuneration vary for different grades and are governed by the industry pattern, qualification & experience / merits, performance of each employee. The Company while deciding the remuneration package takes into consideration current employment scenario and remuneration package of the industry. The annual variable pay of managers is linked to the performance of the Company in general and their individual performance for the relevantyear measured against Company's objectives fixed in the beginning of the year. CRITERIA FOR BOARD MEMBERSHIP Directors The Company shall take into account following points: • Director must have relevant experience in Finance/ Law/ Management/ Sales/ Marketing/ Administration/Research/Corporate Governance/ Technical Operations or the other disciplines related to company's business. • Director should possess the highest personal and professional ethics, integrityand values. • Director must be willing to devote sufficient time and energy in carrying out their duties and responsibilities. Independent Director Independent Director is a director who has no director indirect material relationship with Sunshield or any of its officers, other than as a director or shareholder of Sunshield. Independent Director shall meetall criteria specified in Section 149(6) of the Companies Act, 2013 and rules made there under and Clause 49 of the Listing Agreement entered into with BSE Limited. 14. RISK MANAGEMENT POLICY AND INTERNAL CONTROLADEQUACY The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. The Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. 15. VIGILMECHANISM The Company has established a vigil mechanism named as Whistle Blower Policy within the Company. The policy of such mechanism has been circulated to all employees within the Company, which provides a framework to the employees for guided & proper utilization of the mechanism. The Whistle Blower Policy has been published on the Company's website <http://www.solvayindia.in/en/solvay-in/sunshield->chemical-limited. There have been no instances of any personnel seeking access to the Audit Committee. 16. AUDITORS Statutory Auditors The Statutory Auditors, M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, hold office for a term of Five (5) years subject to ratification by members at every Annual General Meeting. Accordingly, a Resolution seeking Member's ratification for the appointment of M/s. Deloitte Haskins & Sells LLP is included at Item No. 4 of the Notice convening the Annual General Meeting. They have issued necessary certificate as required underSection 141 of the Companies Act, 2013. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Company has appointed M/s. Kishore Bhatia & Associates, Cost Accountant as the Cost Auditor of the Company for the financial year 2014-15. Cost Audit Report for the year 2013-14 was filed with the Ministry of Corporate Affairs on 12th August 2014 in XBRL format. Cost Audit Report for the financial year 2014-15 shall be filed with the Ministry of Corporate Affairs within 180 days from the closure of the financial year i.e. on or before 27thSeptember 2015. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Alwyn D'Souza & Co., Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith asAnnexure A. The Report does not contain any qualification, reservation or adverse remark. Internal Audit M/s. Nikhil Narkar & Associates, Chartered Accountants has been appointed as Internal Auditor of the Company. 17. COMMENTS ON AUDITORS' REPORT There are no qualifications, reservations or adverse remarks or disclaimers made by Deloitte Haskins & Sells LLP, Statutory Auditors, in their report and by Mr. Alwyn D'souza, Company Secretary in Practice, in his secretarial audit report. 18. EXTRACTOFANNUALRETURN: The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure B. 19. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDERSECTION 186 The Company has not provided any loans, Guarantees or made investments under Section 186 of the Companies Act, 2013 20. PARTICU LARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) During the financial year 2014-15, Company has entered into transactions with related parties, which were in the ordinary course of business and on arms' length basis and in accordance with the provisions of the Companies Act, 2013, Rules issued there under and Clause 49 of the Listing Agreement. During the financial year 2014-15, there were no transactions with related parties which qualify as material transactions under the Listing Agreement. The details of the related party transactions as required under Accounting Standard - 18 are set out in Note 27.9 to the financial statements forming part of this Annual Report. The Form AOC- 2 pursuant to Section 134 (3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure C. 21. CORPORATE SOCIAL RESPONSIBILITY The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR policy of the Company and Annual Report on CSR activities is annexed herewith asAnnexure D. 22. FIXED DEPOSITS The Company has not accepted any fixed deposits during the year. 23. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY There have been no 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 statement srelate and the date of the report. 24. EMPLOYEES The information required pursuant to Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, is annexed herewith as Annexure E. 25. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE There were no incidences of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 26. CONSERVATION OF ENERGY, TECHNOLOGY AB SORPTI ON AN D FOREIGN E XCH ANGE EARNINGS AND OUTGO As required by Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, relevant data pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, is annexed herewith as Annexure F to this Report. 27. CORPORATE GOVERNANCE REPORT The Corporate Governance Report for the financial year 2014-15 is set out as a separate Annexure to this Report. Certificate from the Practicing Company Secretary, certifying, compliance with Clause 49 of the Listing Agreement with the Stock Exchange in respect of Corporate Governance is annexed to the Report on Corporate Governance. 28. ENVIRONMENT, HEALTH AND SAFETY Your Company recognizes importance of Health and Safety of its employees and its neighborhood. Regular Safety Audits are being conducted. Your Company has adopted a Health, Safety and Environment (HSE) Policy, which applies to all employees and activities. 29. APPRECIATION Your Directors place on record their sincere appreciation of the wholehearted supportextended by the Company's bankers, business associates, employees' union, shareholders, auditors and various statutory authorities, both, central and state Government. For and On Behalf of the Board of Directors R L Shenoy Chairman Place : Mumbai, Date : 15thJuly2015 |