excel crop care ltd Directors report

TO THE MEMBERS,

Your Directors have pleasure in presenting the Fifty-Fourth Annual Report and the Audited Financial Statements of the Company for the year ended 31st March, 2018.

1. FINANCIAL RESULTS

The salient features of the Companys working are:

		(Rs. in Lacs)
	2017-18	2016-17
Gross Profit for the year	138,46.08	101,27.40
Less: Depreciation and amortization expense	16,83.69	17,10.11
Profit before exceptional items and tax	121,62.39	84,17.29
Add: Exceptional Items	—	10,54.45
Profit before tax	121,62.39	94,71.74
Less: Tax expense (Current and Deferred Tax)	40,31.37	24,27.75
	81,31.02	70,43.99
Add: Balance brought forward from the previous year	31,62.22	79,26.88
Profit after tax	112,93.24	149,70.87
Appropriations:
Dividend paid for F.Y. 2015-16	—	13,75.70
Interim Dividend paid for F.Y. 2016-17	—	12,65.65
Proposed Dividend for F.Y. 2017-18	9,62.99	—
Tax on Dividends	1,97.95	5,32.43
Other Comprehensive income (net of tax) (added to)/reduced from retained earnings	(3,46.86)	1,34.87
Transfer to General Reserve	70,00.00	85,00.00
	78,14.08	118,08.65
Carried forward to next year	34,79.16	31,62.22

2. DIVIDEND

Your Directors have recommended a dividend of 175% amounting to Rs. 8.75 per equity share of Rs. 5.00 each. The Directors consider this appropriate having regard to the requirements for funds for future growth of the Company. Last year the Company paid interim dividend of Rs. 11.50 per equity share.

3. ACCOUNTING STANDARDS AND GST

For and up to F.Y. 2016-17, financial statements were prepared in accordance with the then applicable accounting standards (‘Indian GAAP). From 1st April, 2017, Indian Accounting Standards (‘Ind AS) are applicable to the Company. Accordingly, the Company has adopted Ind AS and prepared financial statements for F.Y. 2017-18 in accordance with the principles laid down in Ind AS. The comparative data for the previous financial year 2016-17 have also been presented in accordance with Ind AS. In preparing these financial statements, the Companys opening balance sheet as at 1st April, 2016, the Companys date of transition to Ind AS, has also been prepared accordingly. The Company has, therefore, made principal adjustments to restate its Indian GAAP financial statements as at and for the year ended 31st March, 2017.

Goods and Service Tax (GST) was introduced with effect from 1st July, 2017. GST subsumed Excise Duty, Service Tax, Value Added Tax, Octroi Duty and Entry Tax, amongst others. GST did not have material cost and pricing impact on the industry and the Company. However, higher amount is locked-up in working capital by way of GST input credit . The Companys transition to GST regime was fairly smooth.

4. OPERATIONS

During the year under review, the sales increased from Rs. 1024.24 crore in the previous year to Rs. 1162.28 crore. Domestic sales turnover increased to Rs. 841.29 crore from Rs. 758.55 crore in the previous year. Export turnover also increased from Rs.265.69 crore in the previous year to Rs. 320.99 crore in the year under review. The Companys profit before exceptional items and tax in 2017-18 is Rs. 121.62 crore as against Rs. 84.17 crores in the previous year.

The overall performance of monsoon in 2017 was satisfactory which helped the Company in improving sales in the domestic market. However, several parts of the country witnessed poor rainfall. In the export market, the Company was able to increase its sales turnover significantly in spite of stiff competition and adverse forex conditions and currency volatility in some importing countries.

5. NEW PRODUCTS/IMPROVEMENTS/EXPANSIONS

In the year under review, your Company continued to pursue initiatives to optimise utilization of its manufacturing facilities by undertaking in-house manufacturing of new products. Your Company commercialised production of four technical grade products and six new formulation products (including combination products in insecticides, herbicides, fungicides and plant nutrient segments). It also expanded manufacturing capacity for four major products during the year under review.

Your Company continues its efforts in the area of product and process improvement for enhancing yields, reducing manufacturing costs, reducing effluent load and effluent treatment cost, and also for staying innovative and competitive in the market. Your Company also continues to focus on energy conservation and energy cost reduction.

The Company continues to maintain ISO:9001-2008 Quality Management System for all its three manufacturing sites at Bhavnagar, Gajod and Silvassa. The quality of the products is maintained and upgraded to the applicable national and international standards through rigorous pursuit of Six Sigma initiative. The Company continues to enjoy the reputation of a consistent and reliable quality supplier.

During the year, the Company expanded the capacity of its solar power plant in Gajod, Kutch by 125 KW. This initiative towards green energy would also help in reducing dependence on outsourced power as well as in energy cost reduction.

6. OUTLOOK

The importance of agrochemicals has been increasing over the last few decades driven by the need to improve overall agricultural productivity and to ensure adequate food availability for the growing population. Preceding three years have been challenging for crop protection chemicals industry in India as well as the world. 2017, however, turned out to be a normal monsoon year. As per the Economic Survey of India, agriculture sector has grown by 4.1% in 2017.

In 2016, the Prime Minister unveiled a strategy to double farmers income by 2022. The Ministry of Agriculture and the Indian Council of Agricultural Research stressed that to achieve this, it is necessary to improve farmers awareness about pesticide use to reduce crop losses and to help them learn modern farming techniques.

Prices of agrochemicals like insecticides and herbicides are likely to go up with shut down of many factories in China, the worlds largest producer of agrochemicals, due to tightening of pollution control norms. Indian players, who have manufacturing strength, especially with backward integration, will have opportunity to emerge as global players. This will be a boost for the ‘Make in India initiative of the government.

As per predictions of both Indian Meteorological Department and Skymet, 2018 southwest monsoon is expected to be ‘normal. The Central Governments announcement of covering more crops under minimum support price ("MSP") regime and promise of cost linked MSP should put more purchasing power in farmers hands, which, in turn, will improve chances of the farm sector recovery, which has seen fluctuating growth in the recent past.

The Company expects to continue to perform well in export of branded products due to favourable climatic conditions in its major export geographies. Performance in export of technical grade products will however depend upon the developments in the Chinese industry. The Company expects to enter certain developed markets which can drive future growth .

7. SAFETY, HEALTH AND ENVIRONMENT

The Company continues to play the role of a responsible corporate citizen in the fulfilment of its aims of protecting and enriching the environment and human health and safety. The Company continues to hold and maintain ISO-9000, ISO-14000 and ISO-18001 certifications which offer benefits in terms of consistent product quality and healthy working environment at manufacturing sites. The Company also continues to sustain its SA 8000 – Certification for Social Accountability for all its sites. Safety audit, training programmes and other safety management processes and programmes are carried out/conducted at regular intervals. All the manufacturing and warehousing sites of the Company are covered by safety audit.

8. EDUCATION, LEARNING AND HUMAN RESOURCES

Your Company continues to invest in the development and growth of the employees through training and development programmes which help in growth of the organisation and also enhance job-satisfaction and employee morale. Your Company endeavours to ensure that it has requisite competency to meet the new challenges in the changing business environment. This is done by focusing on capability, skill and competence building and through specially devised developmental programmes to identify potential candidates and develop them for higher responsibilities.

The relations between the employees and the management continue to be cordial. Your Directors wish to place on record their appreciation of the sincere and devoted efforts of the employees and the management staff at all levels.

Your Company continues to educate farmers on various aspects of farming including latest technology and new products.

9. INSURANCE

The Company continues to carry adequate insurance cover for all its assets against foreseeable perils like fire, flood, earthquake, etc. and continues to maintain Consequential Loss (Fire) Policy and the Liability Policy as per the provisions of the Public Liability Insurance Act.

10. SUBSIDIARIES

Highlights of the financial performance of Excel Crop Care (Africa) Limited, Tanzania and Excel Crop Care (Europe) NV, Belgium, subsidiary companies, during FY 2017-18 are as follows:

Excel Crop Care (Africa) Limited, Tanzania

	(Tanzania Schillings in millions)
	2017-18	2016-17
Sales Turnover	5,087	13,865
Profit before Tax	385	108
Profit after Tax	269	76

Excel Crop Care (Europe) NV, Belgium

	(Euros in thousands)
	2017-18	2016-17
Sales Turnover	2,544	3,031
Loss	41	33

During the year 2017-18, Excel Crop Care (Africa) Limited, Tanzania changed its business model from ‘Trading to ‘Commission Agency business for some businesses. The reduced sales turnover reflects the change in the business model. However its profits have increased as compared to the previous year.

During the year under review, Excel Crop Care (Africa) Limited declared and paid a dividend for FY 2016-17 at the rate of Tanzania Schillings 15,000 per share i.e. 15%. The Company received Rs. 7.25 Lac by way of dividend from the subsidiary.

Excel Crop Care (Australia) Pty Limited, Australia did not have commercial activities during FY 2017-18 as in the past several years. The Board has decided to wind up Excel Crop Care (Australia) Pty Limited and steps are being taken for the same.

Excel Brazil Agronegocious Ltda, the Companys subsidiary in Brazil, was incorporated in 2011 but had no commercial operations. The subsidiary was also not funded for share capital. Excel Brazil Agronegocious Ltda has been wound up effective 31st March, 2017.

The Financial Statements and the Reports of the Board of Directors and the Auditors of the Companys subsidiaries shall be made available to the Members on requisition. These are also available for inspection at the Registered Office and Corporate Office of the Company and are also being posted on the Companys website: www.excelcropcare.com

11. DISCLOSURE UNDER THE COMPANIES ACT, 2013

Information is given below pursuant to various disclosure requirements prescribed under the Companies Act, 2013 and rules thereunder, to the extent applicable to the Company. Some of the disclosures have been included in appropriate places in the Corporate Governance Report which is part of the Boards Report.

a) Energy Conservation, Technology Absorption and Foreign Exchange earnings and outgo:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is given in Annexure I.

b) Extract of Annual Return:

The details forming part of the extract of the annual return in form MGT-9 are given in Annexure II.

c) Policy on Directors appointment, Remuneration Policy and information regarding remuneration:

Particulars of the Companys Policy on Directors appointment, Remuneration Policy and information pursuant to Rule 5(1) of the Companies (Appointment & Remuneration) Rules, 2014 are given in Annexure III.

d) Particulars of Loans, Guarantees and Investments:

The details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

e) Related Party Transactions:

All contracts/arrangements/transactions entered by the Company during the financial year with related parties were on an arms length basis.

All related party transactions are placed before the Audit Committee for their approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a repetitive nature. The transactions entered into pursuant to the omnibus and specific approvals are reviewed periodically by the Audit Committee.

Sumitomo Chemical India Private Limited (SCIPL) is a subsidiary of Sumitomo Chemical Company, Limited, Japan, (SCC), the Companys Holding Company and therefore, SCIPL is the Companys related party. Both, the Company and SCIPL, are engaged in agro-chemicals business. As a part of its regular business, the Company has business transactions with SCIPL which comprise purchase, sale and supply of goods (including raw materials, intermediates, finished product, capital goods and other items), providing and availing services (including job work services), payment of dividend on shares and other transactions in the ordinary course of business. All the transactions with SCIPL are at arms length.

Pursuant to the provisions of Regulation 23 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("the said Regulations") all material related party transactions require approval of the members through a resolution. The said Regulations define the term ‘material to mean a transaction with a related party which individually or taken together with previous transactions during a financial year exceeds ten percent of the annual consolidated turnover of the Company as per the last audited financial statement of the Company.

During the year, the Company entered into transactions with SCIPL which are considered ‘material transactions in terms of the said Regulations.

The Shareholders have given approval for the transactions of the Company with SCIPL during the year by an Ordinary Resolution passed through Postal Ballot Process. By another Ordinary Resolution passed through Postal Ballot Process, the Shareholders have accorded approval for the transactions up to an amount not exceeding Rs. 200 crore to be entered into by the Company with SCIPL during F.Y. 2018-19 .

The Policy on related party transactions as approved by the Board may be accessed on the Companys website www.excelcropcare.com

Particulars of contracts entered during the financial year 2017-18 as per Form AOC-2 are given in Annexure-IV.

f) Business Risk Management:

Over the years, the Company has evolved and implemented its Enterprise Risk Management Policy.

As a part of its risk management process, the Company has identified and compiled a list of risks which need to be addressed, managed and mitigated. The mitigation measures for such risks are also identified and implemented. The major risk areas relate to forex fluctuation, credit risks mainly relating to exports, regulatory risks, business competition risks and insurance adequacy risks.

g) Evaluation of the performance of the Board, Committees of Directors and Individual Directors:

The Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual Directors, including the Chairman of the Board. As a part of this mechanism, a structured questionnaire, which has been approved by the Companys Nomination and Remuneration Committee, is used to carry out evaluation of performance of the Board, Committees of Directors and individual Directors. The questionnaires take into consideration various criteria and factors.

h) Material orders passed by the regulatory authorities or courts/material changes or commitments:

There are no material orders passed by the regulators/courts which can impact the going concern status of the Company and its future operations. There are no material changes or commitments occurring after 31st March, 2018 which may affect the financial position of the Company.

i) Internal Financial Controls and their adequacy:

The Company has adequate system of internal controls to safeguard and protect from loss, unauthorised use or disposition of its assets. All the transactions are properly authorised, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for proper maintenance of books of accounts and for financial reporting.

j) Performance of Subsidiaries:

Details of performance and financial position of each of the Subsidiaries are given in Form AOC-1 in Annexure V. The Company has no associate company.

k) Corporate Social Responsibility (CSR) initiatives:

The Company has formulated its Corporate Social Responsibility Policy which has been posted on its website www.excelcropcare.com

A brief outline of the Policy and the Annual Report on CSR Activities is given in Annexure VI.

l) Particulars of Employees:

The information required under Section 197 of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure VII.

m) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules made thereunder, Mr. Prashant Diwan, Practicing Company Secretary (FCS:1403; CP NO.1979), Mumbai, was appointed Secretarial Auditor to conduct secretarial audit for the year ended 31st March, 2018. The Report of the Secretarial Auditor is attached as Annexure VIII.

n) Secretarial Standards:

The Company has complied with the applicable ‘Secretarial Standards on Meetings of the Board of Directors - SS 1 and ‘Secretarial Standards on General Meetings - SS 2.

12. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Seiji Ota, Non-Executive Director, resigned from the Board with effect from 8th August, 2017 . The Board places on record its appreciation of Mr. Otas contribution to the Board and Committee deleberations .

Mr. Tadashi Katayama, Non-Executive Director, retires by rotation at the ensuing annual general meeting of the Company and is eligible for re-appointment. The Board commends his re-appointment.

The Board has appointed Mr. Kiyoshi Takayama as Executive Director for a period of 3 years with effect from 1st April, 2018, subject to the approval of the members of the Company. A Special Resolution is included in the Notice convening the annual general meeting seeking approval of the members to the appointment of Mr. Kiyoshi Takayama as Executive Director.The Board commends his appointment. Mr. Kiyoshi Takayama is a Key Managerial Personnel under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

13. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

(b) 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;

(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

(e) 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; and

(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

14. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report prepared pursuant to Regulation 24 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in relation to initiatives taken from environmental, social and governance perspective in the prescribed form forms part of the Annual Report and is given in Annexure IX.

15. CORPORATE GOVERNANCE

Your Company is committed to the principles of good Corporate Governance and the Board of Directors lays strong emphasis on transparency, accountability and integrity. Your Company has complied with all the requirements of the Code of Corporate Governance contained in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and, pursuant thereto, Management Discussion and Analysis, Corporate Governance Report and the Auditors Certificate regarding compliance of the same are annexed and form part of the Annual Report.

16. AUDITORS

Statutory Auditors:

At the 53rd annual general meeting of the Company held on 24th July, 2017, the members of the Company had approved the appointment of Messrs BSR & Associates LLP, Chartered Accountants, Mumbai, as the Auditors of the Company for a term from the conclusion of the 53rd annual general meeting until the conclusion of the 58th annual general meeting, subject to ratification of such appointment by the members at every annual general meeting, in pursuance of the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

However, vide the Companies (Amendment) Act, 2017 and the Companies (Audit and Auditors) Amendment Rules, 2018, the requirement for ‘seeking ratification of appointment of the auditors (appointed for five year term) at every annual general meeting has been omitted. This amendment has come into effect on 7th May, 2018. In view of the aforesaid amendment, the ratification of the appointment of the auditors will not be necessary going forward. However, in view of the resolution passed at the 53rd annual general meeting it is proposed to ratify the appointment of the Auditors and confirm their appointment upto the conclusion of the 58th annual general meeting of the Company without the requirement of any further ratifications by the members.

Cost Auditor:

The Board of Directors has re-appointed Mr. Kishore Ajitshi Bhatia as the Cost Auditor for the financial year 2018-19 to carry out audit of the Companys cost records as prescribed under Section 148 of the Companies Act, 2013. The Cost Audit Report for the financial year 2016-17, which was required to be filed with the Ministry of Corporate Affairs on or before 27th August, 2017, was filed on 21st August, 2017 vide SRN: G50918572.

17. ACKNOWLEDGEMENTS

Your Directors wish to place on record their sincere appreciation of the wholehearted co-operation received from the Companys Shareholders, Bankers, various authorities of the Governments and business associates.

	For and on behalf of the Board of Directors
	DR. MUKUL G. ASHER
	Chairman
	DIN: 00047673
Mumbai, 25th May, 2018.