Akzo Nobel India Ltd Directors Report.

Dear Members,

The Board of Directors hereby present their 67th report on the business and operations of your Company along with the audited financial statements for the financial year ended 31 March 2021.

Business Environment Economy

The fiscal year 2020-21 was among the most volatile years in terms of economic growth, demand, commodity prices and forex.

The impact of Covid-19 induced lockdowns dented Indias economy with GDP declining 24.4% in Q1 and 7.3% in Q2 followed by a gradual and slow recovery in H2.

Private consumption (accounting for ~57% of GDP) witnessed a sharp decline of -24.5% in Q1 2020-21, recovering gradually to 2.7% in the fourth quarter. Investments too contracted 48% during the first quarter but concluded the year with 11% growth.

Brent crude prices fell to $9.12 per barrel in April 2020 as the world went under a lockdown. But with the global economy and trade picking up, Brent crude prices steadily rose, brie_y crossing $70 a barrel in March 2021 for the first time since the pandemic.

With the weakening global sentiment, Rupee depreciated to almost 77 to a dollar before RBI interventions and gradual economic recovery strengthened it to average 74 for the year.

While the second wave of Covid-19 infections and associated localized lockdowns made an economic impact and remain a concern, increase in inoculation should allow restrictions to be eased significantly towards the end of 2021 and in 2022. A pick-up in private consumption, investment by Government, agricultural performance, and revival of manufacturing, construction, banking and real estate activity should provide a fillip to recovery.

Despite the challenges brought by the second Covid-19 wave, Indias economy is currently projected to grow 8-10% in the coming year.

Industry

The pandemic also brought about shifts in the Paints & Coatings industry with 2020-21 being a year of two halves. The first Covid-19 wave in H1 2020 impacted Tier 2/3/4 towns relatively lesser than Metros and Tier 1 towns. Consequently, the industry witnessed recovery being led by these markets, with volume growth exceeding value growth. With the unlock in H2, recovery was led by pent up demand, opening of metros, festive season and revival in the real estate industry.

In the backdrop of the Covid-19 pandemic, health and hygiene became the focal point for government, businesses and individuals alike. Paints & Coatings industry was no exception. The year saw many players expanding their portfolio to include offerings with antimicrobial properties, sanitizers and disinfectants. In addition, Paint makers increased their focus on adjacent products in waterproo_ng, construction chemical, putty and adhesives segments.

Projects business also revived with recovery in real estate sector. Rise in real estate registrations, not just in smaller towns but even in cities and urban areas, bode well for paint demand in CY21. Considering projects account for ~10% of paint consumption in India, we believe revival in projects business will augur well for FY22.

The second Covid-19 wave has brought about near-term challenges due to regional lockdowns, particularly impacting rural and semi-urban markets. Short-term paint demand was, therefore, impacted.

However, long-term fundamentals of the industry continue to be buoyant and strong and the industry should see high double-digit growth driven by an increase in the disposable income of individuals and families, various housing schemes and upside potential from low per capita consumption.

On the industrial business, although things may take a little time to recover, there are signs of capex cycle turning, with increased government spending in H2 2020-21. Infrastructure development is anticipated to remain government priority in the medium term. The National Infrastructure Pipeline (NIP) has identified 7,000 projects that require over H 111 lakh crore in investment in core sectors like power, roads, railways, and urban projects over the next five years.

While Passenger vehicle volumes brie_y turned positive after declining for 23 months, the second Covid wave again hit the industry. Gradual revival in auto sector and price hikes (if any) by auto companies could help drive demand for auto refinish segment too.

A significant risk to the industry comes from Raw material prices which have started exerting inflationary pressures. Most players have taken price increases and continue to monitor raw material cost trend and its impact.

Subsidiary

Pursuant to section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014, and other applicable provisions, if any, of the Companies Act 2013 (‘the Act), a statement containing salient features of the financial statement of the subsidiary of the Company viz. ICI India Research & Technology Centre, in Form AOC-1 forms part of this Annual Report. The consolidated financial statements presented in this annual report include financial results of the subsidiary pursuant to Rule 8(1) of the Companies (Accounts) Rules, 2014.

In accordance with section 136 of the Act, the financial statements of the subsidiary are available for inspection by the members at the registered office of the Company during business hours on all days except Saturdays, Sundays and Public holidays up to the date of the Annual General Meeting (‘AGM). Due to prevailing COVID-19 situation, members are requested to email a request for obtaining a copy of the said financial statements at investor.india@akzonobel.com so that necessary arrangements can be made at the registered office of the Company. The financial statements including the Consolidated Financial Statement and all other documents required to be attached to this report have been uploaded on the website of the Company at www.akzonobel.co.in.

Share Capital

The paid up share capital of the Company as on 31 March 2021 was H 455.40 million comprising 45.54 million equity shares of H 10 each (Previous year H 455.40 million comprising 45.54 million equity shares of H 10 each).

Dividend

The Board of Directors at its meeting held on 9 February 2021, approved payment of interim dividend of H 20 per share. This dividend was paid on 5 March 2021 to those shareholders whose name was registered in the Register of Members as on 19 February 2021, being the record date. Your Directors are pleased to recommend a Final Dividend of H 30 per share for the year ended 31 March 2021. The Final Dividend, subject to the approval of Members at the Annual General Meeting on Friday, 13 August 2021, will be paid to those Members whose names appear in the Register of Members, as on the record date 6 August 2021. The total dividend for the financial year, including the proposed Final Dividend, amounts to H 50 per equity share.

In view of the changes made under the Income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. Your Company shall, accordingly, deduct tax, if any, before making divident payments.

The Company is in compliance with its Dividend Distribution Policy as approved by the Board. In compliance with the requirements under Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the Policy has been uploaded on the Companys website at www. akzonobel.co.in and may be accessed from www.akzonobel. co.in/corporate-governance.php#policy.

Transfer to Reserve

During the financial year, there was no amount proposed to be transferred to the Reserves.

Management Discussion and Analysis Financial Statements

The financial statements include:

1. Stand-alone financial statements of the Company, Akzo Nobel India Limited; and

2. Consolidated financial statements of the Group including the operational results of ICI India Research & Technology Centre, on which the Company exercises effective control.

The highlights of the performance during the year are:

Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Revenue from Operations 24,214 26,618 24,214 26,618
Operating Profit (EBITDA)* 3,408 3,791 3,408 3,792
Depreciation (755) (790) (755) (790)
Other Income net of finance costs 129 283 129 283
Exceptional items - (52) - (52)
Profit before tax 2,782 3,284 2,782 3,284
Tax (706) (858) (706) (858)
Profit after tax 2,076 2,374 2,076 2,374

*before exceptional items

Key financial ratios

Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Debtors Turnover 5.9 6.7 5.9 6.7
Inventory Turnover 2.7 3.4 2.7 3.4
Interest Coverage 33.2 40.6 33.2 40.6
Current ratio 1.6 1.6 1.6 1.6
Operating Profit Margin (%) 14 14 14 14
Net Profit Margin (%) 9 9 9 9
Return on Investment (%) 15 18 15 18

Ratios are not comparable on YoY basis due to lockdown impact of H1 2020.

Debt equity ratio not covered as the Company does not have debt.

There is no significant change (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios.

While the first quarter was a washout, the Company made steady recovery with each consecutive quarter, making a strong finish to the year.

The focus of your company for the first couple of quarters was – Customer, People, Cash and Cost as the vectors on which your management pivoted actions.

Revenue declined 9% during 2020-21, with Metros and Tier-1 towns seeing higher impact. Performance in H2 partially offset the adverse impact of H1. This was supported through product launches across health & hygiene categories at different price points, and customer centric B2B solutions when the industry got back to growth. With access to global R&D technology, your

Company continues to focus on innovations by bringing best in class differentiated products to the Indian consumer. Although challenges remained in Oil & Gas and Power sectors, Decorative Paints, Auto and Steel sectors brought growth opportunities in Q4 2020-21.

Gross Margins began to experience some pressure since the beginning of 2021 due to rising raw material costs. However, the impact was somewhat mitigated through value engineering initiatives.

During the most unprecedented global health emergency, your Company swiftly took measures to strengthen its own health. While efficiencies had already been brought in with our transformation initiatives in prior years, the pandemic opened new avenues of cost optimization. As a result, we were able to maintain our profitability at 11% EBIT%. However, at no point were employee interests impacted. We honoured all offers, hikes and rewards, and we continue to keep people welfare our topmost priority.

Industry structure

Indias Paints & Coatings industry is approx. H 55,000 Crore market and a fairly structured one, with organized players accounting for over ~ 70% of the industrys sales. As per Indian Paints Association estimates, ‘Paints account for around 75% of the overall market and ‘Coatings account for the rest. Product performance, differentiation and quality service continue to be the key differentiators across this market. While Paints is a B2C business, Coatings is essentially a B2B business and is technology intensive with a diverse set of growth drivers, with strong emphasis on selling a solution rather than a product. Entry of several new players in recent years has intensi_ed the competition in the market.

Business Performance

Decorative Paints:

AkzoNobels Decorative Paints business offers a wide variety of essential products for every situation and surface, including paints, lacquers and varnishes. The business also supplies a range of mixing machines, color concepts and training initiatives to the building and renovation industry.

Some of the success stories of the business during the year are as follows:

• Launch of Dulux Assurance, a first-of-its-kind consumer program for Premium Emulsions. The program promises perfect colour, uniform finish and coverage from Dulux Paints. The initiative was supported with big scale Print and TV Media campaigns to take the proposition to end consumers.

• Other launches in the Premium category included new SuperClean (with superior washability property), upgrade of Dulux Weathershield Protect premium exterior paint (offering 6 years protection) and a refreshed Weathershield UltraClean proposition.

• Offerings in affordable segment included Promise

SmartChoice Exterior & Interior entry level emulsion, Promise Interior relaunched with Anti-Bacterial formula and Promise Sheen (a high sheen finish at an affordable price range).

• Waterproo_ng category was extended to economy segment with launch of Aquatech DampProtect Basecoat.

• Dulux Professional Weathershield Anti-Carb, a specialist Anti-Carbonation paint, was introduced to support Indian governments efforts towards building world class infrastructure. This water-based coating protects steel reinforcement in concrete from corrosion, while complying with the specifications of the Ministry of Road Transport and Highways.

Automotive & Specialty Coatings (ASC):

Delivering cutting-edge coating solutions to a variety of industries, Automotive and Specialty Coatings in India comprises Automotive OEM Coatings, Consumer Electronics Coatings, Vehicle Refinishes and Specialty Coatings.

The auto industry, which was already facing headwinds from NBFC crisis in the previous year, experienced its worst-ever challenge with the pandemic. However, the industry made a commendable turnaround in the second half of the fiscal year driven by an increasing preference for personal mobility, demand from e-commerce, festive season and new launches.

During the year, the ASC business received OEM approvals from players like Citroen and MG, which reinforces the trust and preference for AkzoNobels premium Sikkens brand. The Value Brand Wanda too made great strides in expanding geographic footprint.

During the year, the business was awarded Best Innovation Award by the World Auto Forum, one of the most aspirational awards across the Automotive & Mobility ecosystem in India.

Powder Coatings:

Our Powder coatings are a first-class and sustainable alternative to liquid paint. These find application in architecture, general industries, automobiles, functional and domestic appliances.

Post Unlock, segments like Hospital infrastructure, Furniture and General industrial saw some green shoots. Last two quarters of the fiscal year saw Automotive come back strongly. Growth has been supported by innovative Liquid to Powder conversion in Industrial and Automotive Markets.

During the year, the business launched Interpon Redox, a new range of corrosion protection for a variety of substrates, surfaces, and environments – from swimming pools to chemical plants and high humidity to highly corrosive areas. With infrastructure activity picking up, Powder business also made inroads in Bonded metallics for Architecture facades which find applications in Airports, Residential and Commercial buildings.

Industrial Coatings:

Serving the consumer goods, buildings and infrastructure industries, the Industrial Coatings business includes Coil and Extrusion Coatings, Packaging Coatings, and Wood Finishes and Adhesives.

Coil and Extrusion Coatings provides high performance coatings to the metal construction industry including roo_ng, building construction, aluminium composite panels (ACP) and Domestic Appliance (DA) segment.

Coated steel market saw a major downturn due to the pandemic with the construction industry declining almost 10-11%. Extrusion Coatings which mainly supplies coatings for aluminium facades, door and window frames, high end infrastructures too saw muted growth as many projects were stalled by the pandemic and labour migration. However, the industry coped up well in the second half with a strong growth in the steel sector both from domestic and export volumes. Demand for this segment is likely to remain strong supported by various government focusing on housing, urbanization and other infrastructure projects.

Packaging Coatings provides coatings and inks for the metal packaging industry including Food, Caps & Closures, General Line and Beer & Beverage industry.

Packaging Coatings business in 2020-21 remained relatively insulated from the adverse impact of the pandemic, as it mainly serves the essentials category. Beer & beverage segment entered growth trajectory in the second half of the year with major volumes coming from exports. Your company successfully launched the BPANI (BPA Non-Intended) Internal Spray Lacquer, a protection solution for all types of beverage cans. Demand for the domestic packaged food and beverages, and products catering the sanitizers industry, remained robust.

Marine & Protective Coatings:

This business is all about protecting and beautifying assets, both in and out of water. Through our flagship International brand, Marine & Protective Coatings find applications in a variety of end-industries including Oil & Gas, Power, Infrastructure projects and Wind Energy.

Innovation and customer focused solutions remained a theme for the year, and the segment launched many pioneering products. Some of these were Intersmooth 7200Si SPC,

Intersmooth 7476Si SPC (antifouling solutions specially designed for Deep Sea Vessels), Interthane 990E (finding application in new construction and maintenance), Interzinc 52E (providing maximum corrosion protection for aggressive environments) and Intershield 4000 USP (a universal primer intended for both anticorrosive and passive fire protection systems).

Although near-term challenges persist, market seems poised for a strong comeback in 2021, with Infrastructure, Power, Oil & Gas and Chemical sector maintenance and repair looking strong.

This year has been a testimony to the resilience of our people, partners and customers, and intrinsic excellence of our products.

Companys Business Strategy

Your Companys strategic objective is to build a sustainable business for long-term value creation as a part of the Grow and Deliver strategy embarked by AkzoNobel Group. To achieve this objective, your company is focusing on:

a) Leveraging world class global brands and colour expertise to develop relevant offerings for the Indian market to create sustainable profitable growth,

b) Growing profitably, while increasing returns to all our stakeholders,

c) Creating new business models to enhance reach and enhance Customer service,

d) Driving digital and sustainable innovation.

Covid-19 Update

The outbreak of Covid-19 pandemic has created economic disruption throughout the world including India. The operations of the Company were significantly impacted earlier during the year due to supply chain disruptions caused by lock down of plants, offices and warehouses. The Company continues to carry its operations in a manner consistent with the directives from the government and local authorities, and continues to ensure compliance with the necessary protocols.

The Company has evaluated the effects of Covid-19 on its operations and financial position. Based on its review of the macro economic conditions and current outlook for the Indian economy, there is no additional impact on financial statements apart from those already considered in the financial statements of the Company as at 31 March 2021. However, given the evolving scenario and uncertainties with respect to its nature and duration, the impact may be different from estimates as on the date of approval of financial statements. The Company will continue to monitor any material changes to its future business and economic conditions.

Risks and Concerns

At AkzoNobel we believe that systematic risk management practices ensure effective navigation to achieve business objectives and enable sustainable growth in a volatile and complex environment. Your Company truly believes that business will always involve risks. These risks are constantly evolving and changing, in terms of their impact & probability of their occurrence. Your Company constantly scans the external environment to identify the emerging risks and also assesses them for impact on your Companys objectives.

The Board is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. In this process, the Board is ably guided by its Risk Management Committee, which reviews the enterprise-wide risk management efforts of the management. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the Company are systematically addressed through mitigating plans further drilled into actions on a continuing basis. Listed below are some of the key risks, their anticipated impact on the Company and mitigation measures:

Raw Material risk: Prices of several raw materials used by the Company are driven by crude oil price and foreign exchange movement. A risk to the industry comes from Raw material prices which have started exerting inflationary pressures. The Company monitors this based on international forecasts and price trends.

Cyber security risk: Digital security breach or disruption to digital infrastructure, due to intentional or unintentional actions, such as cyberattacks, data breaches or human error could lead to serious financial loss, business disruption and/ or damage to our reputation

End user awareness campaigns have been done to maintain awareness and implementation of Security Operating Centre (SOC) for real time monitoring of (cyber) security risks.

Statutory Compliance: The Indian regulatory environment is evolving and we have witnessed considerable increase in regulatory scrutiny as well as stakeholder expectations vis--vis compliance. We recognise that non-compliance with applicable laws and regulations poses a threat to our financial and reputational standing.

Your Company has adequate coverage to ensure complete adherence to the compliance requirements and to report compliance to the Board. Independent assessments are also undertaken to gain assurance.

Corporate Governance

Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. In compliance with Regulation 34 read with Schedule V of the Listing Regulations, a Report on Corporate Governance for the year under review is presented in a separate section as Annexure I.

Board Evaluation

Your Company has a mechanism to evaluate the performance of all Board members. Details of the evaluation are given in the Corporate Governance report.

Vigil Mechanism / Whistle blower Policy

Your Company has adopted a Vigil Mechanism / Whistle blower Policy as detailed in the Corporate Governance Report. The Policy is available on the companys website www.akzonobel. co.in and can be accessed from www.akzonobel.co.in/corporate-governance.php#policy.

Sustainability

Sustainability for the Company means delivering long-term value for all our stakeholders. It underpins your Companys purpose and brands, its core principles and employee value proposition. It also acts as the driver of growth, innovation and productivity.

Your Company focuses on resource productivity and value selling as key drivers of sustainability, with verifiable goals.

SEBI vide its Notification dated 5th May, 2021, has discontinued the requirement of submitting a Business Responsibility Report after the financial year 2021–22 and with effect from the financial year 2022–23, the top one thousand listed entities, based on market capitalization as on the 31st day of March of every financial year, have been mandated to submit a Business Responsibility and Sustainability Report in the format as specified from time to time.

Hence, as per the existing provisions, the Company has provided Business Responsibility Report, attached as Annexure II-A and the same shall be replaced with Business Responsibility and Sustainability Report in the prescribed format from the next FY 2022-23.

Corporate Social Responsibility

The year 2020-21 has been one of the most challenging year for India and the entire world. During these unprecedented times, your Company has tried to put its efforts to provide innovative solutions and create a more equitable and inclusive society.

Some highlights of the CSR activities conducted during the year are as under:

Fight against Covid-19

In continuation of last years efforts, this year your Company continued its relief work against Covid-19. One of the main highlights of this years initiative was to extend the Tele-health project of Bengaluru, and kick off a new project pan India during Covid-19 named ‘Arogya Sakha (healths best friend) exclusively for the painter community and their families. In this project, more than 1.5 million beneficiaries from across India received access to specialist doctors through tele-medicine. In synergy with this initiative we have also started a Covid-19 helpline for painters and their families which facilitated vaccination drive, treatment of Covid-19 patients and provided host of other services. Apart this year we provided more than 8,000 PPE kits to daily wage labourers to help them to resume their work safely.

AkzoNobel Paint Academy

In line with Government of Indias flagship programme viz. ‘Skill India, your company continued its skill training in painting to promote employability amongst youth. This year it offered skill training to 1,130 youth and painters in Decorative Paints and Vehicle Refinish and linked them with employment.

This year, two training centres were recognized by National Skill Development Corporation (NSDC) as International Training Centres.

As a part of Diversity & Inclusion initiative, AkzoNobel Paint Academy is focussing on disadvantaged groups and underprivileged sections of society to bridge inequality. The following initiatives have been taken in this regard:

• 51 women were trained as painters and placed in jobs to help them participate as equals in the work force ensuring female reprecentation in a male dominated Industry,

• As a part of rehabilitation programme for prison inmates and children in conflict with law, 76 prison inmates and juveniles were trained as decorative painters,

• Initiated a skill training programme for transgenders (LGBT community) and helped them start a career as decorative painters.

Kaushal Vahan/Skill on Wheels (Mobile Training Centres)

This year through the project, your Company trained more than 5,000 painters on paint application skills from rural parts of Bihar, Madhya Pradesh and Punjab besides creating COVID awareness for the painters in these states.

E Arogya Kendra Project:

Your Company continued its two E Arogya Kendras at Hoskote, Bengaluru. These centres focussed on carrying out symptom based Covid-19 screening for the villagers and provided specialised health consultations through Tele Medicine.

Education Projects:

Your Company, in partnership with Government Education Department through its non-formal schools, continued to support education to 6,450 underprivileged children in six states of India. Due to ongoing Covid-19 pandemic, the classes were conducted through digital mediums and home visits by the teachers. In order to bridge the digital divide and ensure continuity of education for underprivileged children your company provided digital tabs to the children this year.

The CSR policy of the Company is available on the companys website www.akzonobel.co.in and can be accessed from www.akzonobel.co.in/corporate-governance.php#policy.

A report on the CSR activities undertaken by your Company during the fiscal year 2020-21 is attached as Annexure II-B. It is pertinent to note that significant part of CSR spend is incurred in local areas where your Company has its operations.

Awards

During the year your Company was awarded with

• Best Innovation Award from World Auto Forum for its Auto Coatings product Auto Express Clear, and

• Logistics Technology Project of the Year in 33rd In_ection Web conference and Awards organised by Alden Global Value Advisors.

Human Resources

Your Company had cordial relations with employees across all locations during the year. The total number of employees on the rolls of the Company as at 31 March 2021 was 1,436 (previous year 1,482). Your Company considers Human Resources as a vital asset and give utmost importance to employee engagement, development and wellbeing.

Employee Engagement: During the year, employees participation moved to 90% with top Decile scores in the Organizational Health Index Survey (OHI) carried out worldwide by McKinsey & Company. The year as an outcome of COVID saw several creative and digitally enabled engagement initiatives such as learning programmes, virtual talent competition, virtual coffee sessions, fitness challenges and virtual annual awards. To support employees overcome anxiety and vulnerability due to the pandemic, regular leadership townhalls and interactions forums were conducted. Constant feedback was sought from employees through pulse surveys and AI chatbot to ensure corrective actions during the year.

Employee Wellness: As health became a primary focus along with safety, due to the pandemic. Employees leveraged our visit app that provides a digital experience for medical consultancy and purchasing medicines and booking lab tests. We also launched counselling services through our employee assistance program for emotional and financial wellness. Throughout the year several webinars on health related topics were held and personal fitness was encouraged. Detailed SOPs and protocols were put in place to manage the Pandemic and resume offices.

Rewards: Annual Compensation Process (ACP) for all employees was fairly and effectively executed.

Capability Building: Several curated online modules were conducted throughout the year on various relevant topics especially focussed on leadership Competency and Leading virtual teams. There were structured learning interventions for select workforce.

Diversity & Inclusion: Women inspired Network, India chapter was launched to drive focus on diversity. Several initiatives and interventions were executed throughout the year to create awareness & sensitization.

Over the year "Amber", an AI Engagement Bot, regularly interacted with employees and provided feedback on employee temperament and morale during their tenor in the company. The questions framed were basis the recommendations from in Feedos in-house psychometric psychologists and the inputs provided by the HR leaders.

Information required under section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, forms part of this report. However, in terms of the provisions of section 136 of the Act, the Annual Report is being sent to members excluding the aforementioned information. Any member interested in obtaining such particulars, may inspect the same at the registered office of the Company by writing an email to investor.india@akzonobel.com.

The disclosures below are made in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended:

Name Status (i) Ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2020-21 (ii) Percentage increase in remuneration during 2020-21 over 2019-20
Mr Amit Jain Non Executive 1.81 Nil
Mr Rajiv Rajgopal Managing Director 62.90 (Refer Note 5 below) 10% increase in base salary based on Industry benchmarking.
Mr Lakshay Kataria Wholetime Director and CFO 22.52 9.3% increase in base salary based on Industry benchmarking
Mr Oscar Wezenbeek Non Executive - NA - no remuneration was paid to him during his tenure as a Director
Mr Arvind Uppal Non Executive – Independent 1.63 Nil
Mr Hemant Sahai Non Executive – Independent 1.69 Negligible
Mr Rahul Bhatnagar Non Executive – Independent 1.63 NA - only part of the year in 2019-20
Ms Smriti Rekha Vijay Non Executive – Independent 1.69 NA - only part of the year in 2019-20
Ms Harshi Rastogi Company Secretary 10.88 NA - only part of the year in 2019-20
Description Remarks
(iii) Percentage increase in the median remuneration of employees in the financial year 6.7%
(iv) Number of permanent employees on the rolls of the Company 1,436 as on 31 March 2021
(v) Average percentile increases already made in the salaries of employees other than the 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 in base salary of non-managerial personnel was 6.7%, which is considered in line with the prevailing market conditions and other relevant factors.

It is hereby affirmed that the remuneration to managerial personnel referred to above is as per the remuneration policy of the Company.

Notes:

1. The aforesaid details are calculated on the basis of remuneration for the financial year 2020-21.

2. Median remuneration in the Company (Base Salary) for all its employees was H 0.83 million for the financial year 2020-21.

3. Remuneration to Directors includes sitting fees paid to them for the financial year 2020-21.

4. Remuneration to Directors is within the overall limits approved by the shareholders.

5. As a realization of 15 by 20 ambition, a onetime performance incentive plan payout was made at an at-target level. The ratio of remuneration to median remuneration excluding this onetime performance incentive plan payout was 38.15.

Conservation of Energy, Technology Absorption and Forex Earnings and Outgo

Your Company continues to use its research and development base to bring to consumers new products with improved performance features and for special applications. Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 134 of the Act, are given in Annexure III to this report.

Information Technology.

Your Company has always been on the forefront in terms of leveraging technology for the business.

This year too the Company has continued to invest in digital technologies such as AI (Artificial Intelligence), Advanced Analytics, Robotic Process Automation (RPA) to create immense customer experiences and aid in organisational productivity.

Internal Control Systems

The Companys internal control systems are commensurate with the nature of its business, size and complexity of its operations. Appropriate internal control policies and procedures have been laid down for ensuring an efficient conduct of the business, accuracy and completeness of accounting records, compliance with applicable laws and regulations, safeguarding of its assets, prevention and detection of frauds and errors and reliability of financial reporting. Effectiveness of internal financial controls is ensured through management reviews, self assessment and independent testing by the Statutory Auditors. The organisation is appropriately staffed with qualified and experienced personnel for implementing and monitoring the internal control environment.

The Board periodically reviews the state of compliance with all laws applicable to the Company. The Company uses a robust allied IT tool incorporating all applicable legal compliances with owners and approvers across functions. The compliance library is updated periodically covering all changes with respect to Laws/ Regulations.

The Board has constituted a Risk Management Committee clearly defining its Terms of Reference besides roles and responsibilities. The Board has also delegated the monitoring and reviewing of the risk management plan to the committee which updates the Board from time to time.

Policy against Sexual Harassment

The Company has instituted a policy on Prevention of Sexual Harassment at Workplace, which has been disseminated amongst all employees. The Policy is available on the companys website www.akzonobel.co.in and can be accessed from www.akzonobel.co.in/corporate-governance.php#policy. It seeks to prevent and deter acts of sexual harassment and communicate procedures for their resolution and settlement. Your Company has constituted an Internal Complaints Committee in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and is accordingly fully compliant. To build awareness in this area, the Company has conducted induction / training programmes in the organisation. There was one complaint reported during 2020-21 which was effectively resolved and closed to the satisfaction of the complainant as per the guidelines.

Related Party Transactions (RPTs)

All related party transactions which were entered into during the year under review were on arms length basis and in the ordinary course of business. There were no materially significant related party transactions made by the Company with the Promoters, Directors and KMP which may have a potential conflict with the interests of the Company at large.

The Board of Directors of the Company has approved the criteria to grant omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at arms length.

All related party transactions are placed before the Audit Committee for review and approval.

Your Companys Policy on materiality of RPTs and dealing with RPTs may be accessed on the Companys website at www.akzonobel.co.in.

Members may refer to note no. 33 to the financial statement which sets out related party disclosures pursuant to IND AS 24.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub section (1) of Section 188 of the Act including certain arms length transactions under third proviso thereto are required to be disclosed in Form AOC–2 which forms part of this report.

Loans, Guarantees or Investments

There are no loans given or guarantees issued that are covered under Section 186 of the Act read with the Rules made thereunder. Details of investments made under the said section are covered in Notes 5.1 and 8.1 of the financial statements.

Auditors

Statutory Auditors

M/s Price Waterhouse Chartered Accountants LLP will retire as the Auditors of the Company at the conclusion of the forthcoming Annual General Meeting after completing a term of five years. They have informed the Company that they are willing to continue as auditors for a second term of 5 years. Further they have confirmed that they duly fulfil the requirements under applicable laws and regulations to function as the Auditors of the Company for another term.

Appointment of the statutory auditors is included in the Notice of ensuing AGM for seeking your approval.

The Auditors Report for the financial year 2020-21, does not contain any qualification, reservation or adverse remark.

The Statutory Auditors of the Company have not reported any Fraud as specified under Section 143(2) of the Act.

Secretarial Auditors

In terms of section 204 of the Act, Secretarial Audit was conducted for the financial year 2020-21 by M/s A K Labh & Co., Kolkata. Their report is appended. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has re-appointed M/s A K Labh & Co., Kolkata to conduct Secretarial Audit for the financial year 2021-22.

Cost Auditors

In terms of Section 148 of the Companies Act 2013, Cost Audit was conducted for the year 2020-21 by M/s Chandra Wadhwa & Co., New Delhi. Their report for the year 2019-20 has been filed with MCA within the stipulated time.

The Board has re-appointed M/s Chandra Wadhwa & Co., New Delhi as the Cost Auditors for conducting Cost Audit for the financial year 2021-22, whose remuneration is subject to rati_cation by the shareholders at the forthcoming AGM.

Cost Records

The Cost Accounts and records as required under section 148(1) of the Act are duly maintained by the Company.

Annual Return

In terms of Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, as amended, the Annual Return of the Company is available on the website of the Company at www.akzonobel. co.in, and can be accessed from www.akzonobel.co.in/ investors.php#anr.

Directors & Key Management Personnel

There were no changes in the composition of the Board during 2020-21:

Mr Oscar Wezenbeek will be retiring by rotation at the forthcoming Annual General Meeting (AGM) and has offered himself for re-election.

As approved by the Board, Mr Amit Jain stepped down as the Chairman of the Company and Mr Oscar Wezenbeek became the Chairman with effect from 23 May 2021.

The Board has recommended appointment of Mr Amit Jain as an Independent Director for a period of three years with effect from 14 August 2021.

Mr Arvind Uppal and Mr Rahul Bhatnagar resigned from the directorship of the Company effective 23 May 2021 due to their personal reasons and other professional commitments. The Board took on record its deep sense of appreciation for the services rendered by them during their tenure as directors. The Board has decided not to fill these casual vacancies.

The appointments of Mr Oscar Wezenbeek and Mr Amit Jain are included in the Notice convening the AGM for seeking your approval. A brief profile of Mr Oscar Wezenbeek and Mr Amit Jain as required under regulation 36 of the Listing Regulations is also given as an annexure to the Notice. Mr Rajiv Rajgopal, Managing Director, Mr Lakshay Kataria, Chief Financial Officer and Ms Harshi Rastogi, Company Secretary are the whole-time Key Managerial Personnel of the Company in terms of Section 203 of the Act.

Committees of the Board

The composition of all the Committees of the Board has been provided in the Corporate Governance Report.

Board Meeting Dates

The Board Meeting Dates and the attendance of the Directors at the meetings have been provided in the Corporate Governance Report.

Declaration by Independent Directors

The Company has received necessary declarations from each Independent Director that he/ she meets the criteria of independence, as laid down in Section 149(6) of the Act and the Listing Regulations.

Familiarization Programme for Independent Directors

The Company has adopted a policy on familiarization programme for independent directors. All new Independent Directors (IDs) inducted into the Board are presented with an overview of the Companys business operations, products, organization structure and about the Board procedures. Details of the familiarization programme for Independent Directors is available on the companys website www.akzonobel.co.in and can be accessed from www.akzonobel.co.in/famialirization.php

Directors Responsibility Statement

As required under section 134(5) of the Act, the Board states that:

a) in the preparation of the annual accounts, the applicable Indian 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 judgements 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 the 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

General

Your Directors state that no disclosure or reporting is required in respect of the following items, as there were no transactions on these items during the year under review:

1. The Company has issued only one class of equity shares with equal voting rights.

2. The Company has not issued any shares during the year, under ESOPs or Sweat Equity or otherwise.

3. The Managing Director or Whole time Directors of the Company did not receive any remuneration or commission from any other company belonging to AkzoNobel Group or associate companies.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals, which could impact the going concern status and the Companys operations in future.

5. There has been no change in the nature of business of your Company during the financial year.

6. There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and date of this report.

7. Your Company has not accepted any public deposits during the year and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

8. Your Company has complied with the Secretarial Standards, as applicable, issued by The Institute of Company Secretaries of India.

9. Your Company has neither made any application nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

10. Your Company has not made any one-time settlement against loans taken from the Banks or Financial Institutions.

Cautionary Statement

Some of the statements in this report, describing your Companys objectives and expectations expressed in good faith, may constitute ‘forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those, in the event of changes in the assumptions/ market conditions.

Acknowledgments

Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement across all functions and has ensured efficient utilization of the Companys resources for sustainable and profitable growth in the period of extreme uncertainty. The Directors hereby wish to place on record their appreciation to each and every employee without which the overall satisfactory performance would not have been possible. The Board also wishes to place on record its appreciation for the support and co -operation that your company has been receiving from yourselves, suppliers, distributors, retailers, investors, bankers, agents, government departments, stock exchanges and other business partners. The Directors regret the loss of life due to Covid-19 and have immense respect for every person who risked their life and safety to _ght this pandemic.

On behalf of the Board

Amit Jain
Place: Gurugram Chairman
Date: 22 May 2021 DIN 01770475