Ashok Alco Chem Ltd Management Discussions.

Overall, the business continued to sustain resilience to the downtrend of global growth during the financial year ended March 31, 2016 reflecting a Net profit of Rs 1238.04 lacs, decline of around 14%. The production reached record levels at around 57% and envisages consistency in utilization of its production capacity in continuation.

Economy & Industry Scenario and Outlook

The below par performance of global economy was reflected in a continued deceleration in most emerging and developing economies, driven by low commodity prices, weaker capital inflows and subdued global trade. Against this backdrop, India seemed fairly resilient with a stable domestic macro-economic conditions and currency that performed better than most other emerging market currencies. However, a second consecutive year of drought and a low increase in support prices have led to a sharply slower growing rural economy compared to earlier years. The Chemical industry in spite of Chinese players performed fairly favorably though there was deceleration in the commodity prices. Hence it is inevitable for players to focus on broadening consistently customer base in the near future. Overall, the small players from unorganized sector have evident stiff competition compelling your Company to focus on improvising its margins thereon. Overall the fall prices and economy downtrend of few Asian countries has resulted stagnant exports due to unviability. The strategic efforts of the Management have been successful in consistent and repeated order intake for your Company.

The global economic climate continues to be volatile, uncertain and prone to geo-political risks. Week consumer sentiment and low commodity prices are expected to affect global growth adversely. For India, 2016 despite challenging global headwinds will witness a stable macro performance. The key determinants of Indias economic performance on a long term basis will be the execution of the reforms agenda. While currently inflation is expected to be benign, upside pressures on inflation exist from the vagaries of monsoon or due to competitive devaluation of currencies. The financial Year 2015-16 witnessed few programs initiated by the Indian Government for the development of agriculture. Ethanol blending was one of the programs, but however this program led to scarcity of our raw material (Special Denatured spirit) which resulted in inconsistent pricing. Your Company envisages for addressing the challenges by strategic sourcing of raw materials. The Chemical industry being commodity oriented also witnessed inconsistent pricing. Your Company through its enhanced sales distribution network managed to sustain the market pressure.

Your Company expects to continue its strategy of seeking niche markets, broad customer base overseas and domestically yielding better margins with enhanced volume growth. The new R&D setup is endeavoring in addition of new products and has been successful in testing the outcome. Your Company is also in the process of modifying its idle capacity to cater to the new product expansion.

Segment-wise Performance

The low demand and competitive pricing for minerals in the overseas market marginally dipped down the topline of the Trading Division by approximately 6%. However long term contracts favored your company in sustaining the pressure of the low demand market. Your chemical segment achieved highest volume growth in terms of production but the topline decline was mainly due to reduced pricing of commodity products. The profits before interest and tax marginally declined owing to the low demand. However decline in profitability was marginal as your Company managed to focus only on customers yielding higher margins despite existence of challenging market conditions.

Your Companys overall profit after tax for FY 2015-16 was Rs. 1238 Lacs against Rs. 1451 Lacs in FY 2014-15.

Opportunities,Threats, Risks and Concerns

The increased optimization of capacity of the Chemical Division due to addition of the new boiler and process modification, your Company envisages to significantly increase its market share by broadening its Customer base overseas as well as in the domestic sector. The major threat and risk to reckon with is the highly volatile pricing of one of the raw materials, import as well as domestic. Further in addition is the risk of availability of Alcohol, our major raw material in the domestic arena due to ethanol blending program initiated by the Government. Further, the commodity orientation for your Company, part of the highly volatile Chemical Industry faces certain threats and risks.

Financial Performance

Financial performance achieved by your Company, during the year under review, is as disclosed in this Report under the head Financial Results and Performance.

Internal Control Systems and Adequacy

Your Board has adopted appropriate procedures for ensuring orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

Material Developments in Human Resource / Industrial Relation front, including number of people employed

a. The number of employees for the year under review was 106. b. There were no material developments as regards human resources / industrial relations front during the period under review.

Credit Rating

Your Companys financial discipline and prudence is reflected in the strong credit ratings ascribed by rating agency ICRA. Your Company has retained long-term rating of BBB- and short-term rating of A3. The outlook assigned on the long-term rating is stable.

AUDITORS AND AUDITORS REPORT

Statutory Auditors

Pursuant to the provisions of Section 139 of the Act and the Rules framed thereunder, M/s R. A. Kuvadia & Co., Chartered Accountants, were appointed as Statutory Auditors of the Company from the conclusion of the twenty second Annual General Meeting (AGM) of the Company held on September 26, 2014 till the conclusion of the twenty fifth AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. Your Directors propose ratification of appointment of M/s R. A. Kuvadia & Co, Chartered Accountants, as statutory auditor for the year ended March 31, 2017.

The Auditors Report does not contain any qualification, reservation or adverse remarks.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014 M/s V. J. Talati & Co., Cost Accountants, having Firm Registration No. R00213, were appointed as the Cost Auditors of the Company to conduct the audit of Cost accounting records maintained by the Company relating to "Chemicals" for the FinancialYear ended March 31, 2016.

The Board of Directors at its Meeting held on May 20, 2016 has, on the recommendation of the Audit Committee, re-appointed M/s V. J. Talati & Co., Cost Accountants, having Firm Registration No. R00213, as the Cost Auditors of the Company to conduct the audit of Cost accounting records maintained by the Company relating to "Chemicals" for the FinancialYear 2016-17 on a remuneration of Rs. 50,000/- plus applicable taxes and out-of-pocket expenses payable at actual. The said remuneration is subject to the ratification by the Members of the Company in terms of Section 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time. The payment of remuneration to M/s V. J. Talati & Co., approved by the Board is accordingly placed for ratification.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules made thereunder, the Company had appointed M/s. Jay Mehta & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year 2015-16. The Secretarial Audit Report in Form MR-3, for financial year 2015-16, has been appended as "Annexure B" to this Report.

The Secretarial Auditors contained following qualification, reservation or adverse remarks:

The composition of the Board of Directors of the Company is not in accordance with the provisions of Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Boards Explanation / Comments on above remarks:

The Company will work-out for a suitable option either to appoint new Independent Director or appoint any existing non-executive director, not being a promoter or related to promoter, as Chairman to make the Board composition as per provisions of Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board of the Directors at their Meeting held on May 20, 2016 has re-appointed M/s. Jay Mehta & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year 2016-17.

BOARD COMMITTEES

Detailed composition of mandatory Board Committees viz. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee, number of meetings held during the year under review and other related details are set out in the Corporate Governance Report which forms a part of this Report.

VIGIL MECHANISM

The Company has a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns about unethical behaviour. The said Policy has been uploaded on the website of the Company www.ashokalcochem.com/InvetorUpdate.html.

PARTICULARS OF LOANS, GUARANTEE AND INVESTMENT

The details of Loans and Investment made by the Company, during the year, are as below:

Name of Party Nature of Transaction Amount (Rs.)
Ashapura Claytech Ltd. Loan Given 2,25,00,000
Ashwa Minerals Private Limited Investment in Equity Shares 73,10,000

The Company had also made investment in liquid funds which were redeemed before March 31, 2016. The Company has not provided any guarantee and/or securities.

TRANSACTIONSWITH RELATED PARTY

The transactions entered into by the Company with the related parties are on arms length basis and in the ordinary course of business and were not material in nature. Accordingly, the disclosure of said transactions in requisite Form AOC-2, is not applicable.

CORPORATE SOCIAL RESPONSIBILITY

Your Company embraces responsibility for impact of its operations and actions on all stakeholders including society and community at large. As per the requirements of the Companies Act, 2013, the Company had duly constituted Corporate Social Responsibility Committee. The brief outline of the Corporate Social Responsibility (CSR) policy of the Company and the initiative undertaken by the Company on CSR activities during the year are set out in Annexure C of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The details of composition of CSR Committee etc. are provided under the Corporate Governance Report.

RISK MANAGEMENT POLICY

Risks can be internal and external and are inherent in all administrative and business activities. Formal and systematic risks have evolved and they are now regarded as good management practice also called Risk

Management. Your Directors have been entrusted with the responsibility to assist the Board in overseeing and approving the Companys enterprise wide risk management framework, overseeing all the risks that the organization faces and also identify and assess adequacy of risk management infrastructure. The Companys management systems, organizational structures, processes, standards, code of conduct and behaviors together govern and conducts the business of the Company and manages associated risks. The Company has introduced several improvements and processes to drive a common integrated view of risks, optimal risk mitigation, responses and efficient management of internal control and assurance activities. This integration is introduced several improvements and processes to drive a common integrated view of risks, optimal risk mitigation, responses and efficient management of internal control and assurance activities. This integration is enabled by all three being fully aligned across Group wise Risk Management, Internal Control and Internal Audit methodologies and processes.

EXTRACT OFTHE ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT- 9 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, are set out herewith as "Annexure D" to this Report.

CORPORATE GOVERNANCE

The Report on Corporate Governance forms part of this Report as "Annexure- E".

A Certificate from M/s. Jay Mehta & Associates, Practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance as stipulated under the SEBI Regulations 2015, also forms part of the Annual Report.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014, as amended from time to time.

SIGNIFICANT / MATERIAL ORDERS PASSED BYTHE REGULATORS/COURTS

There are no significant/material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company and its operations in future.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT 2013:

The Company has set up an Internal Complaints Committee to redress complaints received regarding sexual harassment in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and the Rules made thereunder.

During the year under review, the Company did not receive any complaint.

CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In terms of Rule 8 (3) of the Companies (Accounts) Rules, 2014, the required details are as below:

Conservation of energy:

(i) The steps taken or impact on conservation of energy

Energy Conservation dictates how efficiently a company can conduct its operations. Your Company has recognized the importance of energy conservation in decreasing the deleterious effects of global warming and climate change. Your Company has undertaken various energy efficient practices and has strengthened the Companys commitment towards becoming an environment friendly organization. The Key Initiatives towards conservation of Energy were:

• Internal periodic energy audits to improve energy performance and benchmarks.

• Commissioning of an Advance Technology environment Protecting Boiler.

• Minimising energy consumption by calculating thermodynamically feasible energy targets and optimising heat recovery systems, energy supply methods and process operating conditions through Pinch Analysis.

• Modifications of Heat Recovery systems for eliminating waste steam and thereby optimising energy resources.

(ii)The steps taken by the Company for utilising alternate sources of energy

Major energy conservation initiatives taken for steam saving which has helped us to reduce the Coal consumption that has reduced emission of CO2 in atmosphere, which helps in global warming. Harmonic Audit is done at the plant to identify the losses in the plant and rectify the same.

(iii)The capital investment on energy conservation equipment - Rs. 296.05 lacs (Boiler & Heat recovery Cost)

Technology absorption:

The Companys integrated new research and technology unit helps create superior value by harnessing internal research and development skills and competencies and by innovating in emerging technology domains related to various business.

The Company focuses on new product, process modification to support existing business and create breakthrough technologies for new business. Major Efforts made towards Technology Absorption, developed 5 new products in R & D with successive trials. Development of New Quality Control Analyticals for R & D Support solved the debottling of the utility Load to run the plant on full capacity.

Foreign exchange earnings and outgo

(Amount in lacs)

Total Foreign Exchange used and earned 2015 - 2016 2014 - 2015
i. Foreign Exchange used 3275.26 2644.20
ii. Foreign Exchange earned 18486.51 20257.84

ACKNOWLEDGMENT

The Board acknowledges with thanks the contributions and support received from the Shareholders Government, Local Authorities, Financial Institutions & Banks, Creditors & Suppliers, Valued Customers, Employees and other Stakeholders of your Company.

For and on behalf of the Board
sd/- sd/-
Place: Mumbai Purab Shah Sunil Shah
Date: August 11, 2016 Executive Director & CEO Director