DCM Shriram Director Discussions


The Directors have pleasure in presenting the 34th Annual Report of the Company along with Audited Financial Statements, both standalone and consolidated, for the financial year ended 31st March, 2023.

Financial Highlights

The results for the financial year ended 31.03.2023 and 31.03.2022 are as under:

(Rs. in Crores)

Particulars

Standalone

Consolidated

31.3.2023 31.3.2022

31.3.2023 31.3.2022

Revenue from operations

11,811.51 9,676.55 12,079.51 9,849.41

Profit before finance cost, depreciation and tax

1,763.11 1,859.16 1,726.10 1,888.30

Profit before tax

1,454.49 1,539.56 1,413.13 1,564.98

Profit after tax

961.49 1,048.75 910.84 1,066.13

Share of profit/(loss) of joint venture

- - 1.22

Non-controlling interest

- -

Other comprehensive income (after tax)

12.59 (8.41) 12.75 (10.20)

Total comprehensive income (after tax)

974.08 1,040.34 923.59 1,057.15

Basic/Diluted - EPS (Rs. per equity share)

61.66 67.25 58.41 68.45

Other equity

6,237.18 5,494.74 6,162.40 5,470.45

State of Companys Affairs/Performance

During the financial year 2022-23, the Company witnessed an overall strong operating and financial performance, despite the challenges arising from high energy prices, inflationary pressures and supply chain disruptions. Russia-Ukraine conflict added to uncertainties.

The Chlor-Alkali Business performed better supported by higher realizations despite high energy costs. Vinyl business reported a decline in earnings driven by higher energy prices and sharp reduction in PVC and Calcium Carbide prices from their historic highs last year. Shriram Farm Solutions & Fenesta Building Systems witnessed significant growth led by higher volumes and margins. Sugar business earnings were lower since the increase in sugarcane prices last season were not fully compensated by increase in sugar prices.

The Companys total revenues from operation at a standalone level stood at Rs.11,812 Crores in financial year 2022-23 vs. Rs.9,677 Crores last year. Chloro-vinyl business registered a growth in revenue of about 9% driven by higher realizations and higher volumes for Chlor-alkali business partially mitigated by lower vinyl realization. Revenue for sugar business increased by 21% due to higher domestic and export sales and higher realization. Shriram Farm Solutions business registered a 9% growth in revenue, Fenesta business registered a growth of 32% led by Volumes and prices, Fertilizer business revenue witnessed a growth of ~ 50% led by higher gas prices which is a pass through, and revenue for Bioseed business also grew by 19% led by volumes.

Profit before depreciation, interest and tax was at Rs.1,763 Crores, down ~5% over last year. The same was down ~9% on a consolidated basis. The decline was driven by ~84% decrease in PBDIT of Vinyl due to primarily by realizations which came off their all-time highs, although the costs continued to remain firm led by energy and carbon costs. Chlor Alkali business PBDIT recorded an increase of ~15% being driven mainly by a substantial improvement in margins due to higher average realizations that outpaced the increase in input rates especially the energy prices and salt. Sugar business recorded a decline of 20% in PBDIT in current year, higher cost of production due to increase in sugarcane cost in the last season that was not fully compensated by increase in sugar prices. Volumes & realization were better than last year. Agri-input business of Shriram Farm Solutions recorded ~37% growth in PBDIT led by better realization. Fenesta business also recorded ~70% growth in PBDIT, led by higher volumes and better margins. Fertilizer business recorded ~62% growth in PBDIT led by upward revision of energy norms and better gas prices. Bioseed PBDIT also improved significantly. Cement businesses registered de-growth in PBDIT.

Overall PBDIT margins declined to ~15% from ~19% last year.

Net Profit on standalone basis for financial year 2022-23 was lower by 8% to Rs.961 Crores from Rs.1,049 Crores in the financial year 2021-22. It was down by ~15% on a consolidated basis. Net Debt as on 31s March, 2023 stood at Rs.681 Crores vis-a-vis Rs.4 Crores as on 31st March, 2023. Net Debt to equity stood at 0.12x as on 31st March, 2023 vs 0.01x as on 31st March, 2022.

The Company commissioned following projects in the financial year 202223 at an investment of ~ Rs.591 Crores:

• 120 KLD multi-feed distillery with 260 KLD grain attachment at Ajbapur

• 3000 TCD expansion at Ajbapur complex with full capacity conversion to refined Sugar (13,500 TCD)

• 8000 TCD capacity conversion to refinery at Hariawan Sugar unit

• Expansion of Anhydrous Aluminum Chloride capacity by 32,850 TPA The following projects are under implementation at our Bharuch Chemicals complex:

• The 850 TPD caustic soda plant along with 600 TPD flaker expected to be commissioned by Q2 FY24

• Hydrogen Peroxide facility with a capacity of 56,100 TPA is progressing as per schedule, expected to be completed by Q2 FY24

• Epichlorohydrine (ECH) facility with a capacity of 52,000 TPA along with Glycerin purification facility is progressing as per schedule, expected to be completed by Q3 FY24

• 120 MW coal based new power plant is underway and is expected to be commissioned in Q1/Q2 FY24

• 50 MW Renewable (Solar+wind) power via SPV route (group captive) is underway and is expected to be commissioned by Q1 /Q2FY24

• Hydrogen Compressors with total capacity of 0.8 Lakh NM3 per day, implementation progressing as per schedule to be completed by Q1FY 24

• Anhydrous Sodium Sulphate System (AnSS) is progressing as per schedule, to be completed by Q1 FY24

The following Projects in other business in the financial year 2022-23 are progressing as per schedule:

Sugar: Manufacture of Sulphate of Potash (in a 100% subsidiary) with a capacity of 4600 TPA is progressing as per schedule, expected to be completed by Q1 FY24

Fenesta Building Systems: Extrusion plant expansion at Kota is progressing as per schedule, expected to be completed by Q2 FY24 and Fagade fabrication plant will get commissioned by Q3 FY24

SFS: Manufacturing of Water Soluble Fertilizer and Bio products (in a 100% subsidiary) is progressing as per schedule, expected to be completed by Q3 FY24

Dividend

Your Directors are pleased to recommend a final dividend @ 180% i.e. Rs.3.60 per equity share of Rs.2 each for the year ended 31s March 2023, which, if declared by the Members, the total dividend for the financial year 2022-23 will aggregate to 700% i.e. Rs. 14 per equity share of Rs.2 each (including 1st Interim Dividend @ 230% i.e. Rs.4.60 per equity share and 2nd Interim Dividend @ 290% i.e. Rs.5.80 per equity share declared in October 2022 and January 2023, respectively).

The Dividend Distribution Policy of the Company as approved by the Board is available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/Dividend%20Distribution%20Policv%20-%20Final%20-%20Website.pdf

Transfer to Reserve

During the financial year 2022-23, the Company transferred a total of Rs.17.50 Crores to Reserves, namely, Rs.12.30 Crores to Cash Flow Hedging Reserve, Rs.5.01 Crores to General Reserve and Rs.0.19 Crores to Storage Fund for Molasses.

Number of Meetings of the Board

The Board met 6 times during the financial year 2022-23 on 5th May 2022, 17th May 2022, 19th July 2022, 18th August 2022, 19th October 2022 and 20th January 2023.

Report on Performance and Financial Position of Subsidiaries, Associate and JV Company

The details regarding the performance and financial position of the Companys Subsidiaries and Associate, etc. are appearing in Form AOC-1 given at Annexure-1 of this Boards Report.

Key updates on subsidiaries/associate of the Company During the year under review:

• The Company has subscribed and invested in the shares of DCM Shriram Bio Enchem Limited, DCM Shriram Prochem Limited, DCM Shriram Ventures Limited and Shriram Agsmart Limited (formerly known as DCM Shriram Agsmart Limited) consequent to which these companies have become the wholly owned subsidiaries of the Company.

• ReNew Green (GJ Ten) Private Limited has become Associate of the Company, as the Company has invested in its Equity Shares representing 31.20% of its paid-up share capital.

The contribution of subsidiaries and associates to the overall performance of the Company is outlined in Note No. 57 of the Consolidated Financial Statements.

Risk Management Framework

The Company has in place an effective Risk Management Framework. The Company has also formulated a Risk Management Policy and further updated the Risk Management Framework during the financial year 2021-22 to align the same with the amendments in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "SEBI Listing Regulations 2015") on Risk Management and also to make it more contemporary and suitable to the requirements of changing business scenarios. These were approved by the Board on October 19, 2021. The said framework includes identification, assessment, response and monitoring system for mitigation of various risks.

Companys Policy on Directors Appointment and Remuneration The criteria for Directors appointment has been set up by the Nomination, Remuneration and Compensation Committee (NRCC), which, inter-alia, includes criteria for determining qualifications, positive attributes, independence of a Director, basis/criteria of remuneration to Directors/KMPs and other matters provided under Section 178 of the Companies Act, 2013 (the ‘Act) and the SEBI Listing Regulations 2015.

The Company has a remuneration Policy in place which deals in the remuneration of the Directors, Key Managerial Personnel (KMPs), Senior Management Personnel (SMPs) and other employees of the Company. The said remuneration policy is available on the Companys website at the following web link:

http://www.dcmshriram.com/sites/default/files/Remuneration%20Policy0.pdf

Corporate Social Responsibility (CSR)

The details of the programs/activities undertaken as CSR along with Annual Report on CSR activities and the composition of CSR Committee are provided in a separate section, which forms part of this Boards Report. The Company has a policy on CSR which includes the guidelines on the major areas in which the Company engages itself with the CSR activities/projects and the manner of implementation and monitoring the activities/projects. The composition of CSR committee, CSR policy and details of activities/projects approved by the Board are also available on the Companys website at the following web link: https://www.dcmshriram.com/social-responsibility Vigil Mechanism/Whistle Blower Policy

The Company has in place a Vigil Mechanism/Whistle Blower Policy which is available on the Companys website at the following web link: https://www.acmshriram.com/sites/aeTault/Tiles/vigil%20Mechanism%20 Policy.pdf

Internal Complaints Committee on POSH

The Company has complied with the provisions relating to constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH"). During the financial year 2022-23, 2 cases were reported on sexual harassment which stand resolved at the end of the financial year.

Cost Records

The Company is required to maintain Cost Records as directed by the Central Government pursuant to Section 148(1) of the Act and accordingly such accounts and records are prepared and maintained by the Company. Related Party Transactions

During the financial year 2022-23, there has been no materially significant related party transaction between the Company and its related parties which requires disclosure in Form AOC-2.

The Company has formulated a Policy on dealing with Related Party Transactions, which is available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/RPT%20Policv.pdf Material Subsidiary Policy

The Company has formulated a Policy for determining ‘Material Subsidiaries, which is available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/MATERIAL%20SUBSIDIARY%20POLICY%20-%20FINAL.pdf

As on 31s March, 2023, basis the above policy, there was no "Material Subsidiary" of the Company.

Particulars of Loans, Guarantees or Investments The details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act and relevant rules thereunder are given in the Notes to the Financial Statements.

Fixed Deposits

1. The details relating to deposits for the financial year 2022-23, covered under Chapter V of the Act is as under:

a) Accepted including renewals during the year: Rs. 4,48,48,498

b) Remained unpaid/ unclaimed as at the end of the year: Nil

c) There has been no default in repayment of deposits or payment of interest thereon during the financial year 2022-23

2. All the deposits are in compliance with the requirements of Chapter V of the Act.

Internal Financial Control with respect to Financial Statements

The Company has in place adequate Internal Financial Controls with respect to financial statements. No material weakness in the design or operation of such controls was observed during the financial year 2022-23.

DCM Shriram Employee Stock Purchase Scheme

The Company has an Employee Stock Purchase Scheme (DCM Shriram ESPS) duly approved by Members, vide Special Resolution passed on August 13, 2013 and later aligned in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014. Thereafter, the Board of Directors at its meeting held on 2nd May 2023, has recommended amendments in the Scheme to align the same with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, to the Members for approval through Postal Ballot. DCM Shriram ESPS is a secondary market scheme. DCM Shriram ESPS provides for grants of equity shares through Trust, purchased from secondary market, to the eligible Employees as may be decided by the Nomination, Remuneration and Compensation Committee from time to time.

There are no voting rights exercised on the shares held by the Trust. The details required as per SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are available on the Companys website at the following web link:

https://www.dcmshriram.com/DCM-Shriram-ESPS-Report Directors and Key Managerial Personnel (KMP)

Mr. Ajit S. Shriram and Mr. K.K. Sharma, Directors liable to retire by rotation at the ensuing Annual General Meeting (‘AGM), and being eligible, offer themselves for re-appointment.

Approval of the Members is being sought in the ensuing AGM for reappointment of Mr. Ajay S. Shriram as Chairman and Senior Managing Director and Mr. Vikram S. Shriram as Vice Chairman and Managing Director of the Company, for a further period of 5 years w.e.f. 1st November 2023 as recommended by Nomination, Remuneration and Compensation Committee and Board of Directors.

The Board of Directors at its meeting held on 2nd May 2023, on recommendation of Nomination, Remuneration and Compensation Committee has approved the appointment of Mr. Aditya A. Shriram as an Additional Director, and also as Deputy Managing Director of the Company w.e.f. 2nd July 2023, subject to approval of the Members. The approval of the Members is being sought in the ensuing AGM for appointment of Mr. Aditya A. Shriram as Director and also Deputy Managing Director of the Company for a period of 5 years w.e.f. 2nd July 2023 as recommended by Nomination, Remuneration and Compensation Committee and Board of Directors.

The requisite details as required to be disclosed in connection with the appointment/re-appointment of Directors as above are mentioned in the Notice of AGM.

The Company has received declaration from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16 of SEBI Listing Regulations 2015.

The details of familiarization programme for Independent Directors are available on the Companys website at the following web link: https://www.dcmshriram.com/independent-directors

Manner & Criteria of formal annual evaluation of Boards performance and that of its Committees and Individual Directors

In compliance with requirements of the Act and the SEBI Listing Regulations 2015 the formal annual performance evaluation of the Board, its Committees and Individual Directors has been conducted as under:

A. Manner of evaluation as recommended to the Board by the Nomination, Remuneration and Compensation Committee ("NRCC")

1. The Chairman of the Board consulted each Director separately about the performance of Board, Committees and other Directors and sought inputs in relation to the above. The Chairman then collated all the inputs and shared the same with the Board.

2. In respect of the evaluation of Chairman of the Board, the Chairman of NRCC collated the inputs from Directors about his performance as a Director and as Chairman of the Board/Company and as Chairman/Member of the Board Committees and shared the same with the Board.

The Board as a whole discussed the inputs on performance of Board/Committees/Individual Directors and performed the evaluation.

B. Criteria of evaluation as approved by the NRCC

The aforesaid evaluation was conducted as per the criteria laid down by the NRCC as follows:

Performance of

Evaluation Criteria

(I) Board as a whole

Structure of Board including Composition/Diversity/ Process of appointment/qualifications/experience, etc;

Fulfillment of functions of the Board (for instance guiding corporate strategy, risk policy, business plans, corporate performance, monitoring Companys governance practices etc., as per the Companies Act and SEBI Listing Regulations);

Meetings of Board (Number/Manner of board meetings) held during the year including quality/quantity/timing of circulation of agenda for Board Meetings, approval process/recording of minutes and timely dissemination of information to Board; and

Professional Development and Training of Board of Directors as required.

(ii) Board Committees

Composition of Committee;

Fulfillment of functions of the Committee with reference to its terms of reference, the Companies Act, 2013 and the SEBI Listing Regulations 2015; and

Number of Committee meetings held during the year.

(iii) Individual Directors

Fulfillment of responsibilities as a director as per the Companies Act, 2013, the SEBI Listing Regulations 2015 and applicable Company policies and practices;

In case of the concerned director being Independent Director, Executive Director, Chairperson of the Board or Chairperson or member of the Committees, with reference to such status and role;

In case of Independent Directors, fulfillment of the independence criteria as specified under applicable Regulations and their independence from the management;

Board and/or Committee meetings attended; and

General meetings attended.

Particulars of Employees and Managerial Remuneration

The details required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of Directors, KMPs and other employees of the Company, are given in Annexure-2 of this Boards Report.

However, in terms of Section 136(1) of the Act, the Report and Financial Statements are being sent to the Members and others entitled thereto, excluding the Statement of Particulars of Employees as required under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended. The said statement is available for inspection by the Members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting.

Composition of Audit Committee

As on the date of this report, the Audit Committee comprises of 4 NonExecutive Independent Directors, viz., Mr. Pradeep Dinodia as Chairman and Ms. Ramni Nirula, Mr. Sunil Kant Munjal and Mr. Pravesh Sharma as Members.

Composition of other Committees

Details regarding composition of other Committees of the Board are mentioned in the Corporate Governance Report forming part of this Annual Report.

Annual Return

In terms of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company is available on the Companys website at the following web link:- https://www.dcmshriram.com/annual reports

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are given in Annexure-3 of this Boards Report.

Secretarial Audit Report

The Board appointed M/s Sanjay Grover & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2022-23. The Secretarial Audit Report for the said financial year is attached as Annexure-4 to this Boards Report. The Secretarial Audit Report does not contain any qualification or reservation or adverse remark or disclaimer. Secretarial Standards

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2).

Management Discussion and Analysis

A separate section on the Management Discussion and Analysis on the operations of the Company forms part of this Annual Report.

Business Responsibility and Sustainability Report

A separate section on the Business Responsibility and Sustainability Report prepared pursuant to Regulation 34(2)(f) of the SEBI Listing Regulations 2015 forms part of this Annual Report.

Corporate Governance

The Company is committed to adhere to the best Corporate Governance practices. A separate section on the Corporate Governance, along with a certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under the SEBI Listing Regulations 2015, forms part of this Annual Report.

Statutory Auditors

Pursuant to Section 139 of the Act, M/s Deloitte Haskins & Sells, Delhi, a firm of Chartered Accountants (FRN No.015125N) were appointed as Statutory Auditors of the Company by the Members in its 33d Annual General Meeting (AGM) held on 19th July 2022 for a period of five years i.e. from the conclusion of 33rd AGM till the conclusion of 38th AGM.

The Reports given by the Statutory Auditors on the financial statements (Standalone and Consolidated) of the Company for the financial year 2022-23 are forming part of this Annual Report. The said Reports are unmodified and there are no qualifications, reservation, adverse remark or disclaimer.

Directors Responsibility Statement Your Directors state that:

a) in preparation of annual accounts for the year ended 31st March 2023, the applicable accounting standards have been followed and there are no material departures;

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 as at 31st March 2023 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 Act 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 as 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 operating effectively.

Significant and material orders

There are no significant and material orders passed by any regulators or courts or tribunals impacting the going concern status and the Companys operations in future.

Industrial Relations

The Company continued to maintain harmonious and cordial relations with its workmen in all its divisions, which enabled it to achieve this performance level on all fronts.

Other Disclosures

(i) No material change or commitment has occurred after close of the financial year 2022-23 till the date of this Report, which affects the financial position of the Company.

(ii) There are no proceedings initiated/pending against the Company under the Insolvency and Bankruptcy Code, 2016 which impact the business of the Company.

(iii) There were no instances of one time settlement which require the valuation from the banks or financial institutions.

(iv) There were no instances of any fraud reported by the Auditors under Section 143(12) of the Act.

Acknowledgements

The Directors wish to thank Customers, the Government Authorities, Financial Institutions, Bankers, Other Business Associates/Stakeholders and Members for the co-operation and encouragement extended to the Company. The Directors also place on record their deep appreciation for the contribution made by the employees at all levels.

On behalf of the Board

New Delhi

AJAY S. SHRIRAM

2nd May 2023

Chairman & Senior Managing Director
DIN: 00027137