DCM Shriram Ltd Directors Report.

The Directors have pleasure in presenting the 31st Annual Report of the Company along with Audited Financial Statements, both standalone and consolidated, for the year ended 31st March, 2020.

Financial Highlights

The results for the year ended 31.3.2020 and 31.3.2019 are as under:

Particulars

Standalone

Consolidated

31.3.2020 31.3.2019 31.3.2020 31.3.2019
Revenue from operations 7,671.96 7,684.38 7,767.13 7,771.14
Profit before finance cost, depreciation and tax 1,298.29 1,453.27 1,294.87 1,456.33
Profit before exceptional item and tax 923.30 1,180.30 912.01 1,180.24
Exceptional item - 14.76
Profit after tax 743.67 906.83 719.42 902.61
Share of profit/(loss) of joint venture - 2.78 1.77
Non-controlling interest - (5.49) 1.12
Other comprehensive income (after tax) (10.42) (4.89) (11.98) (0.03)
Total comprehensive income (after tax) 733.25 901.94 704.73 905.47
Basic/Diluted - EPS (Rs. per equity share) 47.69 57.17 45.96 57.09
Retained earnings-opening balance 3,517.72 2,999.73 3,436.17 2,919.37
Add/(less):
Profit for the year 743.67 906.83 716.71 905.50
Dividends (including dividend tax) paid during the year (184.24) (169.65) (184.24) (169.65)
Others (including buy-back of equity shares)* (4.70) (219.19) (5.35) (219.05)
Retained earnings - closing balance 4,072.45 3,517.72 3,963.29 3,436.17

* Rs.219.77 crores deducted from retained earnings and Rs.32.67 crores deducted from Securities Premium in previous year ended March 31,2019.

State of Companys Affairs/Performance

The overall operating performance of the Company was stable during the year, with businesses like Sugar, Shriram Farm Solutions, Fenesta and Cement registering growth led by better product prices and volumes. Chlor-Alkali business witnessed a sharp decline in product prices as domestic caustic prices aligned with the international prices. The imports which were restricted last year due to requirements of quality approvals by Indian authorities, grew substantially at a time when domestic capacity was also increasing.

The Companys total revenues from operation at a standalone level stood at Rs.7,672 Crores in FY20 vs. Rs.7,684 Crores last year. Revenue of Sugar business was up by 7% with higher ethanol volumes as well as better realization of Sugar. Shriram Farm Solutions also registered a 6% increase in revenue lead by volumes and realization in Value added inputs vertical. Revenue of chemicals business was down by 10% driven by lower realizations partly offset by higher volumes.

Profit before depreciation, interest and tax, declined to Rs.1,298.3 Crores down ~11% over last year. The same was down ~11% on a consolidated basis. This decline was led by ~35% decline in PBDIT of Chlor-Alkali business due to lower realizations. Sugar business recorded an increase of ~14% in PBDIT led by improved realization of Sugar and higher volumes of Ethanol. Agri-input business of Shriram Farm Solutions recorded ~35% growth in PBDIT of value-added segment with higher revenue and margin. Bioseed, Fenesta and Cement also registered growth in PBDIT.

Overall PBDIT margins declined to ~17% from ~19% last year.

Net Profit on standalone basis for FY20 was down by 19% to Rs.733 Crores from Rs.902 Crores in FY19. It was lower by ~22% on a consolidated basis. Net Debt stood at Rs.1,623 Crores vs. Rs.1,265 Crores last year. Debt equity ratio stood at 0.40x vs 0.36x last year.

The Company commissioned the following projects in FY20 at an investment of ~ Rs. 707 Crores:

• Bharuch - Capacity Expansion of Caustic Soda Plant by 332 TPD at an investment of Rs.145 Crores.

• Plastics - PVC Expansion/de-bottlenecking at Kota by 40 TPD at an investment of Rs.30 Crores.

• Power - Replacement of 50 MW Coal based Power generation at Kota by 66 MW Power Plant at an investment of Rs.240 Crores.

• Sugar - Setting up of distillery with capacity 200 KLD at Ajbapur at an investment of Rs.292 Crores.

The following projects currently underway, progressing as per schedule:

• Bharuch - Capacity expansion of Caustic Soda Plant by 700 TPD (along with 120 MW Captive Power plant and Flaker capacity expansion of 500 TPD) at an investment of Rs.1,070 Crores.

Covid-19

In March 2020, the World Health Organization declared Covid-19 to be pandemic. Pursuant to the outbreak of Covid-19 worldwide, the Government of India declared countrywide lockdown on March 24, 2020 which led to the temporary suspension of some operations of the Company and has impacted the overall business operations of the Company. The Company has adopted all the necessary measures to curb the spread of infection in order to protect the health and well being of employees and ensured business continuity to the extent possible with minimal disruption. The details of impact on operations of the Company and steps taken by the Company to mitigate the impact of Covid-19 are described in the Management Discussion and Analysis Report which forms part of this Annual Report and is provided in a separate section.

Dividend

During the year, your Board of Directors ("Board") declared two interim dividends aggregating @ 410% i.e. Rs.8.20 per equity share of Rs.2/- each which were paid to Members whose names were appeared in the register of Members of the Company as on the record date fixed for the purpose. Further, as per the requirement of Regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 [SEBI Listing Regulations, 2015], Dividend Distribution Policy of the Company approved by Board is attached as Annexure-1 to this Boards Report.

Number of Meetings of the Board

The Board met 4 times during the financial year on 1.5.2019, 23.7.2019, 24.10.2019 & 27.1.2020.

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

The details regarding the performance and financial position of Companys Subsidiaries, Associate and JV are given in Annexure-2 of this Boards Report.

During the year under review, the Board in their meeting held on:

(i) 24th October, 2019

- approved the merger of Bioseeds Limited, Mauritius into Shriram Bioseed Ventures Limited (both wholly owned subsidiaries of the Company) for simplification of organizational structure. The Scheme of Amalgamation for the said merger has been filed with the National Company Law Tribunal ("NCLT") on 27th May, 2020. The hearing in the matter is yet to take place as on the date of this report.

- approved the liquidation of Shriram Bioseed (Thailand) Limited, a step down subsidiary of the Company, subject to necessary approval in Thailand. The said liquidation is under process as on the date of this report.

(ii) 27th January, 2020 approved the sale of entire equity capital and the underlying business including all assets and liabilities thereof on a going concern and "as is where is" basis of the step down subsidiaries in Indonesia and Vietnam held by Bioseed Holdings Pte. Ltd., a subsidiary of the Company in Singapore. The sale of Indonesian entities i.e. PT Shriram Seed Indonesia and PT Shriram Genetics, Indonesia was completed on 27th February, 2020 whereas the transaction for the sale of Vietnam entity i.e. Bioseeds Vietnam Limited is under process as on the date of this report.

Further, the Board, in its meeting held on 19th May, 2020, approved the transfer of 81.41% of the paid - up equity share capital of Shri Ganpati Fertilizers Limited, a subsidiary of the Company ("SGFL), held by the Company along with full management control on as is where is basis. The sale of SGFL was completed on 19th May, 2020.

Risk Management Framework

The Company has in place a Risk Management Framework. The Risk Management Framework is updated periodically to make it more contemporary and suit to the requirements of changing business scenarios and regulations. The current Risk Management Framework was approved by the Board on 23.7.2019. The said framework includes risk identification, assessment, response and monitoring system for mitigation of risk.

Companys Policy on Directors Appointment and Remuneration

The criteria for Directors appointment has been set up by the Nomination, Remuneration and Compensation Committee, 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 Sub-section (3) of Section 178 of the Companies Act, 2013.

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 remuneration policy of the Company is available on the Companys website at the following web link :

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

Corporate Social Responsibility (CSR)

The details about the programmes/activities undertaken on CSR, 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 major area in which the Company engages itself with the CSR activities/projects and the manner of implementation and monitoring the activities/projects, which is available on the Companys website at the following web link: http://www.dcmshriram.com/sites/default/files/CSR-policy.pdf

Business Responsibility Report

In compliance with SEBI Listing Regulations, 2015, Business Responsibility Report (BRR) forms part of this Annual Report and is provided in a separate section. The report, inter-alia, describes the initiatives taken by the Company from environmental, social and governance perspective.

Vigil Mechanism

The Company has established a Vigil Mechanism/Whistle Blower Policy as per the requirement of the SEBI Listing Regulations, 2015 and the Companies Act, 2013 which is also available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/VIGIL%20MECHANISM% 20-WHISTLE%20BLOWER%20POLICY-converted%20%281%29.pdf

Internal Complaint Committee on POSH

The Company has complied with the provisions relating to constitution of Internal Complaint Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH"). No case is reported on sexual harassment during the year.

Cost Records

The Company is required to maintain Cost Records as specified by the Central Government under Section 148(1) of the Companies Act, 2013 and accordingly such accounts and records are made and maintained by the Company.

Related Party Transactions

During the year, 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 also available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/Related%20Party%20Tra nsaction%20Policy%20-%20FINAL 0.pdf

Material Subsidiary Policy

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

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

Particulars of Loans, Guarantees or Investments

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

Fixed Deposits

1. The details relating to deposits, covered under Chapter V of the Companies Act, 2013:

a) accepted including renewals during the year : Rs. 3,49,00,000/-

b) remained unclaimed as at the end of the year : Rs. 2,99,129/-

c) there has been no default in repayment of deposits or payment of interest thereon during the financial year ended on 31st March, 2020.

2. All the deposit are in the Compliance with the requirements of Chapter V of the Companies Act, 2013.

Details in respect of adequacy of 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 year.

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 aligned in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014. 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. DCM Shriram ESPS is a secondary market scheme and hence no fresh issue of shares was made. There are no voting rights exercised on the shares held by the Trust. Further, there are no material changes in the DCM Shriram ESPS and it is in compliance with the applicable regulations. The details required as per SEBI (Share Based Employee Benefits) Regulations, 2014 is available on the Companys website at the following web link:

https://www.dcmshriram.com/sites/default/files/ESPS%20Disclosure%20F.%20Y.%202019-20.pdf

Directors and Key Managerial Personnel (KMP)

Re-appointment of Mr. Ajit S. Shriram, Joint Managing Director, is being sought in the ensuing AGM of the Company for another term of 5 consecutive years. The requisite details of the re-appointment are mentioned in the said AGM Notice

Re-appointment of Ms. Ramni Nirula, Non-Executive Independent Director, is also being sought in the ensuing AGM of the Company for another second term of 5 consecutive years. The requisite details of the reappointment are mentioned in the said AGM Notice. Further, in the opinion of the Board Ms. Ramni Nirula posses adequate integrity, expertise and experience required to best serve the interest of the Company.

Mr. K.K. Kaul and Mr. Sharad Shrivastva, Directors retire by rotation, and being eligible, offer themselves for re-appointment.

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 said Act and 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/sites/default/files/Familiarization- Programme-for-Independent-Director-2019-20 0.pdf

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

In compliance with requirements of the Companies Act, 2013 and 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 their performance as a Director and as Chairman of the Board and the 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 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 and the Listing Regulations; and
Number of Committee meetings held during the year.
(iii) Individual Directors Fulfillment of responsibilities as a director as per the Companies Act, the Listing Regulations 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

The details required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of Employees of the Company, are given in Annexure-3 of this Boards Report.

However, in terms of Section 136(1) of the Act, the Report and Accounts 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 & 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.

Extract of Annual Return

The Extract of Annual Return (MGT-9) of the Company as on 31.3.2020 is attached as Annexure-4 to this Boards Report.

The Annual Return (MGT-7) of the Company as on 31.3.2019 is available on 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-5 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 2019-20. The Secretarial Audit Report for the above financial year is attached as Annexure- 6 to this Boards Report. The Secretarial Audit Report does not contain any qualification or reservation or adverse remark or disclaimer.

Secretarial Standard

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).

Unclaimed Suspense Account

6,23,630 Equity Shares of Rs. 2/- each which were lying in Unclaimed Suspense Account has been transferred to IEPF during the year, in accordance with the Section 124(6) of Companies Act, 2013 read with Rule 6(d) of Investor Education and Protection Fund Authority (Accounting, Audit, transfer and Refund) Rule, 2016, as amended vide Notification dated October 13, 2017.

Corporate Governance

The Company is committed to adhere to best corporate governance practices. The separate sections on Management Discussion and Analysis, Corporate Governance and a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under SEBI Listing Regulations, 2015 forms part of this Annual Report as a Separate section.

Statutory Auditors

Pursuant to Section 139 of the Companies Act, 2013, appointment of the Statutory Auditors M/s. Price Waterhouse Chartered Accountants LLP (FRN No.012754N/N500016) was made by the Members in its 28th Annual General Meeting (AGM) held on 1.8.2017 for a period of five years i.e. from the conclusion of 28th AGM till the conclusion of 33rd AGM.

The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There is no qualification, reservation, adverse remark or disclaimer in the Report.

Shifting of Registered Office

During the the year, the registered office of the Company has been shifted from 1st Floor, Kanchenjunga Building, 18, Barakhamba Road, New Delhi-110001 to 2nd Floor (West Wing), Worldmark 1, Aerocity, New Delhi - 110037.

Directors Responsibility Statement

Your Directors state that:

a) in preparation of annual accounts for the year ended 31st March, 2020, 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, 2020 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.

Industrial Relations

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

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
3.6.2020 Chairman & Senior Managing Director
DIN:00027137