DCM Shriram Ltd Directors Report.

The Directors have pleasure in presenting the 29 Annual Report of the Company along with Audited Financial Statements, both standalone and consolidated, for the year ended 31 March, 2018.

Financial Highlights

The results for the year ended 31.3.2018 and 31.3.2017 are as under:

(Rs. in crores)

Particulars Standalone Consolidated
31.3.2018 31.3.2017 31.3.2018 31.3.2017
Revenue from operations 6,912.99 6,060.94 7,006.56 6,117.19
Profit before finance cost, depreciation, tax and exceptional item 1,105.53 860.09 1,091.04 817.86
Profit before exceptional item and tax 885.46 676.13 867.34 632.70
Exceptional item :
Provision for impairment of investment in foreign subsidiaries (Bioseed business) - 85.12 - -
Profit before tax 885.46 591.01 867.34 632.70
Profit after tax 688.44 522.07 668.66 552.33
Share of profit/(loss) of joint venture - - 0.04 0.03
Non-controlling interest - - 0.86 (0.68)
Other comprehensive income (after tax) (0.45) (7.47) 0.24 (3.58)
Total comprehensive income (after tax) 687.99 514.60 669.80 548.10
Basic/Diluted - EPS (Rs. per equity share)
- Before exceptional item 42.39 37.06 41.22 33.97
- After exceptional item 42.39 32.14 41.22 33.97
Retained earnings - opening balance 2,472.36 2,070.22 2,410.92 1,979.03
Add/(less):
Profit for the year 688.44 522.07 669.56 551.68
Dividends (including dividend tax) paid during the year (160.30) (113.37) (160.30) (113.37)
Others (0.77) (6.56) (0.81) (6.42)
Retained earnings - closing balance 2,999.73 2,472.36 2,919.37 2,410.92

State of Companys Affairs/Performance

The Company recorded satisfactory performance for the year. Chlor-Alkali business has become stronger with economies of scale and substantial improvement in power efficiencies. Sugar business is experiencing difficult price situation with prices significantly below cost. Other businesses continue to perform reasonably.

The Companys total revenues from operations stood at Rs.7,007 Crores in FY18 vs. Rs.6,117 Crores last year. Revenue of chemicals business up by 57% driven by increased volumes due to full capacity utilization of expanded capacity at Bharuch and increase in realizations. Revenue of Sugar business up by 24% with higher volumes aided by higher cane crush.

EBITDA for FY18 stood at Rs.1,091 Crores, a significant improvement from Rs.818 Crores recorded last year. This improvement was lead by better volumes and margins in Chemicals business. Sugar business recorded low EBITDA due to write down of inventory by Rs.185 Crores for FY18 (valued at net realizations) and higher cost of production.

Our Agri-input businesses of Shriram farm solutions and Bioseed recorded some revival in FY18 aided by better monsoon and better liquidity after the effects of demonetization. Fenesta business continues to register good growth.

Overall EBIDTA margins improved to 16% from 13% last year.

Net Profit for FY18 was up by 21% to Rs.670 Crores from Rs.552 Crores in FY17.

Net Debt stood at Rs.653 Crores vs. Rs.928 Crores last year. Debt equity ratio stood at 0.21x vs 0.37x last year.

The Company commissioned 150 KLD distillery at its Sugar unit located at Hariawan at total investment of ~Rs.188 Crores. Distillery will start contributing to the earnings of the Company from the next year.

During the year the Company has announced new capital expenditure projects for expansion cum modernization at an investment of ~Rs.1125 Crores in Chlor- Vinyl and Sugar businesses. These projects are expected to be commissioned in phases in FY 2019 and FY 2020.

Dividend

Your Directors are pleased to recommend a final dividend @ 40% i.e. Re.0.80/- per equity share of Rs.2/- each for the year ended 31.3.2018, which if declared by the Members, the total dividend for the financial year 2017-18 will aggregate to 410% i.e. Rs.8.20/- per equity share of Rs.2/- each (including two interim dividends aggregating @ 370% i.e. Rs.7.40 per equity share).

Further, as per the requirement of Regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015, Dividend Distribution Policy of the Company is attached as Annexure-1.

Number of Meetings of the Board

The Board met 5 times during the financial year on 1.5.2017, 1.8.2017, 7.11.2017, 20.1.2018 & 23.2.2018.

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.

Risk Management Framework

The Company has in place a Risk Management Framework, which was approved by the Board on 28.1.2006 and was implemented w.e.f. 2.1.2007. 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 includes criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Sub-section (3) of Section 178 of Companies Act, 2013 (the Act). The Remuneration Policy is attached as Annexure-3 to this Boards Report.

Corporate Social Responsibility

The details about the Policy on Corporate Social Responsibility (CSR) including 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.

Business Responsibility Report

In compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Business Responsibility Report (BRR) forms part of this Annual Report. 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 Obligations and Disclosure Requirements) Regulations, 2015, and the Companies Act, 2013 which is also available on Companys website at the following web link:

(http://dcmshriram.com/sites/default/files/vigil-mechanism.pdf)

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 Companys website at the following web link:(https://www.dcmshriram.com/sites/default/files/Related%20Party%20Trnsaction%20%20-%20Final%20%28BM-12.11.2014%29.pdf)

Material Subsidiary Policy

The Company has formulated a Policy for determining Material Subsidiaries, which is also available on Companys website at the following web link:(https://www.dcmshriram.com/sites/default/files/MA TERIAL%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 Act 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 Act:

a) accepted including renewals during the year : Rs.6,53,50,000/-

b) remained unclaimed as at the end of the year : Rs.1,54,398/-

c) there has been no default in repayment of deposits or payment of interest thereon during the financial year ended on 31 March, 2018.

2. There are no deposits, which are in non-compliance with the requirements of Chapter V of the Act.

3. Section 124 and other applicable provisions of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (the Rules) as amended from time to time, mandates that the matured deposits including interest that has remained unpaid/unclaimed for a period of seven years be transferred to the Investor Education and Protection

Fund (the Fund), established by the Central Government. According to the said Rules, during the year matured deposits including interest of Rs.61,565/- has been transferred to the Investor Education and Protection Fund (IEPF).

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 in 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 at the following web link of the Company:(https://www.dcmshriram.com/sites/default/files/ESPS%20Disclosure%2 0-%202017-18.pdf)

Directors and Key Managerial Personnel (KMP)

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

Re-appointment of Mr. Ajay S. Shriram, Chairman & Senior Managing Director and Mr. Vikram S. Shriram, Vice Chairman & Managing Director, are being sought in the ensuing Annual General Meeting (AGM) of the Company for a period of five years w.e.f. 1.11.2018. The requisite details of the re-appointment are mentioned in the said AGM Notice.

During the year, Mr. K.K. Sharma was appointed as Additional Director by the Board. He was also appointed as Whole Time Director (EHS), w.e.f. 20.11.2017, subject to the approval of the Members which is being sought in the ensuing AGM.

Dr. N.J. Singh ceased to be Director of the Company w.e.f. 19.11.2017.

The Company has received declaration from all the Independent Directors of the Company under Section 149(7) of the Act, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

The details of familiarization programme for Independent Directors are available on Companys website at the following web link:

(https://www.dcmshriram.com/sites/default/files/Details%20of%20Famili arization%20Programme%20for%20Independent%20Directors%202017-18.pdf)

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 SEBI (Listing Obligations & Disclosure Requirements) 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 and Vice Chairman of the Board, the Chairman of NRCC collated the inputs from Directors about their performance as Chairman/Vice Chairman and Director of the Board and/or 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, excluding the Director being evaluated.

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 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. 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 Act and the Listing Regulations. Number of Committee meetings held during the year.
(III) Individual Directors Fulfillment of responsibilities as a director as per the 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; Board and/or Committee meetings attended; and General meetings attended.

Particulars of Employees

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 Employees of the Company, are given in Annexure-4 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 Board Audit Committee

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

Extract of Annual Return

The Extract of Annual Return of the Company as on 31.3.2018 in Form MGT-9 is attached as Annexure-5 to this Boards Report.

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-6 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 2017-18.

The Secretarial Audit Report for the financial year ended 31 March, 2018 is attached as Annexure-7 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 Shares Suspense Account

In terms of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company reports the following details in respect of equity shares lying in the unclaimed shares suspense account.

Balance as on 1.4.2017 No. of Members who approached the Company for transfer of shares and shares transferred from Suspense Account during the year

Balance as on 31.3.2018

No. of holders No. of shares No. of No. of holders shares No. of holders No. of shares
4515 664970 18 16650 4497 648320

The voting rights on the shares in the suspense account as on 31 March, 2018 will remain frozen unless the rightful owners of such shares claim the shares.

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 Obligations & Disclosure Requirements) Regulations, 2015, forms part of the Annual Report.

Statutory Auditors

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

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

Directors Responsibility Statement

Your Directors state that:

a) in preparation of annual accounts for the year ended 31 March, 2018, 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 31 March, 2018 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 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
24.4. 2018 Chairman & Senior Managing Director
DIN: 00027137