Finolex Industries Ltd Directors Report.

To the Members,

Your directors have pleasure in presenting the Thirty-ninth annual report together with the audited financial statements (both standalone and consolidated) for the financial year ended 31st March, 2020.

State of the Companys affairs:

Financial Results

(J in Crores)
Particulars Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
Profit before depreciation & finance charges 478.91 645.87 503.54 658.72
Less: Finance charges 11.91 12.27 11.91 12.27
Profit before depreciation, exceptional items and taxation 467.00 633.60 491.63 646.44
Less:i. Depreciation 73.81 70.08 73.81 70.08
ii. Exceptional item - 27.90 - 27.90
iii. Provision for taxation 68.99 185.82 85.17 181.22
Profit after depreciation, exceptional items and taxation 324.20 349.80 332.65 367.25
Add/(Less) :
i. Retained earnings at the beginning of the year 1,409.47 1,212.35 1,457.24 1,242.91
ii. Re-measurement of defined benefit plans and income tax effect (2.53) (3.07) (2.53) (3.07)
iii. Share of Other Comprehensive - - 0.22 0.01
Income (OCI) of Associate for the year
iv. Dividend (248.20) (124.10) (248.20) (124.10)
v. Tax on dividend (51.02) (25.51) (51.21) (25.75)
vi. Share in Lease adJustments - - (0.09) -
Retained earnings at the end of the year 1,431.92 1,409.47 1,488.09 1,457.24
Earning per equity share:
Basic & Diluted (H/share) 26.13 28.19 26.81 29.59

Operations

The operational performance is summarized below:

Particulars Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
Revenue from Operations 2,985.98 3,091.32 2,985.98 3,091.32
Other Income 30.84 41.57 29.91 40.41
Total Income 3,016.82 3,132.89 3,015.89 3,131.73
Profit before tax 393.19 535.62 392.26 534.46
Share of profit of associate before tax - - 25.56 14.01
Profit after tax 324.20 349.80 332.56 367.25

 

The total capacity of PVC pipes & fittings stands at 3,70,000 MT p.a. The sales volume for PVC pipes & fittings was 2,54,958.25 MT for the financial year ended 31st March, 2020 as against 2,62,858.00 MT for the financial year ended 31st March, 2019. Total standalone income from operations was at H 3,016.82 Crores for the financial year ended 31st March, 2020 against H 3,132.89 Crores for the financial year ended 31st March, 2019. Profit after tax was at H 324.20 Crores for the financial year ended 31st March, 2020 as against H 349.80 Crores for the financial year ended 31st March, 2019.

Dividend

During the year, your Board has declared and paid an interim dividend on Equity Shares @ 100% (H 10.00 per share) for the year ended 31st March, 2020. The said interim dividend was paid to shareholders of the Company on 20th March, 2020. The interim dividend on equity shares including corporate dividend tax has amounted to H 149.60 Crores. Your Directors have recommended the payment of the said Interim Dividend as Final Dividend for the year ended 31st March, 2020. As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Dividend Distribution Policy which has been uploaded on the Companys website https://www.finolexpipes.com/ investors/policies-code-of-conduct/ and is also enclosed as Annexure-1.

Transfer to Reserves

During the year, amount transferred to General Reserve was H Nil (previous year H Nil). Thus, the total comprehensive Income for the year of H (299.40) Crores was transferred to Reserves and Surplus of Balance Sheet.

Deposits

The Company had no unpaid /unclaimed deposit(s) as on 31st March, 2020.

During the year, the Company has not accepted any deposits described under Chapter V of the Companies Act, 2013.

Management discussion and analysis

Pursuant to Regulation 34 (2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a management discussion and analysis report forms part of this annual report.

Consolidation of financial statements

As at the end of the financial year, your Company does not have any subsidiary company. However, it does have two associate companies namely Finolex Plasson Industries Private Limited and Pawas Port Limited.

The Company has not consolidated an immaterial associate viz. Pawas Port Limited, in which the Company holds 49.99% equity shares (H 0.05 Crores) and has not started operations. The consolidated financial statements as prepared pursuant to the provisions of Section 129 of the Companies Act, 2013 (the "Act") and Schedule III of the Act, are annexed and form part of this annual report.

Revision in financial statements

There has been no revision in the financial statements of the Company during the financial year 2019 – 2020.

Subsidiary and Associate Companies

In terms of Section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of the associate or Joint venture companies in Form AOC-1, is annexed and forms part of this annual report.

Pursuant to Rule 8(1) of the Companies (Accounts) Rules, 2014, the performance and financial position of the associate or Joint venture companies is included in the consolidated financial statement which is annexed and forms part of this annual report.

During the financial year 2019-20, there is no change in associate companies of the Company.

The Company has formulated the policy on material subsidiaries in alignment with the provisions of Regulation 16 (i) (c) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As required under Regulation 46 (2) (h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Material Subsidiary Policy has been uploaded on the Companys website https://www.finolexpipes.com/investors/ policies-code-of-conduct/.

Pursuant to Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the related party disclosures as specified in Para A of Schedule V are given below:

Sr. In the No. accounts of Disclosure of amounts at the year end and the maximum amount of loans/advances/investments outstanding during the year
1. Holding Company • Loans and advances in the nature of loans to subsidiary by name and amount.
• Loans and advances in the nature of loans to associates by name and amount. No Holding Company.
• Loan and advances in the nature of loans to firms/companies in which directors are interested by name and amount.
2. Subsidiary Same disclosures as applicable to the parent company in the accounts of subsidiary company. No Subsidiary Company
3. Holding Company Investments by the loanee in the shares of parent company and subsidiary company, when the company has made a loan or advance in the nature of loan. No Holding Company

Directors Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, your directors, on the basis of information and documents made available to them, confirm that:

a) in the preparation of the annual financial statements for the year ended on 31st March, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the directors 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 the year ended on that period;

c) the directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the directors have prepared the annual accounts on a going concern basis;

e) the directors have 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.

Corporate governance

A separate report on corporate governance in the compliance with corporate governance requirements specified in Regulations 17 to 27 and clauses (b) to (i) of sub-regulation (2) of Regulation 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with compliance certificate dated 23rd June, 2020 obtained from M/s. SVD & Associates, Practicing Company Secretaries, is annexed and forms part of this annual report.

Material changes and commitments

Your directors confirm that there are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company and the date of this report.

However, the Company had to temporarily suspend its operations at all of manufacturing plants, offices and warehouses during the lockdown imposed by the directives/ guidelines of the Central/State Governments/ municipal authorities due to Novel COVID-19 pandemic.Subsequent to receipt of permissions from the authorities, the Company resumed operations by focusing on the safety and well-being of all stakeholdej After commencement of operations, the business and operations of the Company have gradually scaled up to almost normal operating levels. The Company has adequate financial resources to meet the situation. The Company has an adequate internal financial reporting and control mechanism.

Contracts or arrangements with related parties

The particulars of related party transactions are stated in the note no. 36 in the financial statements, Annexures 3, 4 and 6 of this report.

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business of the Company. There are no materially significant related party transactions made by the Company with its Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict of interest with the Company at large. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Companies Act, 2013, in Form AOC-2, is not applicable.

All related party transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee for its approval on a quarterly basis.

The Company has developed a Related Party Transactions Manual, Standard Operating Procedures for the purpose of identifying and monitoring such transactions.

The Related Party Transactions Policy of the Company approved by the Board of Directors of the Company (the "Board") is uploaded on the Companys website https://www. finolexpipes.com/investors/policies-code-of-conduct/.

Risk management

During the financial year 2014-2015, your directors had constituted a Risk Management Committee. The Risk Management Committee was reconstituted w.e.f. 20th September, 2019. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of this report.

The Company has a robust risk management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business obJectives and enhance the Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. Risk management forms an integral part of the business planning and forecasting. The key business risks identified by the Company and its mitigation plans are included in the management discussion and analysis report.

Internal financial controls

Pursuant to Rule 8 (5) (viii) of the Companies (Accounts) Rules, 2014, the details in respect of adequacy of internal financial controls with reference to the financial statements are given below: The Company has in place adequate internal control procedures, proportionate to the nature of the business and the size of operations, for smooth conduct of business. The systems are implemented for safeguarding the assets, the prevention and detection of fraud and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information. The scope and authority of the internal auditors are defined by the Audit Committee from time to time. To maintain its obJectivity and independence, the internal auditors M/s. Sharp and Tannan report their observations to the Audit Committee of the Board. The internal auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of the internal auditors, process owners undertake corrective action in their respective areas which then strengthens the controls. Audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Directors and Key Managerial Personnel:

The Board of your Company is duly constituted with a proper balance of executive, non-executive and independent directoj Pursuant to Section 149 (1) and 161 of the Companies Act, 2013 read with Rule 8 (5) (iii) of the Companies (Accounts) Rules, 2014, the details relating to directors and key managerial personnel who were appointed or have resigned are reported as under:

Re-appointment of Director

Mr. Anil V. Whabi (DIN:00142052), Executive Director - Finance retires by rotation as Director at the ensuing annual general meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

Appointment of Independent Directors

The Board of Directors has co-opted Ms. Bhumika L. Batra (DIN 03502004), Dr. Deepak R. Parikh (DIN 06504537), Mr. Pradeep R. Rathi (DIN 00018577) and Mr. Anami N. Roy (DIN 01361110) as Additional Directors and also as Non-Executive Independent Directors for a term of 5 years effective 20th September, 2019. The said directors holds office of additional directors up to the date of the ensuing annual general meeting of the Company. A notice has been received from members of the Company proposing their appointment as an Independent Directors of the Company. The Board is of opinion that the independent directors so appointed are of integrity and possess the requisite expertise and experience (including the proficiency). The Board recommends their appointment.

Key Managerial Personnel (KMP)

Mr. Devang Trivedi, Company Secretary and Compliance Officer of the Company has resigned with effect from 8th June, 2020 and accordingly he ceased to be the KMP of the Company. As on date of this report, Mr. SanJay S. Math, Managing Director, Mr. Anil V. Whabi, Director – Finance & Chief Financial Officer are KMPs of the Company.

Training and familiarization programme for directors

In compliance of the Regulation 25 (7) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has adopted the familiarization programme for independent directors with an aim to provide them with an insight into their roles, rights, responsibilities within the Company, the nature of the business of the

Company and the business model of the Company. The Board members are provided with necessary documents, reports and internal policies to enable them to familiarize themselves with the Companys procedures and practices.

With a view to sensitize the new Independent Directors, the Company has organized a familiarization program for them on 11th November, 2019 giving an overview on the Companys business, products & markets, financials and key attributes, fairness of the financial statements vis--vis responsibilities of the directors and internal control systems & risk management. Besides, periodic presentations are made at the Board and its Committee Meetings, on business and performance updates of the Company, the global business environment, business strategy and various risks involved. The updates on relevant statutory changes and landmark Judicial pronouncements encompassing important laws are regularly presented to the Directoj The details of the familiarization programme for independent directors are available on the Companys website https://www. finolexpipes.com/investors/policies-code-of-conduct/.

Policy on directors appointment and remuneration

The Companys Nomination and Remuneration Committee is governed by its terms of reference. The Companys Nomination and Remuneration Policy includes directors appointment and remuneration including the criteria for determining qualifications, positive attributes, independence of a director and other details which are furnished in Annexure-2.

The Companys Nomination and Remuneration Policy is also available on the Companys website https://www. finolexpipes.com/investors/policies-code-of-conduct/.

Annual performance evaluation of the Board, its committees and individual directors

The Company has devised a nomination and remuneration policy for performance evaluation of independent, non-executive and executive directoj The basis for this evaluation include fulfillment of the independence criteria, independence from the management, qualification, positive attributes, area of expertise and the number of directorships & memberships held in various committees of other companies. The Board of Directors has carried out an annual evaluation of its own performance, its committees and the directors individually as per the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Remuneration of directors and key managerial personnel

Pursuant to the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of remuneration of directors and key managerial personnel are furnished in Annexure-3.

Particulars of employees

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are furnished in Annexure-4.

Auditors and Auditors Report:

Statutory Auditors

Pursuant to Section 139 of the Companies Act, 2013 and the Rules made thereunder, M/s. P. G. Bhagwat, Chartered Accountants, Pune were appointed as the statutory auditors of the Company in the thirty sixth Annual General Meeting (AGM) of the Company held on 11th August, 2017 for a period of five (5) consecutive years until the conclusion of the 41st AGM to be held in the year 2022 on such remuneration as shall be decided by the Board of Directoj The statutory auditors have issued a certificate of eligibility pursuant to Section 141 of the Companies Act, 2013 and they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

Cost Auditors

The Board at its meeting held on 23rd June, 2020 has, on recommendation of the Audit Committee, appointed M/s. S. R. Bhargave & Co. as cost auditors to conduct an audit of cost accounting records of the Company for the financial year ending 31st March, 2021. Pursuant to the provisions of Section 148 of the Companies Act, 2013 and Rules made thereunder, the ratification by the Members is necessary for the payment of remuneration to cost auditoj Your directors recommend the same.

The Cost Audit Report for the financial year 2018-19, issued by M/s. S. R. Bhargave & Co, Cost Auditors, in respect of the various products prescribed under Cost Audit Rules was filed with the Ministry of Corporate Affairs on 6th September, 2019.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. SVD & Associates, Practicing Company Secretaries, Pune to undertake the secretarial audit of the Company for the financial year 2019-20. The secretarial audit report for the financial year 2019-20, is enclosed herewith as Annexure-5. There is no qualification made by the Secretarial Auditor in the said Secretarial Audit Report. The observation in the said report is self-explanatory. The Company has complied with all applicable secretarial standards.

Disclosures:

Your directors are pleased to furnish the following details which are required to be reported by the Company in the Directors Report pursuant to Section 134(3), (a) to (q) of the Companies Act, 2013:

Number of meetings of the Board

During the year under review, seven meetings of the Board of Directors were held. The details of the meetings are provided in the corporate governance report.

Committees of directors

The details of the committee of the directors pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013, are described in the corporate governance report.

Audit committee

The Audit Committee has been duly constituted as required under the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The required details pertaining to the composition of the Audit Committee, pursuant to Section 177 (8) of the Companies Act, 2013, are given in the corporate governance report. There are no instances of the Board not having accepted the recommendation of the Audit Committee during the financial year 2019-20.

Extract of annual return

Pursuant to Section 134(3)(a) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, the extract of annual return in the prescribed format MGT-9, is enclosed herewith as Annexure-6.

Vigil mechanism / Whistle blower policy

The Company has established a vigil mechanism known as the Whistle Blower Policy (the "WBP") pursuant to Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, to report genuine concerns to the Chairman of the Audit Committee. The WBP provides adequate safeguards against victimization of persons who use such mechanism and ensures direct access to the Chairman of the Audit Committee. The details of the WBP are explained in the corporate governance report and also posted on the Companys website. The Company affirms that no director or employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

Prevention of Sexual harassment policy

The Company has in place a policy for prevention of sexual harassment of its employees at the workplace. In line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, an Internal

Complaints Committee has been constituted by the Company to redress any complaints received regarding sexual harassment. Your directors state that during the year under review, there was no complaint received / case filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Prohibition of Insider trading

In compliance with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015 and to preserve the confidentiality and prevent misuse of unpublished price sensitive information (UPSI), the Company has adopted a Code of Conduct to Regulate, Monitor and Report Trading by Insiders (‘Insider Trading Code) and a Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (‘Code of Fair Disclosure).

The said Code of Conduct is intended to prevent the misuse of UPSI by insiders and connected persons and ensure that the Directors and designated persons of the Company and their immediate relatives shall not derive any benefit or assist others to derive any benefit from having access to and possession of such UPSI about the Company which is not in the public domain, that is to say, insider information.

The Code of Fair Disclosure ensures that the affairs of the Company are managed in a fair, transparent and ethical manner keeping in view the needs and interest of all the stakeholdej

Particulars of loans, guarantees or investments

The details, as applicable, of loans given, investments made or guarantees given pursuant to Section 186 of the Companies Act, 2013, are disclosed in note no. 4 to the financial statements for the financial year 2019-2020.

It is clarified that the Company has no loans/ advances and investments in its own shares.

Significant and material orders passed by the regulators or courts or tribunals

Pursuant to Rule 8 (5) (vii) of the Companies (Accounts) Rules, 2014, it is reported that no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status of the Company and the Companys operations in future.

Employee stock option scheme

During the year under review, your directors confirm that no shares were issued by the Company under the Finolex Industries Limited – Employee Stock Option Scheme/ Plan (ESOP) of the Company.

A statement giving complete details, as at 31st March, 2020, pursuant to Regulation 14 of the SEBI (Share Based Employee Benefits) Regulations, 2014 is available on the Companys website https://www. finolexpipes.com/investors/policies-code-of-conduct/.

Sweat equity shares and equity shares with differential voting rights

Your directors confirm that neither sweat equity shares nor equity shares with differential voting rights have been issued by the Company during the year under review.

The conservation of energy, technology absorption, foreign exchange earnings and outgo

Your Company is committed to achieve the highest standards of environmental excellence by adopting environmentally sustainable and effective operating systems and processes. Your Company has put in place the internationally acclaimed Environment Management System under ISO 14001 certification at Ratnagiri. Your Company, is in compliance with all applicable environmental regulations in respect of air, water, noise, hazardous waste, e-waste etc. to mitigate the potential environmental impact on society. Information on conservation of energy, technology absorption, foreign exchange earnings and outgo required to be given under Section 134(3) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is enclosed herewith as Annexure-7.

Details in respect of fraud reported by Auditors

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee, Board and/or Central Government under Section 143(12) the Companies Act, 2013 and rules framed thereunder.

Business Responsibility Report:

Business Responsibility Report for the year ended 31st March, 2020 as stipulated under Regulation 34(2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed herewith as Annexure-8.

Corporate Social Responsibility:

The Board has constituted Corporate Social Responsibility (CSR) Committee and also framed the corporate social responsibility policy pursuant to Section 135 of the Companies Act, 2013. The details of the CSR Committee are given in the corporate governance report.

The corporate social responsibility policy of the Company can be viewed on the Companys website https://www.finolexpipes.com/ investors/policies-code-of-conduct/.

As a responsible corporate citizen, your Company conducts CSR activities in education, healthcare, sanitation, skill developments, social welfare, water conservation and women empowerment with its CSR partner, Mukul Madhav Foundation ("MMF"). Your Company has been actively contributing to the social and economic development of the underprivileged in and around your Companys plants situated at Ratnagiri and Urse in the state of Maharashtra and at Masar in the state of GuJarat.

The CSR activities carried out by your Company through MMF is headed by Mj Ritu P. Chhabria, Managing Trustee of Mukul Madhav Foundation, a driving force in accomplishing the activities on day-to-day basis.

During the financial year 2019-20, your Company in association with MMF has incurred expenditure on various CSR activities aggregating H 11.92 Crores against the mandatory CSR expenses of H 9.52 Crores. The detailed report on the CSR activities is enclosed herewith as Annexure-9.

Cautionary statement

Statements in the Board of Directors Report and the Management Discussion & Analysis describing the Companys obJectives, expectations or forecasts may be within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting the selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

Acknowledgements

Your directors take this opportunity to place on record their sense of gratitude to the banks, financial institutions, central and state government departments and local authorities for their guidance and support. Your directors are also grateful to the customers, suppliers and business associates of the Company for their continued co-operation and support. Your directors express their deep appreciation for the commitment, dedication and hard work put in by the employees at all levels. Lastly, your directors are grateful for the confidence and faith shown in them by the shareholders of the Company.

For and on behalf of the Board of Directors

Prakash P. Chhabria

Executive Chairman DIN :00016017

23rd June, 2020 Pune

Annexure-1 to the Directors Report

Dividend Distribution Policy

Purpose, ObJectives:

The Securities and Exchange Board of India ("SEBI") vide its Notification dated June 17, 2016 published in the Gazette of India on July 08, 2016 has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations"), by inserting Regulation 43A relating to dividend distribution policy which inter alia provides that the top five hundred listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites. Finolex Industries Limited (the "Company") has formulated this dividend distribution policy to comply with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This dividend distribution policy

(i) aims to ensure that the Company makes a rational decision with regard to the amount to be distributed to the shareholders as dividend after retaining sufficient funds for the Companys growth, to meet its long-term obJective and other purposes; and (ii) lays down various parameters which shall be considered by the Board of Directors of the Company before making a recommendation for declaration of dividend to its shareholdej

Policy:

The Board of Directors of the Company (the "Board") at its meeting held on 4th

February, 2017 has approved and adopted the dividend distribution policy [this "Policy"] of the Company.

The Policy of the Company, effective from 4th February, 2017 is as under:

A. Circumstances under which the shareholders of the Company may or may not expect dividend:

The shareholders of the Company may expect dividend only if the Company is having sufficient profits and free reserves with surplus cash after providing all expenses, depreciation etc. and complying all other statutory requirements of the Companies Act, 2013.

The shareholders of the Company may not expect dividend in the following circumstances, which are inclusive but not limited, subJect to the discretion of the Board: i. Proposed expansion plans requiring higher capital allocation; ii. Business restructuring such as acquisitions, amalgamation, merger, Joint ventures, manufacture of new products etc., all of which require significant capital outflow; iii. Possibilities of alternate usage of cash, such as requirement of higher working capital for the purpose of business of the Company; iv. Non-availability of surplus funds, after providing for expenses, depreciation and complying with statutory requirements under the Companies Act, 2013 (the "Act") and the relevant rules made thereunder; v. Proposal for buy-back of securities; vi. Loss or inadequacy of profits; vii. Operating Profit Margin; and viii. Sales Growth.

The decision regarding dividend payout is a crucial decision as it determines the amount of profit to be distributed among shareholders of the Company and the amount of profit to be retained in business. The decision seeks to balance the dual obJectives of appropriately rewarding shareholders through dividends and retaining profits in order to maintain a healthy capital adequacy ratio to support future growth. The Company has been consistently paying out dividends to its shareholders and can be reasonably expected to continue declaring in future as well, unless the profits of the Company are insufficient or adversely impacted by any of the factors mentioned under paragraphs A, B and C of this Policy.

B. The financial parameters that shall be considered while declaring dividend:

The Board shall consider the following financial parameters which are inclusive but not limited for the purpose of recommending the declaration of dividend: i. Current years net operating profit and profits for any previous financial year available for distribution of dividend as per the applicable provisions of the law; ii. Capital expenditure and working capital requirements; iii. Financial commitments w.r.t. the outstanding borrowings and interest thereon; iv. Financial requirement for business expansion and/or diversification, acquisition etc. of new businesses; v. Provisioning for financial implications arising out of unforeseen events and/or contingencies; and vi. Past dividend trend.

C. Internal and external factors that shall be considered for declaration of dividend:

The Board shall consider the following internal factors which are inclusive but not limited for the purpose of recommending the declaration of dividend:

i. Operating cash flow of the Company;

ii. Profit earned during the year;

iii. Profit available for distribution;

iv. Earnings Per Share (EPS);

v. Working capital requirements;

vi. Capital expenditure requirement;

vii. Business expansion and growth;

viii. Likelihood of crystallization of contingent liabilities, if any;

ix. Additional investment in subsidiaries or associates of the company;

x. Upgradation of technology and physical infrastructure;

xi. Creation of contingency fund; xii. Acquisition of brands and business;

xiii. Cost of Borrowing;

xiv. Past dividend payout ratio / trends;

xv. Repayment need for clearing debt;

xvi. Investment opportunities available; and

xvii. Contingency Fund.

The Board shall consider the following external factors which are inclusive but not limited for the purpose of recommendation/declaration of dividend

: i. Economic environment;

ii. Capital markets;

iii. Relevant international economic trends

; iv. Statutory provisions and guidelines;

v. Dividend payout ratio of competitors;

vi. Government policies; vii. Contractual restrictions / Restrictions in Debt covenants; viii. Nature of Companys business affected by cyclical economic conditions; and ix. Market behavior.

D. Policy as to how the retained earnings shall be utilized:

The Board may retain its earnings in order to make better use of available funds and deliver sustainable value to the shareholdej

The retained earnings will be utilised for: (i) Capital expenditure; (ii) Building up free reserves; (iii) Unforeseen requirements; (iv) Long-term strategic requirements; and (v) Revenue short falls

The decision of utilization of the retained earnings of the Company shall be based on the following factors as may be applicable:

• Market expansion plan;

• Product expansion plan;

• Increase in production capacity;

• Modernisation plan;

• Diversification of business;

• Long-term strategic plans;

• Replacement of capital assets;

• Where the cost of debt is expensive;

• Entry into Joint ventures

• Other such criteria as the Board may deem fit.

E Parameters that shall be adopted with regard to various classes of shares:

The holders of the equity shares of the Company, as on the record date, are entitled to receive dividend as may be declared by the Company. Presently, the issued share capital of the Company comprises of only one class of equity shares of H 10 each which rank pari passu with respect to all their rights. In case the Company decides to issue any other class(es) of shares in future, it shall consider and specify the other parameters to be adopted with respect to such class(es) of shares.

F General: i. Pursuant to the provisions of section 123 of the Act, the Articles of Association of the Company and this

Policy, the Board shall recommend the final dividend which shall be declared by the shareholders of the Company at the annual general meeting of the Company. The Board may also, from time to time, in its discretion, declare interim dividend. ii. The Company shall ensure compliance with the provisions of the Act and rules framed thereunder, the Listing Regulations and other applicable laws with respect to the declaration and payment of dividend. iii. Due regard shall be given to the restrictions or covenants contained in any agreement entered into with the lenders of the Company or any other financial covenant as may be specified under any other arrangement or agreement impacting the Company or to which the Company is a party, before recommending or distributing dividend to the shareholdej

G Disclosure:

This Policy shall be disclosed by the Company in its annual report and on its website.

H Review:

The Board reserves the right to review, modify, amend or change any or all clauses of this Policy in accordance with the provisions of the Act, relevant rules framed thereunder, the Listing Regulations, other applicable legislations governing dividends and the Articles of Association of the Company, as in force, and as amended, from time to time.

Annexure-2 to the Directors Report

Nomination and Remuneration Policy

1. Preamble

1.1 Finolex Industries Limited (the ‘Company) recognizes the importance of attracting, retaining and motivating personnel of high caliber and talent for the purpose of ensuring efficiency and high standard in the conduct of its affairs and achievement of its goals besides securing the confidence of the shareholders in the sound management of the Company. For the purpose of attaining these ends, the Company has constituted a Nomination and Remuneration Committee which is entrusted with the task of devising a transparent reasonable and fair policy of remuneration for its directors, key managerial personnel and other employees.

1.2 The Companies Act, 2013 vide Section 178, the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time, makes it mandatory for the Board of Directors of every listed company to constitute a Nomination and Remuneration Committee.

1.3 The obJective of the Nomination and Remuneration Committee is to assist the Board of Directors of the Company and its controlled entities in fulfilling its responsibilities to shareholders by : 1.3.1. Considering the requirement of skill sets on the Board, eminent people having an independent standing in their respective field/profession and who can effectively contribute to the Companys business and policy decisions are considered by the Nomination and Remuneration Committee, for appointment, as Independent Directors on the Board. The Committee, inter alia, considers qualification, positive attributes, area of expertise and number of Directorships and memberships held in various committees of other companies by such persons. The Board considers the Committees recommendation and takes appropriate decision.

1.3.2. ensuring that the Board of Directors is comprised of individuals who are best able to discharge the responsibilities of directors in consonance with the Companies Act, 2013 and the norms of corporate governance; and

1.3.3. ensuring that the nomination processes and remuneration policies are equitable and transparent.

1.4 The responsibilities of the Committee include:

1.4.1 formulating a criteria for determining qualifications, positive attributes and independence of a director; 1.4.2 recommending to the Board of Directors a policy or recommendation, relating to the appointment and remuneration for the directors, key managerial personnel and all remuneration, in whatever form, payable to Senior Management;

1.4.3 formulating a criteria/ recommendation and manner for effective evaluation of performance of independent directors, Board of Directors and its committee(s). On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director;

1.4.4 devising a policy/ recommendation on Board diversity; and

1.4.5 identifying persons who are qualified to become directors and who may be appointed as part of the ‘senior management or core management team of the Company in accordance with the criteria laid down, and recommend to the Board of Directors the appointment and removal of such personnel.

1.5 This Nomination and Remuneration Policy has been formulated with a view to :

1.5.1 Consider selection, appointment of directors including independent directors, key managerial personnel and Senior Management in compliance of the provisions of the Companies Act, 2013 and Listing Regulations and devise a transparent system of determining the appropriate level of remuneration throughout all levels of employees and teams in the Company;

1.5.2 encourage personnel to perform to their highest level;

1.5.3 provide consistency in remuneration throughout the Company; and

1.5.4 offer incentives on the premise of aligning the performance of the business with the performance of key employees and teams within the Company.

1.6 The Nomination and Remuneration Policy elucidates the types of remuneration to be offered by the Company and factors to be considered by the Board of

Directors of the Company, Nomination and Remuneration Committee and management of the Company.

2. Definitions

Some of the key terms used in the Nomination and Remuneration Policy are as under: 2.1 ‘Board means the Board of Directors of Finolex Industries Limited or the Company.

2.2 ‘Committee means the Nomination and Remuneration Committee constituted by the Board of Directors of the Company in accordance with section 178 of the Companies Act, 2013. 2.3 ‘Director means a director appointed on the Board of the Company including executive; non-executive; and independent directoj

2.4 ‘Employee means every employee of the Company (whether working in India or abroad), including the directors in the employment of the Company.

2.5 ‘Key managerial personnel includes managing director, or chief executive officer or manager and in their absence, a whole-time director; company secretary; and chief financial officer. 2.6 ‘Member means a director of the Company appointed as member of the Committee.

2.7 ‘Nomination and Remuneration Policy shall mean the policy of remuneration of directors, key managerial personnel and other employees of the Company formulated by the Nomination and Remuneration Committee.

2.8 ‘Senior Management means the personnel of the Company who are members of its core management team excluding Board of Directors comprising all members of management who are one level below the chief executive officer/managing director/whole time director/manager (including chief executive officer/manager, in case they are not part of the Board) and shall specifically include company secretary and chief financial officer.

3. Nomination and Remuneration Committee

3.1 The Committee shall be formed by the Board of the Company. It shall consist of three or more non-executive directors out of which not less than one-half shall be independent directoj The Board of the Company shall nominate directors as members of the Committee from time to time.

3.2 The Chairman of the Committee shall be an independent director but shall not be the Chairperson of the Company. He shall be present at the Annual General Meeting, to answer the shareholders queries and may determine as to who should answer the queries.

3.3 The presently nominated members of the Committee are nominated by the Board of Director. The Board will nominate Directors on the Committee, from time to time.

3.4 In respect of the policy on Board Diversity, the Committee shall ensure that the Board has requisite number of independent, executive and other category of Directors as prescribed in the Companies Act, 2013, Rules made thereunder and Listing Regulations including amendments, as may be applicable from time to time.

4. Letter of Engagement or Contract of Employment

4.1 Non-executive directors shall enter into a letter of engagement with the Company, the terms and conditions of which shall be approved by the Board. The letter of engagement shall set forth the terms and conditions of the engagement, the performance expectations for the position, the remuneration package, the availability of the latter being contingent upon fulfillment of certain expectations of the Company measured by benchmarks of performance. 4.2 Executive directors, key managerial personnel and senior management employees shall enter into a contract/ employment contract or acceptance of appointment/ increment letter ("contract ofemployment")withtheCompanyclearly setting out the terms and conditions of the remuneration package for such person. The contract of employment shall set out the expectations for the performance, the key performance indicators, measures and criteria for assessment or evaluation of performance.

4.3 The Committee and the Board must approve the contracts of employment for the senior management and directoj 4.4 The Board shall disclose the terms and conditions of any contract of employment in accordance with the law and the employment rules, as applicable from time to time.

5. Remuneration Structure

5.1 Remuneration to Executive Directors, Key Managerial Personnel and Senior Management The Board shall, in consultation with the Committee approve and finalize the forms of remuneration to be offered to executive and non executive directors, key managerial personnel, senior management and other employees. The remuneration package shall be composed of amounts that are fixed and variable and the endeavor of the Board and the Committee shall be to strike a balance between the fixed and variable components and thereby promote sustainable value for the Company and its shareholders over time.

5.1.1 Fixed Remuneration

The contract of employment entered into by the executive directors, key managerial personnel and senior management employees with the Company shall demarcate a fixed gross annual salary or base salary payable to the employee. The fixed remuneration or salary shall be determined according to complexities of the position and role of the employee, the relevant laws and regulations, conditions prevalent in the labour market and the scale of the business relating to the position. The fixed remuneration will reflect the core performance requirements and expectations of the Company.

5.1.2 Performance based remuneration or incentive or Ex-gratia bonus based payments The performance or incentive or Ex-gratia bonus based payments shall form part of the variable component of the salary payable to the employee. In addition to the fixed remuneration, the Company shall implement a system of bonuses and incentives reflecting short and long term performance obJectives appropriate to the working of the Company and designed to lay emphasis on the direct relationship between performance and remuneration. Performance based remuneration shall be proportionate to and contingent upon the attainment of specific performance targets by employees in the Company. Incentive-based payments take into account factors such as performance of the employee, his conduct, responsibilities, position and role and shall be calculated as a percentage of the fixed remuneration.

5.1.3 Severance Fees or Termination Benefits

Each contract of employment entered into by the executive directors, key managerial personnel and senior management employees with the Company shall demarcate in advance the entitlement to payment upon termination of employment for each employee or shall part of employees service contract or appointment letter. Making of such payments shall be approved by the Board and the Committee and shall be in consonance with the Nomination and Remuneration Policy of the Company.

5.1.4 Employee Benefits

The Company shall comply with all legal and industrial obligations in determining the benefits available with employees, namely short-term benefits such as salaries, social security contributions, bonuses, post-employment benefits such as gratuity, other long-term employee benefits.

5.2 Remuneration to Non-Executive Directors

The Nomination and Remuneration Committee and/ or Board of Directors shall carry out performance review of each of the Director at least once a year. According to the performance of each Director, the Company shall pay remunerationtonon-executivedirectors in such a manner so as to attract and maintain high quality members on the Board. Non-executive directors shall receive a fixed remuneration, for their service. Non-executive directors shall not be entitled to any performance based incentives, bonus payments or retirement benefits. Board of Directors shall be authorized to decide any other mode of remuneration, as may be agreed upon by resolution passed by the Board at the meeting.

6. Disclosure

6.1 The Nomination and Remuneration Policy shall be disclosed in the Boards report of the Company prepared in accordance with sub-section (3) of section 134 of the Companies Act, 2013. 6.2 Payments to non-executive directors shall be either disclosed in the Annual Report of the Company and/ or put up on the website of the Company and reference drawn thereto in the Annual Report as per mandatory requirement or decided by the Key Managerial person from time to time. Further, the number of shares and convertible instruments held by non-executive directors shall be disclosed by the Company in its Annual Report.

6.3 With regard to payment of remuneration, the section on the corporate governance of the Annual Report of the Company shall contain the following disclosures, namely :

6.3.1 All elements of remuneration package of individual directors summarized under maJor groups, such as salary, benefits, bonuses, stock options, pension etc; 6.3.2 Details of fixed component and performance linked incentives, along with the performance criteria; 6.3.3 Service contracts, notice period, severance fees; and 6.3.4 Stock option details, if any - and whether issued at a discount as well as the period over which accrued and over which exercisable.

7. Review and Implementation

7.1 The Key Managerial Person shall conduct an evaluation of performance for all employees on an annual basis to monitor and review, and if necessary, revise the appropriateness of each remuneration package.

7.2 The remuneration package payable to the employees of the Company shall be approved by the Committee or Board, as may be applicable from time to time. 7.3 The Committee shall be responsible for monitoring the implementation of the policy, conducting a review of the same from time to time and advising the Board on the mode of revision of the policy such as inclusion of long-term incentives that would contribute towards creating a sustainable value for shareholders of the Company. Any amendment in the Act, Rules will be applicable from the date of the notification. This policy will be deemed to be amended from such date. Chairman of the Committee shall be authorised to amend the policy from time to time.

Annexure-3 to the Directors Report

The information 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 are given below: i) The percentage increase in remuneration of each director, chief financial officer, company secretary or manager, if any, in the financial year 2019-20, the ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2019-20 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under:

Sr. No. Name of Director/KMP and Designation Remuneration of Director/KMP for Financial year 2019-20 in J Percentage increase/ (decrease) in remuneration in the FinancialYear 2019-20 Ratio of remuneration of each Director to the median/ remuneration of employees (times)
1 Mr. Prakash P. Chhabria 8,54,45,864 -17.34% 146.94
Executive Chairman
2 Mr. SanJay K. Asher # 6,40,000 Not Applicable* 1.10
Non- Executive Director
(upto 19.09.2019)
3 Ms.Bhumika L.Batra ## 6,40,000 Not Applicable* 1.10
Non-Executive Director
(w.e.f. 20.09.2019)
4 Mj Ritu P. Chhabria 12,80,000 -16.95% 2.20
Non- Executive Director
5 Mj Kanchan U. Chitale 12,80,000 Not Applicable* 2.20
Non-Executive Director
(w.e.f. 01.04.2019)
6 Mr. Dara N. Damania # 6,40,000 Not Applicable* 1.10
Non- Executive Director
(upto 19.09.2019)
7 Mr. Saurabh S. Dhanorkar 12,80,000 -28.14% 2.20
Non- Executive Director
8 Mr. Shrikrishna N. Inamdar # 8,40,000 Not Applicable* 1.44
Non- Executive Director
(upto 19.09.2019)
9 Mr. Prabhakar D. Karandikar # 6,40,000 Not Applicable* 1.10
Non- Executive Director
(upto 19.09.2019)
10 Mr. SanJay S. Math 2,92,29,471 15.57% 50.26
Managing Director (KMP)
11 Dr. Deepak R.Parikh ## 6,40,000 Not Applicable* 1.10
Non-Executive Director
(w.e.f. 20.09.2019)
12 Dr. Sunil U. Pathak # 6,40,000 Not Applicable* 1.10
Non- Executive Director
(upto 19.09.2019)
13 Mr.Pradeep R. Rathi ## 8,40,000 Not Applicable* 1.44
Non-Executive Director
(w.e.f. 20.09.2019)
14 Mr. Anami N. Roy ## 6,40,000 Not Applicable* 1.10
Non-Executive Director
(w.e.f. 20.09.2019)
15 Mr. Anil V. Whabi 2,32,29,637 20.52% 39.95
Director - Finance & CFO (KMP)
16 Mr. Devang B. Trivedi 32,30,007 10.28% 5.55
Company Secretary (KMP)

* Not applicable since remuneration was paid for the part of the previous year / current year. # Ceased from the Directorship w.e.f. 19th September, 2019 ## Appointed as Director w.e.f. 20th September, 2019

ii) The percentage increase in the median remuneration of employees for the financial year was 15.34%. iii) There were 1,330 permanent employees on the rolls of the Company as on 31st March, 2020. iv) Average percentage increase made in the salaries of employees other than the managerial personnel in the last financial year 2019-20 was 10.51% and decrease of 6.77% in the managerial remuneration for the same financial year. v) It is hereby affirmed that the remuneration paid to the Directors is as per the Nomination and Remuneration Policy of the Company for directors and key managerial personnel.

Annexure-4 to the Directors Report

Information as per Section 197 of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Sr. No. Name Designation Qualification(s) Age (yj) Total Exper- ience Date of Commencement of Employment Gross remuneration 2019-20 J Last employment held % of equity shares held Whether Employee is relative of any director if yes, give name of such director
1 Mr. Prakash P. Chhabria Executive Chairman B. Sc. (Intl. Business) USA 57 35 13.03.1992 8,54,45,864 Finolex Cables Ltd. 0.138 Mj Ritu P. Chhabria
2 Mr. SanJay S. Math Managing Director B.E. (Chem.), DMS 64 45 13.12.2011 2,92,29,471 I. G. Petrochemicals Ltd. 0.002 No
3 Mr. Anil V. Whabi Director - Finance & CFO B. Sc., ACA 60 36 11.08.2014 2,32,29,637 Kotkar Energy Dynamics Pvt. Ltd. 0 No
4 Mr. Diptesh Patel Chief Information Officer B.Sc, MSM 48 25 07.11.2015 1,14,58,553 JSW Steel Ltd. 0 No
5 Mr. Nitin G. Kulkarni President – Sales & Marketing B.Com, MBA- Marketing 53 32 19.12.2014 88,82,553 HSIL Ltd. 0 No
6 Mr. Jayanta Sinha Vice President – Sales & Marketing B.Sc, MBA- Marketing 53 26 01.09.2014 72,13,430 Elder Pharmaceuticals Ltd. 0 No
7 Mr. Shreedatta Albur Vice President (VCM-O&U) B.E. (Chem) 57 28 01.01.2018 65,22,965 Reliance Industries Ltd. 0 No
8 Mr. Anil Darade President – Operation Pipes & Fittings B.E. (Polymers), MBA 54 28 12.11.2018 57,61,820 Varroc Polymers Pvt. Ltd. 0 No
9 Mr. S. S. Mulye Vice President- PVC (O&M) B.E.-MECH 59 38 01.10.1991 50,77,932 Gharada Chemicals Ltd. 0 No
10 Mr. Venkat Ravi Vice President- Port Facility B.Sc., B. Tech (Chem) 60 37 24.06.1991 48,06,365 NOCIL Ltd. 0 No

Note:

The nature of employment of Directors mentioned as per Sr. No. 1 to 3, is contractual while for other employees, it is permanent. During the financial year 2019-20, no employee has received remuneration in excess of Managing Director/Whole time Directors

.