Godrej Industries Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The highlights of overall performance are as follows:

Rs. Crore
Particulars 2017-18 2016-17
Sales 1,986.32 1,602.17
Total Income 2,287.13 1,649.05
Profit / (Loss) Before Taxation 256.65 (145.35)
Profit / (Loss) After Current Taxation 243.17 (145.35)
Profit / (Loss) After Current & Deferred Taxation 241.40 (145.24)
Earnings per Equity Share ( Rs. ) - Basic 7.18 (4.32)
Earnings per Equity Share ( Rs. ) - Diluted 7.17 (4.32)
Profitability ratios are as follows:
PBDIT/Total Income 24% 7%
PBT/Total Income 11% -9%
PAT/Total Income 11% -9%
Return on Capital Employed 10% 1%
Return on Net Worth 14% -9%
The Financial risk ratios are as follows:
Net Debt/Equity 1.47 1.76
Interest coverage 2.21 0.30

CHEMICALS DIVISION

The Chemicals division is one of India’s leading manufacturers of basic oleo-chemicals, surfactants and derivatives of oleo-chemicals. The division has a blend of domestic and international operations and is one of the leading suppliers in the Indian market. The division achieved export turnover of Rs. 539 crore in this fiscal, accounting for about 33% of its turnover.

The division is focusing on value added chemicals which have steady margins and also helps in de-risking the business.

Despite a challenging macro-economic situation the division recorded a revenue growth of 16% and has a wide distribution network.

The product category-wise review follows:

Fatty Acids

The Fatty Acids portfolio, comprising stearic acid, erucic acid, oleic acid, as well as value-added fatty acids, accounted for about 42% of the turnover of the division. The division plans to enhance the sales of its value-added fatty acids in the domestic as well as export markets.

Fatty Alcohol

Fatty alcohol contributed 26% to turnover of this division. A good portion of the revenues for this category comes from exports. The division is also expanding the product basket by focusing on value-added fatty alcohol and also long chain alcohol.

Surfactants

Surfactants contributed 20% to the turnover of the division.

Our products have been approved by several multi-national companies and we can now strongly participate in their global sourcing programs. Effective sourcing of raw material and increasing customer base are important for improving margins and division has done reasonably well on both the counts.

The division also has the significant presence in Sodium Lauryl Ether Sulphate (SLES) and Alpha Olefin Sulfonate (AOS) market space.

Glycerin

Glycerin accounted for 8% of the turnover of this division. Being largely a co-product, additional sales are mostly opportunistic, depending on market conditions. With the help of R&D and a new plant at Dombivli, the division is now manufacturing value added glycerin product. Our glycerin has been approved by many pharmaceutical companies and known for its consistent quality.

Other Initiatives

Your company continues to focus on use of renewable energy over the years. In FY 2017-18 ~42% of the total energy we consumed was through renewable sources. We achieved this through use of biomass briquettes, Solar roof top and other initiatives.

Our Valia & Ambernath plant has installed solar rooftop of 326kW & 198 kW respectively.

Our Valia plant was awarded the ‘Energy Efficient Unit for third time in a row at CII National Awards for Energy Management 2017 and by FICCI in the most environment friendly company award, 2017. Our Ambernath plant won the ICC Award for "Excellence in Energy Conservation and Management".

We have also initiated various other energy conservation technologies in our plants which has resulted in reducing our specific energy consumption by ~ 25%.

Outlook

The outlook for the coming year FY 2018-19 is good for the value-added fatty acids at this point in time. International demand is showing signs of improvement and procurement of indigenous raw material will be an edge over overseas competition.

Overall, we expect stronger demand in FY2018-19.

Finance and Investments

During the year, your company continued to earn return from its investments in the form of Dividend of Rs. 199 crore (previous year Rs. 47 crore).

Your company participated in GAVL IPO as a promoter shareholder and sold part of its stake. GIL realised a profit of Rs. 267 crore in the Standalone financials on sale of shares in GAVL. The stake of your company in GAVL now stands at 58%. Your company also invested Rs. 60 crore in Natures Basket Limited to support their growth plans.

The market value of Godrej Industries’ investment in GCPL, GPL & GAVL* has increased by ~ Rs. 8,625 crore (34%, Y-O-Y) *For GAVL 16th Oct,2017, GAVL listing date is taken for comparison

Veg Oils

The veg oils business started direct sales of edible oils under ‘Godrej Brand’ in bulk and consumer packs from September, 2015. The business clocked a revenue of Rs. 105 crore and has a reach of 8000+ retail outlets in Mumbai Metropolitan Region (MMR) and 2000+ retail outlets in Western Maharashtra and Goa. The products of this business have been well received in the market. While the Bulk pack business has been stable, consumer pack business recorded a steady growth.

Godrej Industries (Chemicals) has once again bagged the prestigious ‘Trishul Award’ for its Outstanding Export Performance.

The award was presented to Mr. N S Nabar, Executive Director and President, Godrej Industries Limited (Chemicals) by Hon’ble Minister of State for Commerce, Industry and Civil Aviation Shri. Suresh Prabhu.

Human Resource Development and Industrial Relations

Industrial relations at all plant locations remained harmonious.

The total number of persons employed in your Company as on March 31, 2018 were 1,129.

Policy to Prevent Sexual Harassment at the work place

Your Company is committed to creating and maintaining an atmosphere in which employees can work together without fear of sexual harassment, exploitation or intimidation. Your Company has strengthened its existing Policy on Prevention of Sexual Harassment at the workplace. Every employee is made aware that the Company is strongly opposed to sexual harassment and that such behaviour is prohibited both by the law and the Group. Structured sessions on prevention of sexual harassment at workplace were organized at all locations to spread awareness on security & safety of women employees as well as to apprise all employees of the legislative updates on prevention of sexual harassment at workplace.

During the year, the Company has reconstituted its Internal Complaints Committee, pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and formed two separate committees – one for the Head Office, factories in Maharashtra and branches in India and the other for the factory at Valia, Gujarat. Ms. Shefali Kohli is the Presiding Officer for both the Committees. While the Act is applicable only to women employees, our Company policy would be covering all employees and all premises of the Company in India.

No complaints were received by the committee during the year under review. Since the number of complaints filed during the year was NIL, the Committee prepared a NIL complaints report. This is in compliance with section 22 of the Sexual

Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Internal Control Systems and their Adequacy

Your Company has a proper and adequate system of Internal Controls, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposal and that transactions are authorized, recorded and reported correctly. Your Company’s Corporate Audit and Assurance Department, issues well documented operating procedures and authorities with adequate built-in controls at the beginning of any activity and revised procedures, if there is any major change. The internal control is supplemented by an extensive programme of internal, external audits and periodic review by the management. The system is designed to adequately ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability of assets.

Corporate Audit & Assurance Department during the year, facilitated a review of your company’s risk management programme. The risks and mitigation measures were reviewed by your company’s Risk Committee and corrective measures initiated.

During the year, the Corporate Audit & Assurance Department carried out various reviews and provided assurance on compliances to lay down policies, processes and internal controls.

Information Security

Your Company accords great importance to the security of its information assets. To ensure that this gets desired focus and attention, a Chief Information Security Officer, who is attached to the Corporate Audit and Assurance Department, is entrusted with the task of ensuring that your Company has the requisite security posture.

Your Company has in place, all the procedures and practices that are in line with the ISO Security Standards.

Opportunities and Threats

Post the implementation of GST, it provides opportunity for an organized player like us to increase our sales volume since such legislation creates a level playing field for the organized players by bringing the tax evaders under compliance. The improved global environment provides an opportunity to us to enhance our export sales. The political scenario in the coming year in view of several state elections and general election could impact the economic environment/ economic policies.

Risks and Concerns

Your Company had put a risk management framework in place post a comprehensive review of its risk management process. Your Company has taken a fresh look at the risk management framework. The review involved understanding the existing risk management initiatives, zero-based identification and assessment of risks in the various businesses as also the relative control measures and arriving at the desired counter measures keeping in mind the risk appetite of the organization. The Risk Committee has periodically reviewed the risks in the various businesses and recommended appropriate risk mitigating actions.

The Commodity based businesses are likely to be affected by vagaries of the weather, demand for edible oil, oilseed production, etc. The business is exposed to commodity price risks relating to raw materials which account for the largest portion of the costs of both the Chemicals and Vegoils businesses. The Chemicals business growth will also depend on the growth of end user industries like polymer, detergent, cosmetic and personal care.

As a significant employer and chemicals producer, to ensure occupational safety, employment standards, production safety, and environmental protection, your Company maintains strict safety, health, environmental protection and quality control programs to monitor and control these operational risks.

Macro-economic factors including economic and political developments, natural calamities which affect the industrial sector generally would also affect the businesses of your Company. Legislative changes resulting in a change in the taxes, duties and levies, whether local or central, also impact business performance and relative competitiveness of the businesses.

Cautionary Statement

Some of the statements in this management discussion and analysis describing the Company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Company’s operations include a downtrend in industry, significant changes in political and economic environment in India and abroad, tax laws, import duties, litigation and labour relations.

SUSTAINABILITY EFFORTS BY THE GODREJ GROUP

The Godrej Group has been at the forefront of philanthropic and social activities for several decades. About twenty-four per cent of the shares of the Godrej Group are held in trusts that invest back in initiatives which support the environment as well as improve the quality and availability of healthcare and education.

Through investment and oversight by the trust, a large tract of mangrove forests in Mumbai have been protected, developed, and maintained for several years and serve as a second set of lungs for the city. The Godrej Group has continually supported education and supports the Udayachal pre-primary and primary schools, which focuses on the all-round development of children. The Udayachal high school has been accredited with the International School Award in recognition of the school incorporating global education into its curriculum and innovation into classroom teaching.

In addition, the Godrej Group has supported initiatives in healthcare through the Godrej Memorial Hospital, which aims to provide quality healthcare at affordable costs. One such initiative is our partnership with ‘Smile Train’, a US-based NGO, which helps in performing corrective cleft lip and palate surgeries for children from low-income families. The Group offers surgery and hospitalisation to the patients free of cost.

SUSTAINABILITY IN GODREJ’S CORE VISION

Godrej Industries Limited(GIL), part of the larger Godrej Group shares the group’s vision for playing an active part in creating a more inclusive and greener India. This vision is ‘Godrej Good & Green’, that is founded on shared values. The concept of shared value is defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. As part of this initiative, we as a Group aspire to create a more employable Indian workforce, a greener India and innovate for good and green products by 2020.

As part of this vision, our Group-level goals till the year 2020 are:

These goals are supplemented by Brighter Giving, a structured volunteering platform through which our team members can offer their time and skills to help address a non-profit organisation’s needs. Through Brighter Giving, Godrejites can donate their time, knowledge, and skills to help address a non-profit organisation’s specific needs, on a project basis.

ACTUALIZING THE VISION

Here are a few of our social and environmental achievements for the year that helped us to actualise our commitment to sustainability:

We implemented projects to reduce our specific energy consumption such as installing heat pipes and micro turbines.

Our Ambernath (Maharashtra) factory installed a 198 kW solar rooftop plant in 2017. The total installed capacity of our Valia (Gujarat) and Ambernath factories now stands at 326kW & 198kW respectively. This has helped us grow our renewable energy portfolio to 42%.

Our Valia factory was awarded the ‘Energy Efficient Unit’ in Chemicals sector for the third time in a row at the Confederation of Indian Industries’ National Awards for Excellence in Energy Management 2017. We also won the ICC Award for "Excellence in Energy Conservation and Management" for our Ambernath factory.

GIL has installed briquette boilers at our Valia factory. It is for heating thermic fluid and 6TPH Steam for the process. This is going to reduce our GHG emissions by around 12000T of CO2 Eq.

Annexure "B"

FORMING PART OF THE BOARDS REPORT

SECTION A: GENERAL INFORMATION ABOUT THE COMPANY

Godrej Industries Limited [GIL], is a conglomerate with a significant presence in Home and Personal Care, Animal Feeds, Crop-Protection, Oil Palm, Dairy, Poultry and Processed Foods, Real Estate Development, Oleo-chemicals and Vegetable Oils either directly in through its subsidiaries/associate companies.

The shareholding of the promoter/promoter group of the Company constitutes 74.74% of the paid up capital of the Company as at March 31, 2018.

• Name of Company Godrej Industries Limited
• Corporate Identity
L24241MH1988PLC097781
Number (CIN)
Godrej One, Pirojshanagar,
Eastern Express Highway,
• Registered Office
Vikhroli (East), Mumbai
400079.
• Email id investor@godrejinds.com
• Website www.godrejindustries.com

• The three key products that the company (standalone) manufactures and the Sector(s) that the Company is engaged in (industrial activity code-wise) are:

Sr. Name & Description of Main NIC Code
No. Products or Services
1 Fatty Acid 24118
2 Fatty Alcohol 24118
3 Surfactant 24243

• The company operates from its factories at the following locations:

• Ambernath, Maharashtra

• Valia, Gujarat

• Wadala, Maharashtra

• Dombivali, Maharashtra

• The company has spread its wings both in the domestic and international market.

SECTION B: FINANCIAL DETAILS OF THE COMPANY

FY 2017-18 Amount ( Rs. crore)
Paid up Capital 33.63
Total Income 2287.13
Net Profit 241.40
Total Spending on Corporate
Social Responsibility (CSR) as
N.A
a % of average Net Profit after
Tax of the last 3 years.
Market capitalization (as on
18,424
March 31, 2018)

SECTION C: OTHER DETAILS

GIL has subsidiaries which are required to comply with Section 135 of the Companies Act, 2013. They have their own CSR projects and do not participate in the business responsibility activities of the parent company.

The other entities with whom the Company does business with viz suppliers, distributors etc. don’t participate in the BR initiatives of the Company.

SECTION D: BR INFORMATION

1 (a) Details of Director/Directors responsible for BR

At GIL, we have established a CSR Committee in accordance with Section 135 of the Companies Act, 2013 which is spearheaded by Mr. Nadir B Godrej as its Chairman for its various business responsibility initiatives. The CSR committee of the Board of Directors is responsible for the CSR projects undertaken. The committee reports to the Board of Directors.

The CSR Policy made in accordance with the CSR guidelines focuses on addressing critical social, environmental and economic needs of the marginalized/underprivileged sections of the society. Through this policy, we align our CSR strategy with the Godrej group’s Good & Green vision and goals. We adopt an approach that integrates the solutions to these problems into the strategies of the company to benefit the communities at large and create social and environmental impact.

The Committee met once in the year to assess the CSR Requirements of the Company. CSR requirement as per Section 135 is NIL for the current year. Consequently, no business responsibility initiatives undertaken by the company have been tagged and reported as CSR spends.

The CSR Committee comprises of the following members:

Name of the Director Designation DIN Number
Mr. N. B. Godrej Managing Director 00066195
Executive Director & Chief Brand
Ms. T. A. Dubash 00026028
Officer
Mr. K. N. Petigara Director 00066162
Mr. A. B. Choudhury Director 00557547

1 (b) Details of Business Responsibility Head

Name - Mr. N. B. Godrej
Designation - Managing Director
Telephone - 022-25188010
Email id - nb.godrej@godrejinds.com

2. Principle-wise (as per NVGs) BR Policy/policies

(a) Details of compliance (Reply in Y/N)

No. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9
1 Do you have a policy/ policies for the principles? Y Y Y Y Y Y Y Y Y
2 Has the policy being formulated in consultation with the relevant stakeholders? Y Y Y Y Y Y Y Y Y
3 Does the policy confirm to any national / international standards? If yes, specify? (50 words) Y Y Y Y Y Y Y Y Y
4 Has the policy being approved by the Board? N N N N N N N N N
5 Does the company have a specified committee of the Board/ Director/ Official to oversee the implementation of the policy? N N N N N Y N N N
6 Indicate the link for the policy to be viewed online? - - - - - - - - -
7 Has the policy been formally communicated to all relevant internal and external stakeholders? Y Y Y Y Y Y Y Y Y
8 Does the company have in-house structure to implement the policy/ policies. Y Y Y Y Y Y Y Y Y
9 Does the Company have a grievance redressal mechanism related to the policy/ policies to address stakeholders’ grievances related to the policy/ policies? Y Y Y Y Y Y Y Y Y
10 Has the company carried out independent audit/ evaluation of the working of this policy by an internal or external agency? N N Y N N Y N N N

SECTION E: PRINCIPLE-WISE PERFORMANCE BY GODREJ INDUSTRIES LIMITED

As per the Business Responsibility guidelines established by the Ministry of Corporate Affairs and SEBI, following are updates for GIL on each of the Principles as stated in the Guidelines.

Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability

The Company pursues good Corporate Governance by ensuring regulatory compliance, transparency in disclosures, efficient operational practices, strong internal controls, risk management systems and by engaging & operating with fairness and integrity with all its stakeholders namely shareholders, customers, employees, suppliers, regulatory authorities and general public.

Organization Structure

At the Apex is the Board of Directors headed by a non-executive Chairman. The Board provides guidance and support to the management in terms of broad strategy, direction, governance and compliance. The Company’s Board of Directors has six committees.

They monitor and provide direction to the senior leadership team. This ensures greater focus on specific aspects of Corporate Governance and expeditious resolution of issues of governance as and when they arise. These Committees have clearly defined areas of operation and they operate as empowered by the Board.

Code of Conduct

The Board of Directors and Senior Management of the Company comply with the Code of Conduct. An annual confirmation affirming compliance with the code of conduct is obtained from Board Members and senior management every year and the same has been obtained for the year ended March 2018.

The Company also has a code of conduct which is applicable to all individuals working in the company. The Company encourages its Business Partners also to follow the code.

A Whistleblower policy has also been put in place .The purpose of the Whistleblower Policy is to allow employees to raise concerns about unacceptable, improper or unethical practices being followed in the organization, without necessarily informing their supervisors. A Whistleblowing Officer has been designated for the purpose of receiving and recording any complaints under this policy.

65 stakeholder complaints were received in the financial year and all such complaints were satisfactorily resolved by the management.

Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle

Godrej Group’s Good & Green vision supports the development of goods that are environmentally sustainable. As part of the vision, we aspire to develop products that consume fewer resources (energy, water), emit fewer greenhouse gases and include a hundred percent of recyclable, renewable, and/or natural materials.

Principle 3: Promoting the well-being of all employees

The total number of persons employed in your Company as on March 31, 2018 is 1129. Your Company has made concerted efforts towards creating learning and development opportunities that continually enhance the employee value in line with the organizational objectives.

Your Company focuses on ensuring well-being of all its employees. Safety and health of employees is extremely important to the Company and we are committed to building and maintaining a safe and healthy workplace.

The following are essential parts of the Code of Conduct.

Diversity & Zero discrimination : Health & Safety : Good working environment

All employees who join the company demonstrate their commitment to follow the code of ethics by signing in their acceptance to adhere to the same. Examples of a few of the principles of this code of conduct are listed below.

Diversity and equal opportunities

We value diversity within the Godrej Group and are committed to offering equal opportunities in employment. We do not discriminate against any team member or applicant for employment on the basis of nationality, race, colour, religion, caste, gender, gender identity/ expression, sexual orientation, disability, age, or marital status and always allow for equal opportunities for all team members. We are proud to share that out of the total employee count of 1129 as on March 31, 2018, the number of permanent female employees is 88.

Diversity & Inclusion initiatives are taken care of at the corporate level by the Diversity &

Inclusion Team, and is supported by the Diversity Council comprising of business leaders and HR representatives from across businesses in the GILAC group.

Some of the initiatives taken by our Diversity & Inclusion Team includes the following;

  • Godrej Careers 2.0

The Careers 2.0 programme offers live business projects of 6-9 months duration to women who are currently on a career break. This programme is designed to reintegrate women back into the workforce who have taken a break due to various reasons.

  • Godrej Women’s Leadership Network

The Godrej Womens Leadership Network provides women at Godrej, several opportunities to network, learn and grow.

  • Diversity Sensitization workshops:

A special diversity sensitization workshop focusing on gender inclusion is being conducted for all people managers across the GILAC group. The workshop focuses on unconscious biases and how managers can tackle them in the workplace to create an inclusive culture.

  • Policy for prevention of sexual harassment:

The Company is committed to creating and maintaining an atmosphere in which all employees can work together, without fear of sexual harassment, exploitation or intimidation. A gender- neutral policy on prevention of sexual harassment has been in place for years. During the year, the Company has reconstituted its Internal Complaints Committee, pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and formed two separate committees - one for the head office, factories in Maharashtra and branches in india and the

other for the factory at Valia, Gujarat. Ms. Shefali Kohli is the Presiding Officer for both the Committees. All employees go through mandatory training on Prevention of Sexual Harassment.

Health & Safety

• On-campus:

We have canteen facilities, where food and refreshments are provided to ensure that hygienic and healthy food is available at the premises.

All company premises are non-smoking zones. Smoking is strictly prohibited in the campus.

During the National Safety Week, we focused on importance of safety in all occupations. Various number of activities were conducted like a life safety session of evacuation through fire escape chute, live firefighting training for employees and more and during the course of the year there were continuous awareness sessions

• Health Check-up

The Company has a policy for regular health checkup of employees, wherein they can have the health checkup done at designated hospitals.

There are multiple touch points for leadership team to interact with employees through forums like open houses, town halls, the long range plan and annual operating plan cascades, focus groups around engagement surveys, HR connect sessions, skip level meetings by senior leadership etc. The organization invests in functional training for all employees in line with their current and future career aspirations.

The learning suite encompasses functional training, leadership development programs and behavioral training geared towards leading self, leading others and leading business.

Principle 4: Businesses should respect the interests of, and be responsive, towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized

We at Godrej Industries continue our engagement with all our stakeholders through various mechanisms such as, consultations with local communities, supplier/ vendor meets, customer/ employee satisfaction surveys, investor forums, etc.

The identification of all relevant stakeholders and understanding their expectations is of high concern for Godrej Industries in our quest to remain sustainable. Stakeholders are identified on the basis of their influence on the Company’s operations and impact of the Company’s operations on them.

Community Development

In the past, we have carried out detailed community needs assessment of villages around our Valia and Ambernath factories. We invited an external agency to carry out the assessment. The team followed a three-step approach, where they connected with our plant and corporate office, held extensive field based assessments, backed by thorough secondary research to validate key facts and add on additional information available from official sources. The result is a comprehensive report of the community, their needs, gaps in the system and our way forward. We have now started to streamline our activities and implemented high impact programmes.

  • At Valia, we work closely with our neighbouring village Kanerao. As part of our community initiative, we partnered with the community to construct 21 toilets for BPL families in the village. The community got together to nominate the names of the households and also contributed in terms of ‘shramdaan or community labour for the project. These toilets are now being used by the households and the village is well on its way to become open defecation free.
  • We have also directed our special efforts towards the less privileged in the society through various ways. Recruitment of candidates from the Scheduled Caste/ Scheduled Tribe and Physically Challenged categories has been taken up as one of the major performance measures of the recruitment process owner.
  • As part of the employee referral policy, referrals of Scheduled Class/Scheduled Tribe/

Principle 5: Businesses should respect and promote human rights

GIL respects and promotes human rights for all individuals. No violations in this regard have occurred.

Our Code of Conduct covers aspects like Diversity, Anti-Discrimination, equal opportunity, compliance with the law and integrity which all contribute to respecting and promoting human rights. We also have policies like Whistleblower, Prevention of Sexual Harassment that encourage respect and promotion of human rights. Any violation of the Code of Conduct can result in stern disciplinary action including termination of employment and / or other appropriate actions as permissible under the law.

The Company has a policy which is applicable to all employees. The Company encourages its

Business Partners to follow the policy.

Principle 6: Businesses should respect, protect and make efforts to restore the environment

Godrej as a group believes in conserving the various resources of mother earth. As part of its Good & Green vision there is a specific commitment at Godrej group to create a "Greener India". The details of our strategy is available at: http://www.godrej.com/good-and-green.html

We at GIL focus on five major areas related to climate change i.e.

• Energy conservation,

• Water conservation,

• Use of renewable energy,

• Green House Gas (GHG) mitigation &

• Waste minimization.

A dedicated team of ‘Good & Green’ has been set up to identify the risks and opportunities for individual manufacturing facilities. After identifying the risks and opportunities, the team proposes necessary action to be taken. Several measures proposed by the ‘Good & Green’ team have been implemented which yielded excellent results.

We are proud to share that the emissions/ waste generated by the company are within the permissible limits given by CPCB/SPCB for the financial year being reported.

Our business has undertaken various initiatives towards:

• Reducing specific energy consumption,

• Increasing our renewable energy portfolio,

• Becoming carbon neutral and water positive,

• Reducing waste to landfills.

Reducing specific energy consumption

Our efforts for energy conservation have resulted in reducing our specific energy consumption. In the last six years, we reduced our specific energy consumption by ~25%. Our Valia and Ambernath factories have adopted various energy conservation technologies and implemented short-term and long-term projects to achieve our targets. Some of the major initiatives we undertook during FY 2017-18 are:

• We identified high-energy consumption equipment and replaced them with cost effective & energy efficient equipment. We also installed heat pumps, heat pipes and micro turbines.

• We monitored the operations and optimised the usage of pumps, compressors, motors and cooling tower operations

• Replacing conventional lights with LED lights

• Other process modification projects

Increasing our renewable energy portfolio

Our renewable energy usage as a percentage of overall energy used has increased substantially over the years. In FY 2017-18, ~42% of the total energy we consumed was from renewable sources. We achieved this through use of biomass briquettes, solar energy consumption, and other such initiatives.

Our Valia & Ambernath factories have installed solar rooftop of 326kW & 198 kW respectively.

The total installed capacity is now around 524 kW. This has helped us grow our renewable energy portfolio to 42%.

Becoming carbon neutral and water positive

Our specific GHG emission has reduced substantially by 38% from our baseline in FY11. We achieved this through various environment friendly projects such as, replacing of fossil fuel with biomass for boilers, utilisation of pitch in boilers that enables organic waste to be reused as fuel and reduce carbon emissions in the plant processes. We have started our third briquette boiler for our hot oil system and expanded our solar roof top capacity by 120kW.

We have also shifted some of our transport from roadways to railways and minimised the distance of travel. We continue to drive a relentless focus on optimising the distance of travel, increasing loading ability of our products and enhance truck utilisation to reduce GHG emission.

Since FY11, we have reduced our specific water consumption by ~38%. We treat waste water in our water treatment plants and reuse the same in our process. We have also reduced our dependency on raw water consumption by installing condensate recovery systems that recovers the condensate and reuses it in the process.

Last year our Ambernath factory commissioned an RO (Reverse Osmosis) plant to recycle waste water from its processes and reuse it in the plant. The commissioned RO plant has a capacity to treat 500m3 / day.

This year we have expanded our rainwater harvesting capacity as well. We were able to harvest 2500 KL of water this year at the Valia Plant.

Reducing waste to landfill

Our specific waste to landfill has reduced by 71% from our baseline in FY11. We segregate biological and chemical sludge from ETP. This has reduced the amount of waste going to landfill substantially. Biological sludge is converted into compost and used in gardening.

Further, we are in the process of exploring trials to convert industrial waste into energy using plasma gasification process.

Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner

For any policy advocacy, GIL ensures that it does so with the highest degree of responsible and ethical behaviour and also works with collective platforms such as trade and industry chambers and associations.

GIL is a signatory to the Confederation of Indian Industry’s (CII) Mission of Sustainable Growth and the CII-ASSOCHAM Code of Conduct for Affirmative Action. We are also a member of Indian Chemical Council which is the apex national body representing all branches of the chemical industry in India.

Principle 8: Businesses should support inclusive growth and equitable development

Our Good & Green vision inspires each one of us at GIL to continue to work towards building a brighter, greener and more inclusive India.

We work in collaboration with NGOs and social enterprises to design and run a number of employability training programmes across Godrej Industries Limited & Associate Companies. The focus of these programmes is to improve the earning potential of our graduates, through skill building. We also help facilitate self-employment or job placements.

In FY17-18, the Godrej Group has trained close to 135,000 people in skills that will enhance their earning potential. Since the inception of the programme, the Group has trained over 3,80,000 people. The Good & Green team also undertakes impact assessments for the skill development initiatives, it has undertaken.

Principle 9: Businesses should engage with and provide value to their customers and consumers in a responsible manner

We are a customer centric company and greatly value the trust, satisfaction and loyalty of our customers across the world. Our primary focus is delighting our customers, both external and internal. We strive to ensure that customer needs are satisfied and that our products and services offer value to the customer. Our customer focus does not only extend to external customers alone, but includes internal customers as well.

Our Valia factory which operates on Distributed

Control System is ISO 9001 & ISO 14001 certified and has been Kosher certified for manufacturing Fatty Acids, Fatty Alcohols and Glycerin and is well equipped to deliver the products of superior quality, in time and at competitive prices.

GIL regularly conducts consumer surveys to know the consumer satisfaction trends. No customer complaints/ consumer cases are pending as at the end of the financial year.

GIL displays adequate information to enable safe and effective usage of its products. Godrej is a member of fatty alcohol consortium which was formed as per ECHA/REACh guidelines. REACh stands for Regulation for Evaluation, Authorization & Registration of all substances entering into Europe. As per REACh and GHS requirement we have developed MSDS where all the characteristics of the product are clearly stated with instructions how to handle and use the product safely.

Annexure "C"

FORMING PART OF THE BOARDS REPORT

As per Section 62 of the Companies Act, 2013, Rule 12 of Companies (Share Capital and Debentures) Rules, 2014, SEBI (Share Based Employee Benefits) Regulations, 2014 and the SEBI (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines 1999, following information is disclosed for FY 2017-18 in respect of Godrej Industries Limited Employee Stock Option Plan I, and Employee Stock Grant Scheme, 2011 :

Sr. No. Heading Particulars (ESOP) Particulars (ESGS)
A Options granted during the year Nil 1,03,828
B The pricing formula ESOP I : Market Price plus Interest at such a rate not being less than the Bank Rate then prevailing compound- able on an annual basis for the period commencing from the date of Grant of the Option and ending on the date of intimating Exercise of the Option to the Company or March 31, 2012, whichever is earlier. Rs. 1 per equity share
C Options vested during the year ESOP I : Nil 1,34,866
D Options exercised during the year ESOP I : 1,58,250 1,32,945
E The total number of shares arising as a result of exercise of option Nil. 1,32,945
As shares purchased from secondary market, there is no further issue of shares as a result of exercise of options.
F Options lapsed/revoked during the year ESOP I : 46,000 50,104
G Variation of terms of options None -
H Money realized by exercise of options ESOP I : Rs. 6,42,10,220/- Rs. 1,32,945
I Total number of options in force ESOP I : Nil. 2,19,380
J Employee wise details of options granted to;-
i) senior managerial personnel; Nil Annexure 1 (Table 1)
ii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year. Nil Annexure 1 (Table 1)
Nil
iii) identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant; Nil
K Diluted Earnings Per Share (EPS) pursuant to issue of shares on ex- ercise of option calculated in ac- cordance with Indian Accounting Standard (IndAS) 33 ‘Earnings Per Share’. There is no fresh issue of shares hence, not applicable. Basic EPS : 7.18 Diluted EPS : 7.17
L Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed. The company has calculated the employee compensation cost using the fair value method for stock options. The company has calculated the employee compensation cost using the fair value method
M Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. No options were granted during the year hence the weighted average exercise price and weighted average fair value has not been computed. Rs. 1/-
N A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: No options were granted during the year. The fair value of the options has been measured using the Black- Scholes Option Pricing Model and charged to the Statement of Profit and Loss. The value of the options is treated as a part of employee compensation in the financial statements and is amortised over the vesting period.
i) risk-free interest rate, - 6.54% to 6.80%
ii) expected life, - 1 to 3 years
iii) expected volatility, - 30%-32%
iv) expected dividends, and - Rs. 1.75 per share
v) the price of the underlying share in market at the time of option grant - Weighted average market price at the time of grant of option Rs. 578 per option.

Annexure 1 (ESGS)

Table 1: Senior Managerial Personnel:

Sr. No Employee Name Options granted
1 Sumit Mitra* 6,054
2 Swaminathan V 3,807
3 V Chakradhar 3807
4 Robert Menzies 4,326
5 Shailesh Deshpande 2,508
6 Parmesh Shahani 2,508
7 Manasi Narasimhan 1,731
8 Vikas Goswami 2,508
9 Avani Davda 3,807
10 Sumit Zaveri 2,751
11 Nitin Nabar* 11,247
12 Arvinder Singh 2,076
13 Clement Pinto 2,250
14 Atul Prakash 2,421
15 Dorab Mistry 3,738
16 Rohinton Khajotia 2,490
17 Balram Singh Yadav* 12,111
18 Rajeev Murthy 3,114
19 Varadaraj S 3,978
20 Praful J Bhat 3,978
21 V V Mishra 2,769
22 Rakesh Dogra 2,769
23 Sanjivani Sadani 2,250
24 Nasim Ali 2,769
25 Sandeep Kumar Singh 2,769
26 Vivek Raizada 1,731
27 Sujit Patil* 6,247
28 Shefali Kohli 1,314
Total 1,03,828

* Options granted to all above is in excess of 5% of the total options granted during the year.

Annexure "D"

FORMING PART OF THE BOARDS’ REPORT

Information pursuant to Section 134(3)(m) of the Companies Act, 2013, read with rule 8 of the Companies (Accounts) Rules, 2014 in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo.

A. Conservation of Energy and Water

I. Steps taken or impact on conservation of energy and water:

Valia:

1. Installation of Steam Micro Turbine of 98Kw which generates electrical energy from pressure reduction in the steam instead of Pressure Reducing Valve (PRV)

2. Rain water harvesting systems at multiple plant locations

3. Heat exchanger for recovering heat from product line section

4. Installation of 120Kw solar rooftop at new sulfonation plant which will further increase our renewable portfolio

5. Installation of new biomass boiler which will reduce GHG emissions by 12000 T of CO2 Eq

6. LED Bulb replacement across factory

7. Condensate Recovery to reuse water and capture waste heat

8. Cooling Tower Treatment System (Baccomber) which will increase the efficiency of the cooling tower and reduce the treatment cost

Ambernath:

1. Heat pipe in Spray Dryer which will result in around 20% energy savings

2. LED Bulb Replacement across factory

3. Cooling Tower Treatment System (Baccomber) which will increase the efficiency of the cooling tower and reduce the treatment cost

4. Condensate Recovery to reuse water and capture waste heat

5. Installation of Energy Efficient Equipment and other energy conservation projects like pump replacement, Compressor operation optimization & Variable Frequency Drive (VFD) installation in Cooling Tower Fans & Pump

Wadala:

1. LED Bulb Replacement across factory

2. Installed roof ventilator at finished goods storage area, saving power and better illumination

3. Installed a low HP blower at ETP and avoided frequent running of 20 HP compressor, thus saving in power

4. The factory recycle and use ETP water for gardening and floor cleaning

II. Steps taken by company to utilise alternate sources of energy:

Use of briquette (renewable resource) as fuel in place of natural gas.

Use of Solar energy in the form of solar roof top Use of fatty acid distillation bottom (pitch) as fuel in place of furnace oil

III. Your Company made capital investments amounting to approx. Rs. 1.5 crore during the financial year 2017-18 on energy conservation equipments.

B. Technology Absorption

I. Specific areas in which R&D carried out by the Company:

During the year under review, Research &

Development efforts in the following areas strengthened our Company’s operations through technology absorption, adaptation and innovation:

• Vegetable Oils

• Fatty Acids

• Fatty Alcohols

• Surfactants & Bio-surfactants

• Glycerin

• Derivatives of Fatty acids and Fatty alcohols, designed for Personal and Home care industries

• Customer centric support for Home, Personal and Oral Care Products, as well as Oilfield Chemicals

• Formulations and Performance Evaluation

II. Benefits derived as a result of the above R&D:

• Premium quality fatty acids and fatty alcohols from alternate raw materials

• Understanding the impact of raw material quality and manufacturing process on the quality of the finished goods

• Value added fatty alcohol and fatty acid derivatives, so as to enter niche markets

• Manufacture of high value, fractionated fatty acids and fatty alcohols, specifically for the lubricant, photography, oilfield, paper and polymer industries.

III. Future Plan of Action:

• Tailor-made value-added fatty alcohols and fatty acids for low volume, high value markets.

• Value-added chemicals, derived from Glycerin, Fatty Acids and Fatty Alcohols so as to enter niche markets in the field of Pharmaceuticals, Personal Care , Industrial Lubricants and agriproducts.

• Enhancing our knowledge base of product applications and formulations, through customer engagement and market information.

• Development of Biosurfactant with viable applications and explore enzymatic processes for new products.

IV. Expenditure on R&D:

Rs. Crore
Particulars 2017-18 2016-17
(a) Capital 0.06 0.31
(b) Recurring 3.15 1.78
(c) Total 3.21 2.09
(d) Total R & D expenditure 0.16 0.13
as a percentage of
total sales turnover

C. Foreign Exchange earnings and outgo

The Chemical Division’s exports were

Rs. 539.27 crore in the current year as compared to Rs. 399.5 crore in the previous year. The Company continues to export refined glycerin, fatty alcohol and other chemicals to over 60 plus countries including Brazil, Mexico, U.S.A., Japan, South Korea, Nigeria, Russia, Argentina, Belgium, China, U.A.E.

Rs. Crore
Particulars 2017-18 2016-17
Foreign exchange used 510.67 385.76
Foreign exchange earned 524.95 390.84