Hindustan Organic Chemicals Ltd Directors Report.

The Board of Directors presents herewith the 58th Annual Report of your Company along with the Audited Statement of Accounts for the financial year 2018-19.

1. FINANCIAL RESULTS

The financial results for the year ended 31.03.2019 with the comparative figures of companys operations for the previous year is as under:

(Rs. In Lakhs)
Particulars 2018-19 2017-18
Revenue from operations 47,199.01 24,232.94
Other Income 11,571.30 6859.97
Total 58,770.31 31092.91
Expenditure 51,514.51 50,760.99
Profit before Depreciation & Tax 7255.80 (-)19668.08
Less Depreciation 175.69 676.84
Profit /(Loss) before Exceptional Items and Tax 7080.11 (-)20344.92
Less : Exceptional Items - -
Less :(1) Current Tax - -
(2) Deferred Tax 2069.00 -
Profit/(Loss) for the Period after Tax 5011.11 (-)20344.92
Other Comprehensive Income:
(i) Items that will not be reclassified to profit or loss 0.00 0.00
a) Revaluation of Plant, property & equipments (569.17) 12478.07
Less: Deferred Tax assets (36.00) (2,793.25)
b) Provision for duties& taxes 381.22 -
c) Changes in defined benefit plan (156.89) 873.02
Other Comprehensive Income for the year, Net of Tax -380.84 10,557.84
Total Other Comprehensive Income for the year 4630.27 (9787.08)

Note :

The Audited Financial Statements approved by the Board on 28th May 2019, was revised based on the provisional comments issued by Director General Audit, Mumbai (O/o. Director General Audit and Member Audit Board I Mumbai) and approved by the Board on 29th July 2019.

2. CONSOLIDATED FINANCIAL STATEMENT

In accordance with the provisions of the Companies Act, 2013("the Act") and Ind AS 110 Consolidated Financial Statement, the audited consolidated financial statement is provided in the Annual Report.

3. DIVIDEND

In view of the continuous losses during the previous years as well as carry forward of the accumulated losses of the previous years, the Board of Directors do not recommend any Dividend for the year under review.

4. CHANGE IN NATURE OF BUSINESS IF ANY

Closure of Companys Rasayani Unit and consequent shifting of the Registered Office of the Company from Rasayani [Raigad District] to CBD Belapur [Thane District], within the same ROC, Mumbai.

As per the Govt. approved HOCL Restructuring Plan, comprising among other approvals, included closure of Companys Rasayani unit, sale of part of Rasayani land of the Company to BPCL. Consequently, on closure of Rasayani unit, the Corporate Office was shifted w.e.f. 2 nd July, 2018, and w.e.f. 26/9/2019, Companys Registered Office was shifted from Rasayani to office Nos. 401, 402 & 403, 4 th Floor, V Times Square, Plot No.3, Sector-15, CBD Belapur, Navi Mumbai, PIN-400614, Thane District, within the same ROC, Mumbai.

As per the approval of Government of India (viz. Govt.), the operation of all the plants at Rasayani Unit (except C NA / N204 plant along with the manpower transferred to ISRO) has been closed. In Kochi unit, two plants (Phenol and Hydrogen Peroxide plants) are operational.

Further during the year under review, out of the balance +/-191 acres of land approved for sale to BPCL (442-251 acre), sale of 38.687 acres has been completed for which an amount of Rs.53.62 Crore after deducting 1% TDS, was received from BPCL. After adjustment of part amount towards BPCL raw material supplies principal dues, the balance amount received from BPCL has been utilised partially to pay off the other liabilities and payment of salary dues of Kochi unit employees.

Subsequently, during 2018, Government has also approved the sale of +/-10% 242 acres of land at Rasayani to BPCL for Rs.381.27 Crore +/- .

During the year out of the 242 acres of land approved for sale, sale of 85.27 acres has been completed during the current year (on 13th May, 2019), for which, BPCL, has paid an amount of Rs.135.81 crore(net of 1% TDS). After adjustment of the raw material supplies secured dues towards interest accrued (DPC), amounting to Rs.57.62 crore, on the Principal amount and GST @18% amounting to Rs.10.37 crore, balance amount of Rs. 67.82 crore was received on 13th May, 2019. Part of sale proceeds amounting to Rs.13.19 crore was utilised to pay off Govt. Plan Loan , where charge was created on the immovable properties of the company and balance to clear other liabilities to the extent possible.

5. FINANCIAL HIGHLIGHTS

During the year 2018-19 the Company registered an impressive growth of 94.78% under Revenue. The Gross Income of the Company stood at Rs. 58,770.31 Lakhs as against Rs. 31,092.91 Lakhs,achieved during the previous year. The Profit before tax for the year 2018-19 was Rs.7080.11 Lakhs as against the loss of Rs.20344.92 Lakhs (reinstated as per Ind AS) incurred during the corresponding period of last year.

6. NUMBER OF MEETINGS OF BOARD (including the dates of Board and committee meetings indicating the number of meetings attended by each director in every financial year)

During the year the Board Meetings were held on the following dates: 29th May 2018, 10th August 2018, 14th November 2018, 13th February 2019.

Other details are furnished in the Corporate Governance Report in Annexure IV to this Report.

7. CORPORATE GOVERNANCE

The Company has complied with the various requirement of Corporate Governance under provisions of Companies Act 2013, under SEBI LODRRs and various Rules / Regulations made there under. The details in this regard forms part of Corporate Governance Report as Annexure IV to this report.

8. MANNER IN WHICH FORMAL ANNUAL EVALUATION OF PERFORMANCE OF BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS HAS BEEN CARRIED OUT :

HOCL being a CPSU governed by the DPE, Guidelines on the Annual Evaluation of Performance of Board, its committees and of individual Directors have been carried out by the Administrative Ministry (DCPC).

9. DETAILS OF DIRECTORS AND/OR KMPS WHO HAVE BEEN APPOINTED OR RESIGNED DURING THE YEAR

In compliance with Regulation 36(3) of the LODRRs, following information is furnished: i Govt. has appointed Mrs. Alka Tiwari AS & FA in the Ministry of Chemicals & Fertilizers as Govt Nominee Director in place of Ms. Meenakshi Gupta w.e.f 29-01-2019 for a period of three years or till the date of superannuation or till further orders, whichever is the earliest.

Mrs. Alka Tiwari, AS & FA in the Ministry of Chemicals & Fertilizers Govt Nominee Director HOCL retires by rotation at this Annual General Meeting (58th AGM) of the Company and being eligible offers herself for re-appointment. ii GOI has appointed Shri Chander Prakash Bhatia (Ex GM (Fin.) REC) as Director (Finance) on the Board of HOCL vide GOI Order No. 51011/1/2018-CHEM. III-CPC dated 16th July, 2019 w.e.f. the date of assumption of charge of the post, till the age of superannuation (31.07.2021) or until further orders, whichever is earlier. Shri Chander Prakash Bhatia assumed the charge of Director (Finance), HOCL on 07-08-2019. iii Tenure of Mrs Pushpa Trivedi Independent Director was ended on 14-06-2019 iv Mr. S. B. Bhide CMD, HOCL also holds the Additional charge of Director Finance HOCL from 18-02-2018 upto 06-08-2019. v Shri Samir Kumar Biswas, Joint Secretary, Govt Nominee Director retires at the 58th AGM and Govt Order is awaited.

10. COMPOSITION OF AUDIT COMMITTEE (AC) AND NON ACCEPTANCE OF ANY RECOMMENDATIONS OF AC (only for public and listed companies)

The Audit Committee is in existence during the year in compliance with the Companies Act, 2013 and LODRRs. Details of Composition, meetings of Audit Committee are provided in Corporate Governance Report in Annexure IV to this Report.

11. DIRECTORS RESPONSIBILITY STATEMENT

Your Directors make the following statement in terms of Section 134(5) of the Companies Act, 2013 -

a. That in the preparation of the annual accounts for the year ended 31st March, 2019; the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. That such accounting policies as mentioned in the Notes on Accounts had been applied 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 the financial year ended 31st March, 2019 and the profit or loss of the Company for that period.

c. That proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. That the annual accounts for the year ended 31st March, 2019 had been prepared on a going concern basis.

e. That the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

12. INDEPENDENT DIRECTORS DECLARATION

f. The Company has received Declarations of Independence as stipulated under Section 149(7) of the Companies Act, 2013 from Independent Directors confirmingthat he/she is not disqualified from appointing/continuing as Independent Director.

13. DISCLOSURE ON REAPPOINTMENT OF INDEPENDENT DIRECTORS

- not applicable.

14. COMPANIES POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF DIRECTORS ETC.

Company being a CPSE and appointments of all the Directors on the Board of the Company are made by the Govt. of India/President of India and under the supervision, control and directors of the DC&PC and the prescribed DPE Guidelines are being followed. The Terms and Conditions of appointment of Independent Directors and other directors are as per the Goverment Orders and are disclosed on the Companys website.

15. RATIO OF DIRECTORS REMUNERATION TO MEDIAN EMPLOYEES REMUNERATION AND OTHER PRESCRIBED ELABORATE DISCLOSURES AND DETAILS :

Company being a CPSE which is under the supervision, control and directions of the DC&PC, the prescribed DPE Guidelines are being followed in respect of employees remunerations and DPE Guidelines as well as CVC Guidelines are being followed, as regards to the other prescribed perquisites

16. AUDITORS

a) M/s. M.B.Agarwal & Co, Chartered Accountants were appointed as Statutory Auditors of your Company for Rasayani unit / Corporate office for FY 2018-2019 by C&AG.

The Auditors have furnished a declaration confirming their independence as well as their arms length relationship with the Company as well as declaring that they have not taken up any prohibited non-audit assignments for the Company. The Audit Committee reviews the independence and objectivity of the Auditors and the effectiveness of the Audit process. The Auditors attend the Annual General Meeting of the Company

b) M/s. BSJ & Associates, Chartered Accountants were appointed as Branch Auditors of your Company for Kochi Unit for FY 2018-2019. M/s. BBS & Associates, Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. BBS &Associates, Cost Accountants as Cost Auditors of your Company for FY 2018-2019. A proposal for ratification of remuneration of the Cost Auditor for the financial year 2019-20 is placed before the shareholders.

c) i) M/s. JMT & Associates, Chartered Accountants were appointed as Internal Auditor of your Company for Rasayani unit / Corporate office FY 2018-2019.

ii) M/s. Isaac & Suresh, Chartered Accountants were appointed as the Internal Auditors of Companys Kochi unit for the FY 2018-19.

17. SECRETARIAL AUDITOR

The Board has appointed S.N. Ananthasubramanian & Co, Practising Company Secretary to conduct Secretarial Audit for the FY 2018-2019. The Secretarial Audit Report for the Financial Year ended March 31, 2019 is annexed to this Report as Annexure and complied with Section 204 of Companies Act and Regulation 24A of SEBI LODRRs. The replies to observations forms part as Annexure to this Report. The Company also obtained Annual Secretarial Compliance Report form the same PCS S. N. Ananthasubramanian & Co. for the year 2018-19 under Regulation 24A of LODRRs.

18. SAFETY, HEALTH AND ENVIRONMENT

In the areas of Health, Hygiene and Environment, the company has undertaken periodic medical examination, as well as statutory requirements of fitness check-up under form no. 23 for its employees. In our commitment to environment we have ensured that the level of pollutants from the factory and nearby surroundings was much below the permissible levels.

HOC Kochi unit received pollution control award among very large scale industries from Kerala State Pollution Control Board for substantial and sustained efforts in pollution control during the earlier years.

HOC Kochi unit received safety awards from Dept. of Factories & Boilers, Govt. of Kerala for outstanding performance in industrial safety for the year 2012. No further awards received during the year 2018-2019.

19. INDUSTRIAL RELATIONS:

The overall Industrial Relation situation continues to be peaceful and cordial during the year. There was no strike or lockout during the year.

20. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

There are no loans, Guarantees, or investments made by the company under Section 186 of the Companies Act 2013 during the year under review and hence said provisions are not applicable.

However, the cumulative investment on the Subsidiary Company Hindustan Fluorocarbons ltd., 31.3.2019 stood at Rs.11.06 Crore. In addition, the company has given Secured Loan of Rs.35.10 Crores to HFL [on the security of HFL Land] and Company has also extended Corporate Guarantee to the working Capital loan to the subsidiary company HFL.

The investments made in HFL during earlier years under section 186 of the Companies Act 2013, were shown in the financial statements.

However, as the MDI Project was abandoned long ago, the subsidiary company HOCL Chematur Ltds. name was struck off w.e.f. December, 2018 under section 248 of the Companies Act,2013, after following due procedures there under.

As per Govt. approval, the investment of the Company in the Equity of the Companys subsidiary, Hindustan Fluorocarbons ltd. was set out for disinvestment during 2018. However as no bids were received, Govt. has directed for the sale of HFL Land and to give VRS to the employees etc. The action plan thereof is in progress.

21. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

1. Details of Contracts or arrangement or transactions not at arms length basis: - None

a) Name(s) of related party and nature of relationship

b) Nature of Contracts/arrangements/transactions

c) Duration of contracts/arrangements/transactions

d) Salient terms of the contracts or arrangements or transactions including the value if any

e) Justification for entering into such contracts or arrangements or transactions date (s) of approval by the Board f) Amount paid as advances, if any

g) Date on which a special resolution was passed in general meeting as required under first proviso to section 188

2. Details of material contracts or arrangements or transactions at arms length basis:- None.

a) Name(s) of related party and nature of relationship

b) Nature of contracts/arrangements/transactions

c) Duration of contracts/arrangements/transactions

d) Salient terms of the contracts or arrangements or transactions including the value, if any:

e) Date(s) of approval by the Board if any:

f) Amount paid as advance, if any:]

22. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND PRACTISING COMPANY SECRETARY IN THEIR REPORTS

There were no qualifications, reservations or adverse remarks made by the Auditors in their Audit report.

The Secretarial Auditors of the company have submitted their Secretarial Audit Report for the year 2018-19 and management replies to the audit observations thereof are annexed to the Directors Report and forming part of 58th Annual Report of the Company.

23. AMOUNTS IF ANY WHICH IT PROPOSES TO CARRY TO RESERVES

In view of the accumulated losses incurred during the previous years, no amounts are transferred to reserves

24. MATERIAL CHANGES AND COMMITMENT, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

During the year under review, out of the balance +/-151 acres of land approved for sale to BPCL (442-251 acre), sale of 38.687 acres has been completed for which an amount of Rs.53.62 Crore after deducting 1% TDS, was received from BPCL. After adjustment of part amount towards BPCL raw material supplies principal dues, the balance amount received from BPCL has been utilised partially to pay off the other liabilities and payment of salary dues of Kochi Unit employees. Further out of the 242 acres of land approved for sale in the year 2018, sale of 85.27 acres has been completed on 13th May, 2019, for which, BPCL, has paid an amount of Rs.135.81 crore (net of % TDS). BPCL has paid balance amount of Rs. 67.82 crore, on 13th May 2019, after adjustment of the raw material supplies secured dues towards interest accrued (DPC), amounting to Rs.57.62 crore, on the Principal amount and GST @18% amounting to Rs.10.37crore. Part of sale proceeds amounting to Rs.13.19 crore was utilised to pay off Govt.Loan, where charge was created on the immovable properties of the company. The balance amount was utilised to clear other liabilities to the extent possible.

25. THE DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS :

Company ensures existence of adequate internal controls through documented policy and procedures laid down in the manuals to be followed by the executives at various levels. Internal controls are supported by periodical internal audits and management reviews. The management is keen on these issues and initiated various measures such as upgrading the IT infrastructure, evaluating and implementing ERP software, web based application and establishing connectivity amongst manufacturing units and branch offices for effective and proactive services and businesses. Board periodically reviews the internal controls, audit programme, financial results and recommendations, the replies of the management to Government Audit and internal audit etc.

26. CONSERVATION ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

A. Conservation of energy: Nil

i. The steps taken or impact on conservation of energy : Nil

ii. The steps taken by the company for utilizing alternate sources of energy and : Nil

iii. The capital investment on energy conservation equipment: Nil

B. Technology Absorption Nil :

i. the efforts made towards technology absorption:Nil

ii. the benefits derived like product improvement, cost reduction, product development or import substitution : Nil

iii. in case of imported technology (imported during the last three years reckoned from the beginning of the financial year): Nil

(a) the details of technology imported;

(b) the year of import;

(c) whether the technology been fully absorbed;

(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and

iv. the expenditure incurred on Research and Development : Nil

27. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

Key Threats include :

o Competition from domestic / imports and fluctuation in the input prices

o High input costs

o High utility costs

o High overheads

o Continued availability of anti-dumping support for the main products Phenol and Acetone.

o Acute working capital shortage affecting continuous operations

o High interest cost and employee remuneration.

Some risks and concerns :

o High manpower cost per ton of finished product.

o Depreciated plants, requiring high maintenance cost.

o Dumping in main products Phenol / Acetone.

o Volatility in main input Benzene.

28. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES WHICH HAVE BECOME OR CEASED TO BE

HOC Chematur Ltd. (Company), a Joint Venture subsidiary abandoned the proposed MDI Project in the earlier years and Company has applied to the Registrar of Companies (ROC/MCA) for striking off the name of the Company under the Early Exit Scheme of the MCA during the year 2017-18. ROC/MCA has approved the striking off the name of the Company vide ROC/MCA Notice of Striking off and Dissolution order dated 06/12/2018.

Hence AOC-1 in respect of the Company (HOC Chematur Ltd.) is not being furnished.

29. DETAILS OF CSR POLICY AND ITS IMPLEMENTATION DURING THE YEAR

Company since its inception is very much aware about its social responsibility. For over five decades, as a socially responsible and sensitive corporate, your Company continues to remain committed to social thought and action to serve society through providing basic civic amenities to the neighboring villages, rendering assistance in different forms. Your Company is not required to carry out any CSR activities on account of losses incurred in the previous Financial Year 2017-18 and carry forward of the accumulated losses in the Year 2018-19. However Company has recognized its social obligations and extended the following during the year under review.

On closure of Rasayani Unit, Company has donated Rasayani unit sold used tables, fans, chairs and cupboards etc. to Zilla Parishad Schools and other educational institutions and charitable trusts etc during the year under review.

o As a part of social obligation the company is extending need based assistance to deserving students along with SC/ST students for their School / Graduate education.

o Vocational training facilities to the wards of employees of the company in the nearby Engineering / Management colleges for enhancing skill / knowledge.

o Engaging professional students of ICAI/ICSI who have completed intermediate level as trainees for imparting practical knowledge of company working by paying stipend.

Further during the Previous Year (2017-18) in view of closure of Rasayaniunit, Company has donated Rasayani units Library books valuing Rs. 3.19 lakhs (WDV) to Dr. Babasaheb Ambedkar Marathwada University, Aurangabad, as a CSR activity, as these books will be useful to the students community at the university.

30. DISCLOSURES PRESCRIBED IN TERMS OF SECTION 67 (only for public and listed companies)- N.A.

31. DEPOSITS : Nil

During the period under review, the Company has not invited or accepted any deposits either from the directors or from shareholders of the Company.

32. THE DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATIONS IN FUTURE:

The Joint Secretary (Industrial Relations), has passed the Order on 13-02-2019 for the Closure of Companys Rasayani Unit with effect from 13-03-2019 in accordance with sub-section (1) of Section 25(O) of the Industrial Disputes Act 1947.

Except the above, there is no other order passed by the Regulators/ Courts/Tribunals in respect to the Company during the financial year.

33. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (‘Act) and rules made there under, your Company has adopted a Sexual Harassment Policy for women to ensure healthy working environment without fear of prejudice, gender bias and sexual harassment. The policy has been widely disseminated.

The Board states that there were no cases or complaints filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

INTERNAL FINANCIAL CONTROLS

The Company has maintained adequate financial control system, commensurate with the size, scale and complexity of its operations and ensures compliance with various policies, practices and statutes in keeping with the organizations pace of growth and increasing complexity of operations.

34. VIGILANCE MECHANISM: (Under Sec.177(9) of Companies Act,2013)

Hindustan Organic Chemicals Limited, being a Government Company, a Vigilance Department is already existing in pursuance of CVC Guidelines. And therefore, Vigilance Mechanism is being handled by the Vigilance Department and the Company has already adopted a Vigilance Manual in pursuance of CVC Guidelines. Vigilance Manual is available on Companys Website.