Manali Petrochemicals Ltd Management Discussions.

to the Shareholders

The Directors present their 33n Annual Report on the business and operations of your Company and the Audited Financial Statements for the year ended 31st March 2019.

Financial Results

The highlights of the financial results for the year are given below which have been prepared as per the Indian Accounting Standards (Ind AS) adopted by the Company since last year:

(र In crore)

DESCRIPTION 2018-19 2017-18
Profit Before interest & depreciation* 114.75 94.91
Interest 1.74 2.82
Depreciation 10.32 8.25
Profit Before Tax 102.69 83.85
Provision for Taxation 37.52 28.98
Profit After Tax 65.17 54.87
Total Comprehensive income 65.86 54.54

* including exceptional items

Operational Highlights

Total revenue during the year was र 709 crore against र 647 crore in 2017-18, registering an increase of about 10%. The margins were better during the year under review compared to the previous year.

During the year profitability improved significantly. The Directors are happy to report that the Company has recorded historically the highest profits during the yeai under review and also crossed the र 100 crore mark.

The total additions to fixed assets during 2018-19 were i 23 crore and the major spends were for improvements to Effluent Treatment Plant and RO Watei Plant.

During the year the Company completed the project for revamp of the Effluent Treatment facilities at both the Plants at an aggregate cost of र 17 crore incurred over the last 2 years. Post revamp, the Company has overcome the issues faced in meeting the extant environmental norms stipulated by the authorities. However, due to disparity in methods adopted in testing the treated effluent, there were variations in the values arrived at by the Central Pollution Control Board (CPCB) and the Company, which led to temporary closure of Plant 1 for about 22 days during the year. The Company complied with the further directions of the CPCB in the matter and the earlier order for closure was revoked by the authorities. To avoid recurrence of such occurrences in future, the Company has taken steps to align the testing methodology jointly with CPCB.

The Company continues to source power from third parties besides the power supplied by TANGEDCO. The bio mass Captive Power Plant continued to remain inoperative as it was more economical to use the furnace oil based energy. It is expected that the supply of LNG would commence during the year 2019-20 and a decision on further use of the CPP would be taken once the LNG supplies have commerced and stabilized.

Financial Review

During the year working capital facilities were used judiciously and the finance cost was lower than the previous year. The capital expenditure was met from internal sources and the Company has no long term debts.

The Company has been reaffirmed with ratings of CARE A- signifying Tow credit risk for long-term bank facilities and CARE A1 signifying ‘lowest credit risk for short-term bank borrowings upto र 100 crore.

Dividend

Your Company has been following a consistent dividend policy, ensuring that the dividend payments are sustained even when the conditions are not favourable. You would be happy to note that the Company has an unb.oken dividend tiack of 13 years till the last year.

Your Directors are happy to recommend a dividend of 15% i.e. seventy five paise per equity share of t 5/- each fully paid-up, for the year 2018-19, aggregating to 112.90 crore excluding dividend distribution tax. It may be seen that the dividend rate has been increased by 50% from 10% in the previous years.

Industry structure and development

Your company operates in the Polyurethanes industry. Polyurethane known as PU is a mixture of compounds containing urethane, urea, isocyanates, allophanates etc. depending upon the starting raw mateuals and their reactions. In chemical terms it is a polymer containing carbamate or urethane linkage formed by reaction of isocyanates with polyol.

PtJ offers unique properties like good abrasion and wear resistance, elongation, resilience, flexibility, scratch resistance, mechanical strength, adhesion lowtemperature, flexibility, thermal insulation, electrical insulation etc. It is one of the very few polymers which is available in wide range of hardness and shows properties of thermoset, thermoplastics and elastomers.

PU is one of the most versatile polymers available in many forms, ranging from soft foams to very rigid and tough materials. This provides opportunity for almost infinite applications which are evolving continuously. Due to wider range of properties and forms, it finds applications in rigid and flexible foam, fiber, film, composites, elastomers, coatings, adhesives and mainly caters to industries like Automotive, Appliances, Building & Construction, Energy, Defense, Paints and Coatings, Soft furniture, etc..

Flexible and rigid foams together have a global market share of about 65%. The other major segments are coating (13%) and thermoplastic elastomers (12%).

While the usage levels are advanced in Europe, North America and Far East, in India it is still in the emergent stage. The increasing requirement for lightweight but durable materials from end-use industries has been driving the demand for the PU products in the recent years.

Your Company specializes in manufacture of propylene glycol, polyether polyol and related substances. Your Company is the first and largest Indian manufacturer of Propylene Oxide, the input material for the aforesaid derivative products.

Polyols are made in four grades, viz., Flexible Slabstock, Flexible Cold Cure, Rigid and Elastomers. These find application in the automobile, refrigeration and temperature control, adhesive, sealant, coatings, furniture and textile industries. Use of Polyols is gaining popularity in footwear and roofing applications.

Propylene Glycol (PG) is a colorless, clear, nearly odorless, viscous liquid with a faint sweet taste chemical produced by reaction of propylene oxide with water. It is chemically neutral and so does not react with other substances.

PG when mixed with water, chloroform and acetone can form a homogenous mixture and it tends to absorb moisture from air. Thus, it is useful in mixing contrasting elements such as perfumes and is also consumed as solvent in a wide variety of applications.

PG is widely utilized in pharmaceuticals, food & flavor and fragrance industries and also for manufacture of polyester resins, carbonless paper and automobile consumables like brake fluid and anti-freeze liquid. Some of the major applications of PG include medicines, canned food, body sprays, perfumes, cosmetics, soaps and detergents. The off-take of PG for industrial purposes is generally low due to availability of alternate cheaper materials.

MPL supplies more of food and pharmaceutical grade PG to the Indian market, which like the Polyols is dominated by imports. In addition to PG, the by-products such as DPG are also bought by smaller players for food, flavours and related applications mainly as preservatives.

Your Company also produces Propylene Glycol Mono Methyl Ether (PGMME), an environment-friendly solvent used in paints and coatings and electronics industries.

Indian PU and PG market continued to be impacted by large volume of imports aggravated by the new capacities that have come up in the past few years especially in Thailand and Singapore without corresponding demand for the product in their region. Pricing has been a major issue in the last few years, weaning the domestic customers away from the local manufacturers.

Opportunities and threats

Polyurethane materials, due to their versatility, perform extremely well as part of any application that is subject to dynamic stress. They provide many advantages including resilience, high tear resistance, low viscosity and low heat build-up. Polyurethane can be used for varied applications like building insulations, refrigeration, furniture, footwear, automotive, coatings and adhesives, sealants etc. The development of polyurethane materials is still evolving and new applications are regularly being created. It is a polymer that helps in smart designing and achieving more with less. So, its popularity has been on the raise for the past several years with infinite opportunities.

With costs going up, the need of the hour for the OEMs is to identify potential for savings in power costs which could be achieved by using lightweight but durable materials. This has stimulated high demand for newer PU products from user industries such as furniture, construction, appliances, footwear, automotive which has opened up the prospects of the industry in the recent years. Of these the construction and footwear applications look to be promising.

Reports suggest that the PU market, earlier projected to grow at a CAGR of 7% during 2016 to 2020, would continue the trend till 2025. The increased use of the PU based materials in construction applications, replacing the conventional fiberglass, mineral wool, etc. is expected to propel the demand further. Though this market is still emerging in India, given the advantages such as higher insulation, living space, energy efficiency, environmental friendly, the usage is expected to grow further in the near future and open up better opportunities for the new products of your Company under development. Also many Indian states are contemplating to introduce regulations for energy efficient buildings and so the popularity of the PU applications in this sector are set to grow further in India. Besides the threat of lower margins due to ever increasing imports, tougher environmental laws have resulted in additional spending on the treatment process. With monsoon failing for two consecutive years, availability of water for industries has been becoming hard and also very expensive.

Though the Company succeeded in its efforts for imposition of anti- dumping duty on imports from certain countries, there had been no real relief either in the volume or in the pricing. So, the Company has taken various actions for cost reduction and product development to produce more value added products such as water proofing, foot-wear applications, etc.

Indian Market Scenario

Indian PU industry has recorded steady growth over the years mainly on account of rapid urbanization and improved disposable incomes in the hands of the consumers. Items such as refrigerators, mattresses, etc. which were considered luxury have become essential in most of the households. Flexible financing options have further aided the market growth. PU has established itself as the preferred material in the coatings segment on account of the superiority and other advantages. Thus there has been major growth in the demand but the Indian market continues to be dominated by imports.

Indian PG market is also generally dominated by imports, but your Company continues to get better realization from sale of PG. This is mainly due to higher growth in demand for PG which is estimated at 11-12% in the country against 5-6% globally.

Reports suggest that besides PG, the growth of almost all segments in India such as Slab Stock Polyol, Rigid, shoe Soles, HR Polyol, etc. was nearly twice the global average during the year 2018-19. While the global projections for 2019-20 look to be stagnant, in India the growth is expected to be more than the year under review.

Risk Management Policy

The Company has established a structured frame work for addressing business risk management issues. A risk management plan has been framed, implemented and monitored by the Board through the Risk Management Committee of Directors (RMC) comprising Ms. Sashikala Srikanth as the Chairperson and Mr. T K Arun, Mr. G D Sharma and Mr. Muthukrishnan Ravi, as the other Members.

The Company has two employee-level Committees viz., a sub-committee and an Apex Committee, headed by the Wholetime Director (Works) to review and assess the risks that could affect the Companys business. The sub-committee brings out the matters that could affect the operations and the Apex Committee, determines the issues that could become business risks. The mitigation actions are also suggested by the Committees and the report of the Chairman of the Apex Committee is submitted to the Risk Management Committee of Directors (RMC). The RMC meets periodically, reviews the reports and recommends actions to be taken in this regard. During the year under review the Committee met on 16th May 2018, 3rd August 2018, 13th October 2018 and 11th February 2019.

As required under S. 177 of the Act, the Audit Committee also reviews the risk management process periodically.

Risks and Concerns

The Indian Polyol and PG markets continue to be dominated by imports. The new facilities set up by major players such as DOW, BASF elsewhere with high capacities offer higher quantity of Polyols to Indian market at very low prices. Even imposition of Anti-Dumping duties has not alleviated woes of the domestic producers as the MNCs either supply the materials from places not covered under ADD or bear the additional cost.

The PU industry is concentrated globally and a major portion of the supplies are controlled by smaller number of producers. The top manufacturers control over 60% of the total PU production giving them enormous control over product pricing & other strategies. Such major multinationals enter into strategic alliances across countries to ensure that they have an upper hand in select regions. These arrangements jeopardize the interest of the smaller, domestic players in the industry with modest facilities.

Frivolous actions with ulterior motives by the self-styled environment protectors have become a new threat to industries, especially the chemical processing sector.

These call for higher outlay to have a relook at the existing processes resulting in disproportionate spend on the treatment and also the associated capital costs.

The Company explored various options for improving the quality of the treated effluent to meet stricter standards which had been a big challenge. The projects have been completed and the standard and quality of the treated effluent have improved to the required levels. Sustainability could be a concern in the long run as these are biological processes and so the Company would have to be very watchful on the developments and may be required to spend higher amounts, affecting the profitability.

Though the Company has overcome the issues faced in achieving the environmental norms successfully, the case filed with the National Green Tribunal against the marine disposal of the treated effluent is still pending. Since the Southern Bench of the NGT is not functional, the case has been transferred to NGT, New Delhi during the year and hearing is awaited.

During the year 2017, the period of lease relating to Plant 2 expired and though the Company filed its request for extension well in advance with the Government of Tamilnadu, the same is yet to be renewed. The Auditors have drawn their attention to this, but since the land has been put to use by the Company for the purpose for which it has been allotted and also as the matter is being closely followed up, your Company is confident that the request would be considered favourably by the authorities.

Outlook

As per the World Economic Outlook released by the World Bank in April 2019, global economic activities have shown signs of melting during the 2nd half of 2018, after robust activity in 2017 and the first half of 2018. It has been projected that the growth in 2019 would be 3.3% against 3.6% in the preceding year, with an expectation that it would go back to the earlier level in the succeeding year.

The main reason for the meltdown is attributed to the decline in Chinese output which to a major extent is attributable to regulatory tightening and trade tensions with USA. The EU nations lost more momentum than expected and countries like Germany, Italy too have declined. Japan was affected by more frequent and severe calamities out of human control.

As regards India, the WEO has projected GDP growth of 7.3% and 7.5% in 2019 and 2020 respectively, against 7.1% in 2018. The Asian Development Bank figures are slightly different at 7.0% for 2018, 7.2% in 2019 and 7.3% in 2020. It may be noted that projections for China for the next years are lower at 6.3% and 6.1%, against 6.6% in 2018.

After the interruption in the growth due to demonetization and introduction of the Goods and Services Tax (GST), the Indian economy looks to be getting back to a respectable growth in 2019 and 2020, which is relatively higher than the global average and also other major economies. In fact as per the WEO report none of the other economies are in the 7+ league. The revenue collections have been good for the Government and so it is expected that the public spend would be more to propel the economy. However, the impact of sanctions on oil imports from Iran could be a thorn in the growth story and this would also affect the exports from India.

During the year your Company commenced production of Notedome products and supplies are being made to the domestic and other Asian customers. Product development to meet customer requirements and also introduce innovative applications are continued.

The facility for PO manufacturing set up by another Company in Manali has commenced production during the year and so dependence on imported PO has come down considerably. This has also helped in reduction in the input costs. Having successfully overcome the environmental issues, the Company has taken actions for augmenting the capacity of various products, though not in a big way due to other constraints.

Subsidiaries

As at the year end, the Company had one Wholly Owned Subsidiary and two Step Down Subsidiaries (SDS), all of which are incorporated outside India. The financials of all these subsidiaries have been consolidated and the financial and other information have been furnished in the Consolidated Financial Statement (CFS) attached to this Report.

AMCHEM, Singapore

AMCHEM Speciality Chemicals Private Limited, Singapore, has been set-up by the Company in 2015-16, to expand its global footprint, to hold all the foreign assets of the Company. The Company invested US$ 16.32 million (र 110.32 crore) in the WOS to part fund the acquisition of Notedome Limited, UK and also for further exploratory work.

During the year 2016-17 the WOS set up AMCHEM Speciality Chemicals UK Limited as its WOS which acquired Notedome Limited. Thus, AMCHEM, UK and Notedome are the SDS of MPL.

During the year under review, the total income of AMCHEM, Singapore was US$ 1.62 million (र 11.35 crore) and the profit for the year was US$ 870,903 (र 6.09 crore). AMCHEM, Singapore continues to explore other opportunities for acquisition of existing overseas facilities to further improve the global presence of MPL, besides taking up other activities such as trading, transaction facilitations, business and project consultancy.

AMCHEM, UK

AMCHEM Speciality Chemicals UK Limited, UK was established in September 2016 by AMCHEM Singapore as its WOS which completed the acquisition of Notedome Limited effective 1st October 2016 through the equity contributions from its holding company and bank loans. AMCHEM, UK at present continues to be the holding company of Notedome Limited, UK. The total income of AMCHEM UK was 420,000 (र 3.85 crore) comprising mainly dividend of 300,000 from Notedome Limited and profit was 334,052 (र 3.06 crore).

Notedome Limited, UK

Notedome, established in 1979, is a System House with more than 30 years experience, manufacturing Neuthane Polyurethane Cast Elastomers catering to customers across 45 countries. Neuthane polyurethanes are used in diverse range of industries and applications, in the automotive sector for anti-roll bar, suspension and shock bushes for buses, trucks and other high performance vehicles, limit or bump stops, material handling etc. and in the agriculture sector for Rollers, Harvester components and idler wheels on track laying tractors.

The total revenue for the year 2018-19 was 11.99 million (र 108.08 crore) and profit 0.64 million (र 5.93 crore). During the year under review the profitability was impacted due to higher input prices which could not be passed on to the customers. Since the WOS is competing with composite units it does not have pricing flexibility. So it is focusing on product development to widen the customer base.

Environment and Safety

Your Company has laid down clear policies for quality, environment and safety and has set-up various teams and committees to monitor and improve observance of the said policies. Besides periodical in-house reviews and audits, surveillance audits of ISO 9001 and ISO 14001 have been done regularly, ensuring proper adherence to the quality, environment and safety requirements. World Environment Day is celebrated and to mark the occasion tree planting and similar activities are undertaken.

Your Company pays special attention to safety of men and material and various competitions are held during the Safety Week to create awareness among the employees about the need to adhere to safe manufacturing practices. Training is provided to the employees in safety related matters and first aid and mock drills are conducted to ensure that the systems and processes are in place to meet any eventualities.

Audit Committee

The details are furnished under the Corporate Governance Report (CGR) annexed to this Report. All the recommendations of the Committee were accepted by the Board.

Vigil Mechanism

As required under S. 177 of Companies Act, 2013 (the Act) and Regulation 22 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, (the Regulations) the Company has established a vigil mechanism for directors and employees to report genuine concerns through the whistle blower policy of the Company as published in the website of the Company. As prescribed under the Act and the Regulations, provision has been made for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.

Human Resources

Your Company believes that achievement of its goals is reliant on the ability of its workforce to convert the plans into actions. Therefore, every effort is taken to retain talent and also introduce newer ideas from the younger generation, for the success story to continue. Various HR initiatives are also taken to enhance the competency of the employees through inclusive decision making process by delegation, recognition, leadership development, etc. Your Company imparts need based training to its employees with special focus on youngsters, stimulating them to play an important role in shaping the Companys future. The industrial relations have generally been cordial, except in relation to a wage dispute with the workmen from 2001, being contested earlier in the Supreme Court and now in the Madras High Court. The Managements efforts to settle the issue through dialogue have succeeded largely with most of the workmen barring a few accepting the offer. The minority workmen are persisting with the case which is pending before the Madras High Court.

As on 31st March 2019, your company had 318 employees on its roll at different locations including Senior Management Personnel, Engineers, Technicians and Trainees.

Related Party Transactions

During the year under review, there were no transactions not at arms length within the meaning of Section 188 of the Act or any material transactions with the related parties in terms of the policy framed by the Audit Committee of the Company as published in the website of the Company viz., http://manalipetro.com/wp-content/uploads/2016/08/ Policy-on-Transactions-with-Related-Parties.pdf.

As required under Regulation 23(2) of the Listing Regulations, approval of the Members has been obtained through postal ballot for transactions with Tamilnadu Petroproducts Limited upto र 200 crore in 2019-20.

Board of Directors and related disclosures As on the date of the Report the Board comprises of 10 directors of whom five are independent including a woman director. All the Independent Directors have furnished necessary declaration under Section 149 (7) of the Act and under Regulation 25(8) of the Regulations. As per the said declarations, they meet the criteria of independence as provided in Section 149 (6) of the Act and the Regulations. The Board met five times during the year under review and the relevant details are furnished in the CGR.

The Board has approved a Remuneration Policy as recommended by the Nomination and Remuneration Committee (NRC), which inter alia contains the criteria for determining the positive attributes and independence of a director as formulated by the NRC. The policy on remuneration to directors is disclosed in the CGR annexed to this Report.

There has been no changes in the Key Managerial Persons after the last AGM. The following changes took place in the composition of the Board since the last Annual General Meeting:

a. Dr. Aneesh Sekhar S IAS, (DIN: 07887010) Executive Director, TIDCO has been appointed as an Additional Director with effect from 2nd April 2019, in the category of Non-Independent, Non-Executive Director. Pursuant to Section 161 of the Companies Act, 2013, (the Act) he holds office till the ensuing Annual General Meeting (AGM) and is seeking reappointment.

b. Lt. Col. (Retd.) Chatapuram Swaminathan Shankar (DIN: 08397818) and Dr. N Sundaradevan IAS, (Retd.) (DIN: 00223399) have been appointed as an Additional and Independent Directors of the Company for a period of five years from 20th May 2019 and 12th June 2019 respectively. Approval of the Members for the above under Sections 150, 152 and 160 read with Schedule IV to the Act will be considered at the ensuing AGM.

As regards the Independent Directors, the following may be noted:

a. Brig. (Retd.) Harish Chandra Chawla (DIN 00085415), retired on 27th May 2019 as an Independent Director of the Company upon completing his first term of five years as Independent Director. The Board places on record its appreciation for the invaluable services rendered by Brig. Chawla during his association with the Company since July 2011.

b. Mr. G Chellakrishna (DIN 01036398) and Ms. Sashikala Srikanth (DIN: 01678374) would be completing their first term of five years on 12th August 2019 as Independent Directors and are being proposed for appointment for a further term of five years from 13th August 2019 which would also be considered at the ensuing AGM.

c. Pursuant to Regulation 24(1) of the Regulations Ms. Sashikala Srikanth has been appointed as Director of AMCHEM, Singapore and AMCHEM, UK, which are material subsidiaries of the company.

Pursuant to proviso to S. 160 (1) there is no requirement of any deposit for the proposals for the appointment of Dr. Aneesh Sekhar S, IAS as a Director and also for appointment of the Independent Directors.

Mr. Ashwin C Muthiah (DIN: 00255679), Chairman, retires by rotation and being eligible offers himself for re-election.

Annual Evaluation of the Board, Committees and Directors

The formal evaluation of the Board was done taking into account the various parameters such as the structure, meetings, functions, risk evaluation, management of conflict of interests, stakeholder value and responsibility, corporate culture and value, facilitation to the Independent Directors to function impartially and other matters. The evaluation of the Committees was done based on the mandate, composition, effectiveness, structure and meetings, independence and contribution to the decisions of the Board.

The evaluation of the individual directors, including the independent directors was done taking into account their qualification, experience, competency, knowledge, understanding of their respective roles (as a Director, Independent Director and as a member of the Committees of which they are Members/Chairpersons), adherence to Codes and ethics, conduct, attendance and participation in the meetings, etc.

In compliance with the requirements of Schedule IV to the Act and the Regulations, a separate meeting of the Independent Directors was held during the year.

Directors Responsibility Statement

Pursuant to the requirement of sub-sections 3 (c) and 5 of Section 134 of the Act it is hereby confirmed that

(a) in the preparation of the annual accounts for the financial year ended 31st March 2019, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review.

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

(d) the Directors had prepared the accounts for the financial year ended 31st March 2019 on a "going concern" basis.

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

Details of unclaimed Share Certificates

In accordance with the requirements of the Clause 5A of the erstwhile Listing Agreement, shares remaining unclaimed even after 3 reminders have been transferred and held in a separate demat account. As per the information provided by the Registrars and Transfer Agent, out of the 2,34,782 shares, which remained unclaimed by 644 shareholders at the beginning of the year, 8703 shares, were released to 20 shareholders during the year. Further, 17,790 shares relating to 68 shareholders were transferred to the Investor Education and Protection Fund in compliance with the requirements of S. 124 (6) of the Act. As at the end of the year 2,08,289 shares remained unclaimed by 556 shareholders. As specified under the Regulations, the voting right on the above shares remain frozen.

Auditors

M/s Brahmayya & Co., Chartered Accountants, Chennai were appointed as the Auditors of the Company at the 31st Annual General Meeting held on 25th July 2017 and in the first term they will hold office for a period of five years.

The proposal for remuneration to the Auditors as recommended by the Audit Committee is being placed before the Members for their consideration and approval at the ensuing AGM.

Maintenance of Cost Records & Cost Audit

The Company is required to maintain cost records as specified by the Central Government under S. 148 (1) of the Act is also covered under Cost Audit, which are duly complied with.

Mr. S Gopalan, Proprietor, S Gopalan & Associates, Cost Accountants, Chennai was appointed as the Cost Auditor of the Company for the financial year 2018-19 on a remuneration of र 4.00 lakh plus applicable taxes and reimbursement of out of pocket expenses which is to be ratified by the Members at the SS"1 Annual General Meeting. The Cost Auditor holds office till 30th September 2019 or submission of his report for the year 2018-19, whichever is earlier.

Adequacy of Internal Financial Controls

Your Company has in place adequate internal financial control systems combined with delegation of powers and periodical review of the process. The control system is also supported by Internal Audit and management review with documented policies and procedures. The system was also reviewed by an external agency, and no major weaknesses were reported. To ensure effective operation of the system, periodical reviews are made by the Internal Auditors and their findings discussed by the Audit Committee and with the Statutory Auditors. The Statutory Auditors of the Company have also furnished certificates in this regard, which are attached to their Reports.

Corporate Governance

Your Company has complied with the requirements of Corporate Governance stipulated under the Regulations. A Report on Corporate Governance is given in Annexure A along with a Certificate from Practicing Company Secretary.

Secretarial Audit Report

As required under Section 204 of the Act, the Secretarial Audit Report issued by Mrs. B Chandra, Company Secretary in Practice is annexed to this Report as Annexure B.

Disclosures under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,

2014

a. The ratio of remuneration of Mr. C Subash Chandrabose, Wholetime Director (Works) to the median remuneration of the employees of the Company was 9.5.

b. The percentile increase in remuneration of the Company Secretary was 17% and for the Wholetime Director (Works) and Chief Financial Officer 10%.

c. The percentage increase in the median remuneration of the employees (other than workmen who are covered under wage settlement for which a litigation is pending before the Madras High Court) was 6%

d. As at the year-end there were 251 permanent employees, including MD and WTD, and excluding trainees.

e. During the year the average percentile increase in the salaries other than managerial remuneration was 6.6% and the increase in managerial remuneration was 10%.

f. Information required under Rule 5(2) are given in Annexure C to this Report.

g. The remuneration paid to the employees are as per the remuneration policy of the Company.

Other disclosures

a. Information on conservation of energy, technology absorption, foreign exchange earnings and outgo prescribed under Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, to the extent applicable are given in Annexure D.

b. The extract of the Annual Return in Form MGT-9 is given in Annexure E.

c. The Company has not accepted any deposits from the public during the year under report.

d. The information under Section 186 of the Act relating to investments, loans, etc. as at the year-end has been furnished in notes to the Financial Statement.

e. The CSR Policy related disclosures are given in Annexure F.

f. The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No cases were filed under the said Act.

g. The Company has complied with the requirements of all the applicable Secretarial Standards.

h. There has been no significant change in the key financial ratios viz., change of 25% or more compared to the previous year and Return on Net Worth which was 15.8% for the year 2018-19 against 15.4% for the preceding year.

Acknowledgement

Your Directors express their sincere gratitude to the Government of India, the Government of Tamilnadu, the Promoters and the Banks for the assistance, co-operation and support extended to the Company. The Directors thank the shareholders for their continued support.

The Directors also place on record their appreciation of the consistent good work put in by all cadres of employees. Disclaimer

The Management Discussion and Analysis contained herein is based on the information available to the Company and assumptions based on experience in regard to domestic and global economy, on which the Companys performance is dependent. It may be materially influenced by changes in economy, government policies, environment and the like, on which the Company may not have any control, which could impact the views perceived or expressed herein.

For and on behalf of the Board
Ashwin C Muthiah
Chennai DIN: 00255679
June 12, 2019 Chairman