Mysore Petro Chemicals Ltd Management Discussions

To,

The Members

Your Directors hereby present the Forty Seventh Annual Report alongwith Audited Financial Statements of the Company for the financial year ended 31st March, 2017.

1. Financial Results

Rs in Lakhs

	2016-17	2015-16
Revenue from Operations (Gross)	3,352.50	2,621.86
Less: Excise duty	322.74	293.26
Revenue from Operations (Net)	3,029.76	2,328.60
Other Income	93.65	100.26
Total Revenue	3,123.41	2,428.86
Gross Profit	652.17	713.15
Less:
Finance Cost	73.69	76.68
Depreciation and Amortisation expenses	293.23	276.81
Profit/(Loss) before Tax	285.25	359.66
Tax Expenses:
– Current Tax	135.76	167.20
– Deferred Tax	(53.14)	-
Profit for the year	202.63	192.46

2. Operational Review

The Gross Sales amounted to Rs 3,352.50 lakhs (previous year Rs 2,621.86 lakhs) and Net Sales was Rs 3,029.76 lakhs (previous year Rs 2,328.60 lakhs). After providing for Depreciation, Finance cost and Taxes, the Net Profit was

Rs 202.63 lakhs as against Rs 192.46 lakhs in the previous year 2015-2016.

3. Sale of Maleic Anhydride (MA) Business, Taloja, Maharashtra

During the year under review the Board of Directors decided to transfer the MA Business of the Company by way of slump sale as a "going concern" to M/s. I G Petrochemicals Ltd. at a consideration of

Rs 74.48 crores effective from 1st April, 2017. The Special Resolution was approved by the shareholders by way of Postal Ballot the results of which were declared on 17th December, 2016. Thereafter the Agreement to sell was executed on 1st April, 2017. The consideration would be received by the Company in tranches over a period of five (5) years.

4. PA Plant Status

The PA Plant at Raichur, Karnataka was closed since July, 2013 due to economic unviability and the management staff and a few workmen accepted the retrenchment compensation offered by the Company. 52 (fifty two) workmen had not accepted the offer and have approached the Labour Department, Government of Karnataka for further demands and the matter is pending before the Industrial Tribunal, Hubballi, Karnataka. The management is awaiting the outcome of the Tribunal’s judgement in this regard. Meanwhile the Company has filed a Writ Petition in the Hon’ble High Court of Karnataka, Bengaluru, Gulbarga Bench. The hearings are awaited.

5. Dividend

Your Directors are pleased to recommend dividend of Re. 1/- (10%) per equity share of Rs . 10/- each. The total outgo on account of dividend (including dividend distribution tax) for the current year amounts to

Rs 79.24 lakhs (previous year Rs 79.24 lakhs).

6. Share Capital & Finance 6.1 Share Capital

The paid up Equity Share Capital as on 31st March, 2017 was Rs 658.76 lakhs. During the year under review, the Company has neither issued any shares or granted any stock options or sweat equity. The Promoter shareholding as on 31st March, 2017 is 72.99%.

6.2 Finance

The Company does not have any secured debts as on date.

6.3 Fixed Deposits

The Company has not accepted any Fixed Deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Rules framed thereunder.

6.4 Particulars of Loans, Guarantees or Investments

The Company has not given any loans or guarantees within the meaning of the provisions of Section 186 of the Companies Act, 2013.

The details of the investments made by the Company are given in the notes to the Financial Statements.

7. Taxes and Duties

The Company has contributed Rs 545.85 lakhs (Rs 533.89 lakhs) to the Central and State exchequer by way of Excise Duty, Sales Tax, Income Tax and Professional Tax.

8. Economic Scenario, opportunities, concerns and future outlook

The Indian economy continues to be robust even though there was a slight fear of slowdown due to the demonetisation implemented during the year. The GDP is expected to be around 7-7.2% in the current year 2016-17 which is still one of the highest in the world. The Governments continued thrust for infrastructure sector will be a big boost for the economy as a whole and for the manufacturing sector in particular. The outlook for India’s national economy in the year 2017 and beyond shows a strong emerging potential. This will encourage a good growth for industrial activities in the years to come. The Company is exploring options on various parameters in order to establish its business activities in future.

9. Corporate Social Responsibility (CSR)

The Corporate Social Responsibility (CSR) Policy of the Company aims to bring a difference in the lives of the needy, under privileged persons of the society including children, women and senior citizens. During the year, the CSR Committee of the Company directed its spending on the sectors primarily in education and community services in accordance with its CSR Policy.

The Report on CSR activities is annexed herewith as "Annexure A".

10. Risk Management

The Company manufactured a single product MA in the previous year which is recovered from the Wash Water. MA is sold in local markets and there are no exports. Hence there are only the general business risks which are inherent to any business viz. Technical/Operational risk, Interest rate risk, Economic and Geo-political risk, etc. The Board of Directors do a periodic assessment of risks through properly defined frame work and its mitigation resulting in minimization of risks.

The MA business is now sold to I G Petrochemicals Limited (IGPL) and hence there are no risks related to the manufacturing activities. The Company is evaluating options to establish its business activities in future.

11. Vigil Mechanism/Whistle Blower Policy

The Company has a Vigil Mechanism Policy to deal with instance of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the Company’s website www.mysorepetro.com. There was no fraud or irregularity noticed during the year under review.

12. Directors & Key Managerial Personnel

Shri S N Maheshwari, Director retires by rotation and being eligible has offered himself for re-appointment. The Company has received necessary declarations from all Independent Directors of the Company as required under Section 149(7) of the Companies Act, 2013 that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.

There were no changes in the Key Managerial Personnel during the year under review. However Mr. Paras Jain, Chief Financial Officer resigned on 31st May, 2017 and Mr. Nilesh Panchal has been appointed as Chief Financial Officer and authorized as Key Managerial Personnel of the Company w.e.f. 25th July, 2017.

12.1 Board Evaluation

As mandated under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the annual performance evaluation of the Directors individually vis--vis the Board and its committees have been carried out during the year. The manner of such evaluation has been disclosed in the Corporate Governance Report.

12.2 Remuneration Policy

The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and determination of their remuneration. The Remuneration Policy forms part of the Corporate Governance Report.

12.3 Meetings

During the year four Board Meetings and four Audit Committee Meetings were convened and held. The details of the same are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act.

13. Directors’ responsibility statement

To the best of our knowledge and belief and according to the information and explanation obtained by us, in terms of Section 134(3)(c) of the Companies Act, 2013 we state: a) that in the preparation of the annual financial statements for the year ended 31st March 2017, all the applicable accounting standards have been followed and no material departures have been made from the same; b) that appropriate accounting policies have been selected and applied consistently and have 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 at the end of the financial year ended 31st March 2017 and of the profit of the Company for that year; c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities; d) that the annual financial statements have been prepared on a going concern basis; e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

14. Related Party Transactions

All transactions entered into with related parties and which were material in nature were on arm’s length basis, in the ordinary course of business and with the approval of the Audit Committee, Board of Directors and members of the Company, wherever required. In view of the sale of MA Business, the long term related party transactions have been terminated w.e.f. 1st April, 2017.

Information on Related Party Transaction is given in Annexure ‘B’.

15. Auditors

15.1 Statutory Auditors

The retiring Auditor’s M/s. Hariharan & Co., Chartered Accountants, Bengaluru (Firm’s Registration No. 001083S) term expires at the forthcoming AGM. The Board appreciates the contributions of M/s. Hariharan & Co. for their diligence and independence during their long association with the Company.

In terms of the provisions of Section 139(2) of the Companies Act, 2013 read with the Companies (Audit & Auditors) Rules, 2014, the Board of Directors have appointed M/s. MSKA & Associates, Chartered Accountants, Mumbai (Firm’s Registration No. 105047W) as Statutory Auditors of the Company in the meeting held on 25th July, 2017, subject to the approval of the shareholders in the forthcoming Annual General Meeting (AGM) to hold office for five (5) consecutive years from the conclusion of this AGM till AGM of the Company to be held in the year 2022. The said appointment shall be ratified by the Members at every AGM till the expiry of their tenure. The Auditor has provided a written confirmation to the effect that their appointment, if ratified, would be in conformity with the limits specified in Section 141(3)(g). Also they have confirmed their eligibility under Section 141 of the said Act and the Rules framed thereunder for appointment as Auditors of the Company. As required under Regulation 33 of the SEBI Listing Regulations, the Statutory Auditor has also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India (ICAI).

Your Directors recommend their appointment as the Statutory Auditors to hold office for a term of five (5) consecutive years subject to ratification of their appointment at every AGM upto the end of their tenure.

15.2 Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. Makarand M Joshi and Associates, Practicing Company Secretaries (CP No. 3662) to conduct the Secretarial Audit of the Company for the Financial Year 2016-17. The said Report is annexed herewith as "Annexure C".

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

16. Listing of Shares

Your Company’s shares are listed on BSE Limited under Scrip Code No. 506734. The ISIN code is INE741A01011.

17. Corporate Governance

The disclosures as required under Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are attached herewith and forms part of this report.

18. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014 is annexed herewith as "Annexure D".

19. Extract of Annual Return

Pursuant to the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of the Annual return in Form MGT-9 is annexed herewith as "Annexure E".

20. Internal Control System

The Company has internal controls commensurate with the size of its business and has established framework of internal controls to ensure that the assets are safeguarded and are productive. Necessary checks and balances are in place to ensure that transactions are adequately authorized and reported correctly. The Company is following all the Accounting Standards for properly maintaining the books of accounts and the reporting of financial statements. The Company has appointed the Internal Auditors to review various areas of the operations of the Company. The audit reports are reviewed by the management and the Audit Committee of the Board and corrective actions are taken by the Company when needed.

21. Human Resource Development/Industrial Relations

The PA Plant at Raichur, Karnataka has closed down its operations since July, 2013 and the settlement with the workers is in progress.

Industrial relations was cordial at the MA Unit at Taloja, Maharashtra upto 31st March, 2017.

22. Cautionary Statement

Statements made in this report describes the Company’s objectives, projections and estimates and may be forward looking and are stated as required by applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Company’s operations include market conditions, Government regulations, exchange rate fluctuations, interest and other costs.

23. Particulars of Employees

During the year, there are no employees who are in receipt of the remuneration exceeding the limit specified in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The information relating to remuneration in respect of directors/employees of the Company as required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be provided to the members upon request.

24. Acknowledgements

Your Directors sincerely thank the various Central and State Government Departments and various Organizations for their continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for their excellent support. The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company.

	For and on behalf of the Board of Directors
Mumbai	M M Dhanuka
25th July, 2017	Chairman & Managing Director

ANNEXURE ‘A’ TO THE DIRECTORS’ REPORT

ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES

1. A brief outline of the Company’s CSR Policy, including overview of projects or programmes proposed to be undertaking and a reference to the web-link to the CSR policy and projects or programmes: CSR Policy of the Company is available on http://www.mysorepetro.com

2. Composition of the CSR Committee:

The CSR Committee was constituted by the Board of Directors effective 25th May, 2015. The composition of the Committee is given below:

Name of the Director	Position	Category
Shri Nikunj Dhanuka	Chairman	Non-Executive Director
Shri Shrikant Somani	Member	Non-Executive & Independent Director
Shri S N Maheshwari	Member	Non-Executive Director
Smt. Uma Acharya	Member	Non-Executive & Independent Director

3. Average net profit of the Company for the last three financial years: Rs 667.21 lakhs.

4. Prescribed CSR expenditure (two per cent of the amount as in item No. 3 above): Rs 13.34 lakhs.

5. Details of amount spent on CSR during the financial year 2016-17: a. Total amount spent: Rs 13.34 lakhs b. Amount unspent, if any: Nil c. Manner in which the amount spent during the financial year is detailed below:

(Amount in Rs)

			Projects or program	Amount outlay	Amount spent on the Project	Cumulative Expenditure
			1. Local area or other	(Budget)	or Programs Sub-heads	upto the reporting period	Amount spent: Direct or through implementing agency
Sr. No.	CSR Project or Activity identified	Sector in which the project is covered	2. Specify the State and district where projects or Programs was undertaken	Project or Programs- wise	1. Direct expenditure on projects or programs
					2. Overheads
1.	Social Welfare	Community Organisation	Mumbai	51,000/-	51,000/-	51,000/-	Donation to Kalki Tejomaya Social Welfare Trust
2.	Society	Education/ Community Organisation	Vrindaban, U.P.	12,83,000/-	12,83,000/-	12,83,000/-	Donation to H P Dhanuka Charity Trust
		TOTAL		13,34,000/-	13,34,000/-	13,34,000/-

The CSR Committee hereby confirms that the implementation and monitoring of CSR Policy is in compliance with CSR objectives and Policy of the Company.

Sd/-	Sd/-
M M Dhanuka	Nikunj Dhanuka
Managing Director & CEO	Chairman–CSR Committee

ANNEXURE ‘B’ TO DIRECTOR’S REPORT

Form AOC-2

(Pursuant to Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arm’s length transaction under third proviso thereto.

1. Details of contracts or arrangements or transactions not at arm’s length basis:

Not applicable

2. Details of contracts or arrangements or transactions at arm’s length basis:

Name of the related party and nature of relationship	Nature of contracts/ arrangements/ transactions	Duration of the contracts/ arrangements/ transactions	Salient terms of the contracts or arrangements or transactions including the value, if any.	Justification for entering into such contracts or arrangements or transactions	Date of approval by the Board	Amount paid as advances, if any.
	a) Supply of Goods & Services.	a) Contract Agreement dt. 1.3.2014 for five(5) years upto 28.2.2019.	a) Purchase of Wash Water, Steam and Orthoxylene from IGPL.	a) Wash Water available only from IGPL being its effluent in the process of manufacture	a. 23.5.2014	NIL
I G Petrochemicals Limited (IGPl) – Co-Promoter	b) Office premises on Lease	b) Leave and License Agreement dt. 21.3.2014 for five (5) years upto 28.2.2019.	b) Let on lease to IGPL on security deposit of Rs. 6.25 crores.	b) To put the premises to optimum use.	b. 13.2.2014	NIL