Phillips Carbon Black Ltd Directors Report.

To the members

Your Directors have pleasure in presenting the fifty-ninth Annual Report on the business and operations of Phillips Carbon Black Limited and the Audited Accounts for the financial year ended 31st March 2020.

FINANCIAL HIGHLIGHTS

Particulars Year ended Year ended
31.03.20 31.03.19
Revenue from operations 3243.54 3528.56
PBDIT 488.03 639.91
Less: Finance and hedging cost including foreign currency fluctuation (net) 44.83 34.73
PBDT 443.20 605.18
Less: Depreciation 92.36 66.38
PBT 350.84 538.80
Tax expense 67.35 150.27
PAT 283.49 388.53
Earnings Per Equity Share ( EPS) (In H) 16.45 22.54

The financial statements for the year ended 31st March 2020 have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Companies Act, 2013 (the Act) read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.

DIVIDEND

The Board of Directors of the Company at its Meeting held on Thursday, 13th February, 2020 has declared an Interim Dividend @ 350 %, i.e. Rs.7/- per equity share on the face value of H2/- per equity share, for the financial year ended 31st March, 2020 which includes a Special Dividend @175 %, on the occasion of Diamond Jubilee year of the Company. The said Interim Dividend was paid on and from 2nd March, 2020.

PERFORMANCE OVERVIEW

Carbon Black

Your Companys FY20 EBITDA came down to Rs.488 Crores as against H640 Crores in the previous year. PAT for the year was H283 Crores, which is around 0.72 times that of previous years PAT of H389 Crores in the backdrop of the continued global recession in the automobile industry further aggravated by the COVID-19 pandemic.

Power

Your Companys power segment revenue (excluding inter segment revenue) was at Rs.86 Crores, lesser by H11 Crores, as compared to H97 Crores in FY19, on the back of lower sales volume.

A detailed review of the operations of the Company for the financial year ended 31st March 2020 is given in the Management Discussion and Analysis Report, which forms a part of this Report.

COVID 19-

In view of the lockdown across the country due to the COVID-19 pandemic, the manufacturing operations of the Company across all its locations had been suspended temporarily in compliance with the directives/orders issued by the relevant authorities. The Company has made detailed assessments of the recoverability and carrying values of its assets comprising property, plant and equipment, inventories, receivables and other current assets as at the balance sheet date and on the basis of evaluation, has concluded that no material adjustments are required in the standalone financial results. The Company is taking all the necessary steps and precautionary measures to ensure smooth functioning of its operations and to ensure the safety and well-being of all its employees. Given the criticalities associated with nature, condition and duration of COVID-19, the impact assessment on the Companys financial statements will be continuously made and provided for as required. Subsequent to year end, Companys plants across all its locations have resumed operations as per government guidelines and directives prescribed.

MANUFACTURING

Carbon Black production during FY20 is 4,07,887 MT as compared to FY 19 4,10,798 MT in the previous year. Production reduction has been observed due to lockdown imposed by the Government because of the COVID-19 pandemic.

Project work on brownfield specialty lines of 32,000 MT is progressing satisfactorily and is expected to be commissioned by the end of FY21. With its strategically located four plants and seamless ability to swtich between alternative feedstocks thereby ensuring raw material flexibility, your Company is well poised to service customers in India and overseas. The vicinity of seaports to a couple of the Companys plants facilitate logistic costs within India and abroad.

CORPORATE GOVERNANCE RATING

The Company has obtained a Corporate Governance Rating of CARE CGR2+ (CGR Two Plus) from CARE Ratings dated 12th February, 2020.

CREDIT RATINGS

During the year under review, the Company had received its credit ratings from CARE and ICRA. Both the rating agencies have assigned the Company a long term rating of AA- Stable ( Double A minus with Stable outlook) against its long term borrowings. CARE has also assigned a rating of A1+ (A one plus) in respect of Companys short term bank facilities and Commercial Paper issuance programme.

LIQUIDATION OF PCBL NETHERLANDS HOLDNGS B.V

PCBL Netherlands Holdings B.V., a step down subsidiary of the Company has been liquidated during the quarter ended 31st December, 2019, in accordance with the local laws of Netherlands.

SUBSIDIARY COMPANIES

The Company has two subsidiaries as on date, namely, Phillips Carbon Black Cyprus Holding Limited and Phillips Carbon Black

Vietnam Joint Stock Company. There are no associate companies or joint venture companies within the meaning of Section 2(6) of the Act.

The Company has prepared a Consolidated Financial Statement of the Company and of all the subsidiaries, namely, Phillips Carbon Black Cyprus Holding Limited and Phillips Carbon Black Vietnam Joint Stock Company in the form and manner as that of its own, duly audited by M/s. S R Batliboi & Co., LLP, the statutory auditors in compliance with the applicable accounting standards and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (hereinafter referred to as the SEBI Listing Regulations.) The Consolidated Financial Statements for the year 2019-20 form a part of the Annual Report and Accounts and shall be laid before the Members of the Company at the AGM while laying its financial statements under sub-section (2) of the said section. Pursuant to the provisions of Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is attached to the financial statements of the Company.

Further pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company at www.pcblltd.com under the segment Investor Relations. Shareholders desirous of obtaining the Accounts of the Companys subsidiaries may obtain the same upon request by email to the Companys email id - pcbl.investor@rpsg.in .

The Company does not have any material subsidiary in the immediately preceding accounting year. However, as per Regulation 16 of the SEBI Listing Regulations, as amended, the Company has adopted the policy for determining material subsidiaries, which states that a material subsidiary means a subsidiary, whose income or net worth exceeds 10% of the consolidated income or net worth respectively, of the Company and its subsidiaries in the immediately preceding accounting year.

Accordingly, a Policy on material subsidiaries was formulated by the Audit Committee of the Board of Directors of the Company and the same is also posted on the Companys website and may be accessed at the link:. https://www.pcblltd.com/policies/.

SHARE CAPITAL

Your Companys paid-up Equity Share Capital as on 31st March 2020 stood at H34.47 Crores. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity. As on 31st March 2020, none of the Directors of the Company hold shares or convertible instruments of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

In compliance with Regulation 34 of the SEBI Listing Regulations, a separate section on the Management Discussion and Analysis, as approved by the Board of Directors, which includes details on the state of affairs of the Company is given in Annexure-A, which is annexed hereto and forms a part of the Boards Report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT 9 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is given in Annexure B, which is annexed hereto and forms a Part of the Boards Report and is available on the website of the Company at the link: https://www.pcblltd.com/annual-general-meetings/.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under sub-section (3)(m) of Section 134 of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in Annexure-C, which is annexed hereto and forms a part of the Boards Report.

PUBLIC DEPOSITS

The Company does not have any Public Deposits under Chapter V of the Act and has repaid all Public Deposits that matured and were claimed by the depositors under the earlier Public Deposit Schemes. There is no outstanding balance as on 31st March 2020.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments, affecting the financial position of the Company that have occurred between the close of the financial year ended 31st March 2020 and the date of this Boards Report.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS AND TRIBUNALS

No significant and material order has been passed by the Regulators, Courts and Tribunals impacting the going concern status and the Companys operations in future.

INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

A detailed section on the Companys internal financial controls with reference to financial statements and its adequacy is a part of the Management Discussion and Analysis Report, which forms a part of the Boards Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments are given in the notes to the financial statements.

COMMITTEES OF THE BOARD

Currently, the Board has six committees: Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee, Independent Directors Committee and the Risk Management Committee. A detailed note on the composition of the Board and its committees is provided in the Corporate Governance Report section of this Report.

CORPORATE SOCIAL RESPONSIBILITY

The Companys commitment to create significant and sustainable societal value is manifest in its Corporate Social Responsibility (CSR) initiatives and its sustainability priorities are deeply intertwined with its business imperatives. In accordance with Section 135 of the Act and the rules made thereunder, the Company has formulated a Corporate Social Responsibility Policy, a brief outline of which, along with the required disclosures, is given in Annexure-D, which is annexed hereto and forms a part of the Boards Report.

The Company, along with other companies of the Group, has set up the RP-Sanjiv Goenka Group CSR Trust to carry out CSR activities. During the year 2019-20, the Company has undertaken the CSR initiativesinthefieldsofpromotingeducation,promotinghealthcare, environment sustainability and community development thereby helping in the upliftment of the underprivileged and disadvantaged sections of the society. All the CSR activities fall within the purview of Schedule VII of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The detail of the CSR Policy is also posted on the Companys website and may be accessed at the link: https://www.pcblltd.com/policies/. The Company continues to do its best to support its communities during the current situation. PCBL as a responsible corporate citizen has contributed in PM CARES Fund.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

In compliance with the provisions of Section 177(9) of the Act and SEBI Listing Regulations, the Company has framed a Whistle Blower Policy / Vigil Mechanism for Directors, employees and stakeholders for reporting genuine concerns about any instance of any irregularity, unethical practice and/or misconduct. Besides, as per the requirement of Clause 6 of Regulation 9A of SEBI (Prohibition of Insider Trading) Regulations as amended by SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, the Company ensures to make employees aware of such Whistle -Blower Policy to report instances of leak of unpublished price sensitive information. The Vigil Mechanism provides for adequate safeguards against victimization of Directors or Employees or any other person who avail the mechanism and also provide direct access to the Chairperson of the Audit Committee. The details of the Vigil Mechanism / Whistle Blower Policy are also posted on the Companys website and may be accessed at the link: https://www.pcblltd.com/policies/.

BOARD EVALUATION

The Company has devised a formal process for annual evaluation of performance of the Board, its Committees and Individual Directors

(Performance Evaluation) which include criteria for performance evaluation of non -executive directors and executive directors as laid down by the Nomination and Remuneration Committee and the Board of Directors of the Company. It covers the areas relevant to the functioning as Independent Directors or other directors, member of the Board or Committee of the Board. The Independent Directors carried out annual performance evaluation of the Chairman and Executive Directors. The Board carried out annual performance evaluation of its own performance. The performance of each Committee was evaluated by the Board, based on report on evaluation received from respective Committees. The Company engaged a leading HR Consulting Firm for compilation of the report and feedback received from the Board members, Committee members and directors in the questionnaires circulated and for identifying key inferences and observations with respect to Performance Evaluation. A consolidated report was shared with the Chairman of the Board for his review and giving feedback to each Director.

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for the selection and appointment of Directors, Senior Management Personnel and their remuneration. The Remuneration Policy and the details pertaining to the remuneration paid during the year are furnished in the Corporate Governance Section of the Annual Report.

The Remuneration Policy is also posted on the Companys website and may be accessed at the link: https://www.pcblltd.com/policies/.

RELATED PARTY TRANSACTIONS

All Related Party Transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. Hence, the provisions of Section 188 of the Act are not attracted. Thus, disclosure in Form AOC-2 is not required. Further, there are no materially significant Related Party Transactions during the year under review made by the Company with its Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee for approval.

The Policy on Related Party Transactions duly approved by the Board of Directors of the Company is posted on the Companys website and may be accessed at the link: https://www.pcblltd.com/policies/.

RISK MANAGEMENT

Risk Management is the process of identification, assessment and prioritisation of risks followed by coordinated efforts to minimise, monitor and mitigate/control the probability and/ or impact of unfortunate events or to maximise the realisation of opportunities. Risk Management Policy enables the Company to proactively manage uncertainties and changes in the internal and external environment to limit negative impacts and capitalize on opportunities. The Company has laid down a comprehensive Risk

Assessment and Minimisation Procedure in accordance with the requirements of the Act and the SEBI Listing Regulations, which is reviewed by the Audit Committee and approved by the Board from time to time. This procedure is reviewed to ensure that the executive management controls risk through means of a properly defined framework.

PARTICULARS OF EMPLOYEES

As required under the provisions of Section 197 of the Act and Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees concerned forms a part of the Boards Report. Having regard to the provisions of Section 136 of the Act, the Annual Report and Accounts, excluding the aforesaid information are being sent to the Members of the Company by e-mail. Any Member interested in obtaining such particulars may write to the Company Secretary of the Company.

KEY MANAGERIAL PERSONNEL

During the year, there was no change in the Key Managerial Personnel of the Company.

DETAILS RELATING TO REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND EMPLOYEES

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is marked as Annexure - E, which is annexed hereto and forms a part of the Boards Report.

LISTING

The equity shares of the Company continue to be listed on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Calcutta Stock Exchange (CSE). The Company has paid the requisite listing fees to all the Stock Exchanges for FY 2020-21.

CORPORATE GOVERNANCE

A separate Report on Corporate Governance as prescribed under the SEBI Listing Regulations, together with a certificate from the Companys Auditors confirming compliance, is set out in the Annexure forming part of this Annual Report.

NUMBER OF MEETINGS OF BOARD OF DIRECTORS

During the year 2019-2020, the Board of Directors met five times. The details of the number of meetings of the Board of Directors held during FY 19-20 have been detailed in the Corporate Governance Section of the Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3) (c) of the Act, the Directors, to the best of their knowledge and belief, confirm that: i) In the preparation of the annual accounts for the financial ended 31st March 2020, the applicable accounting standards have been followed and there are no material departures; ii) Appropriate accounting policies have been selected and applied consistently and judgments and estimates have been made 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 and of the profit and loss of the Company for the period; iii) Proper and sufficient care has been taken 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; iv) The annual accounts have been prepared on a going concern basis; v) Internal financial controls laid down by the Directors have been followed by the Company and such internal financial controls are adequate and are operating effectively; and vi) Proper systems to ensure compliance with the provisions of all applicable laws are in place and are adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received the necessary declarations from each Independent Director under Section 149(7) of the Act that he/she meets the criteria of independence laid down in Section 149(6) of the Act and Regulation 16(1)(b) read with Regulation 25(8) of the SEBI Listing Regulations. The Board have taken on record these declarations after undertaking the due assessment of the veracity of the same.

STATUTORY AUDITORS

In terms of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, Members of the Company in 56th Annual General Meeting held on 21st September,2017, approved the appointment of M/s. S R Batliboi and Co. LLP, Chartered Accountants (ICAI Registration No-301003E/E300005), as the Statutory Auditors of the Company for an initial term of five consecutive years, i.e. from the conclusion of the 56th AGM till the conclusion of the 61st AGM of the Company to be held in the year 2022. The Statutory Auditors have confirmed they are not disqualified from continuing as Auditors of the Company.

The Report given by M/s. S R Batliboi and Co. LLP, Chartered Accountants on the financial statement of the Company for the year 19-20 is part of the Annual Report. The Notes on financial statement referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report does not contain any qualification, reservation, adverse remark or disclaimer. During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

COST AUDIT AND AUDITORS

Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Cost Audit records maintained by the Company relating to manufacturing of Carbon Black and generation and transmission of electricity at its plants located at Durgapur in West Bengal, Kochi in Kerala, Mundra and Palej in Gujarat, is required to be audited, the Directors of the Company had, on the recommendation of the Audit Committee of the Board of Directors of the Company, appointed Messrs Shome & Banerjee, to audit the cost accounts for the FY 20-21 at a remuneration of H4,50,000/- (Rupees Four Lacs Fifty Thousand only). As required under the Act, the remuneration payable to the Cost Auditors is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a Resolution seeking ratification of the Members for the remuneration payable to Messrs Shome & Banerjee, Cost Auditors is included at Item No. 4 of the Notice convening the AGM.

The Company has received the written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed thereunder. The Cost Auditors have confirmed they are not disqualified to be appointed as the Cost Auditors of the Company for the financial year ending 31st March, 2020.

The Company submits its Cost Audit Report with the Ministry of Corporate Affairs within the stipulated time period.

SECRETARIAL AUDITORS AND SECRETARIAL STANDARDS

The Secretarial Audit was carried out by M/s. Anjan Kumar Roy & Co., Company Secretaries (ICSI Membership No. FCS 5684) for the financial year ended on 31st March, 2020.

The Report given by the Secretarial Auditors is marked as Annexure -F. and forms a part of the Boards Report. The Secretarial Audit Report is self-explanatory and do not call for any further comments. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

During the Financial Year, your Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report as required under Regulation 34 of the SEBI Listing Regulations is marked as Annexure - G, which is annexed hereto and forms a part of the Boards Report.

QUALIFICATION, RESERVATION OR ADVERSE REMARK IN THE AUDIT REPORTS

There is no qualification, reservation or adverse remark made by the Statutory or Cost or Secretarial Auditors in their Audit Reports issued by them.

DIRECTORS

Dr. Sanjiv Goenka retires by rotation at the forthcoming AGM and being eligible, offers himself for re-appointment.

Details of the proposal of re-appointment of the afore-mentioned Director is mentioned in the Explanatory Statement u/s 102 of the Act of the Notice of the 59th AGM of the Company.

The Policy on Directors appointment and remuneration, including the criteria for determining the qualifications and positive attributes, forms a part of the Corporate Governance Section of the Annual Report.

CHANGE IN THE NATURE OF BUSINESS

During the year under review, there was no change in the nature of the business of the Company.

HUMAN RESOURCES

A detailed section on the Companys Human Resource Development is a part of the Management Discussion and Analysis Report, which forms a part of the Boards Report.

DIVIDEND DISTRIBUTION POLICY

The Companys Dividend Distribution Policy is provided in the Annexure forming a part of this Report and is also available on the website of the Company and can be accessed at the link: https:// www.pcblltd.com/policies/. There has been no change in the Policy during the year.

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year ended 31st March, 2020, are provided in the Management Discussion and Analysis Report given in Annexure - A, which is annexed hereto and forms a part of the Boards Report.

GREEN INITIATIVES

As a responsible corporate citizen, the Company supports the Green Initiative undertaken by the Ministry of Corporate Affairs,

Government of India, enabling electronic delivery of documents including the Annual Report etc. to Members at their e-mail addresses previously registered with the DPs and RTAs.

To support the Green Initiative, Members who have not registered their email addresses are requested to register the same with the Companys Registrar and Share Transfer Agent/Depositories for receiving all communications, including Annual Report, Notices, Circulars, etc., from the Company electronically.

Pursuant to the MCA Circulars and SEBI Circular, in view of the prevailing situation of the Pandemic, owing to the difficulties involved in dispatching of the physical copies of the Notice of the 59th AGM and the Annual Report of the Company for the financial year ended 31st March, 2020 including therein the Audited Financial Statements for the year 2019-2020, the afore-mentioned documents are being sent only by email to the Members. A newspaper advertisement in this regard has also been published and intimated to the Members of the Company.

ACKNOWLEDGEMENT

Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Companys resources for sustainable and profitable growth.

Your Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible. Your Directors also record their grateful appreciation for the encouragement, assistance and cooperation received from members, government authorities, banks, customers and all other stakeholders. They also thank them for the trust reposed in the Management and wish to thank all employees for their commitment and contribution.

For and on behalf of the Board
Dr. Sanjiv Goenka
Kolkata

Chairman

23rd June, 2020 (DIN 00074796)