Phillips Carbon Black Ltd Directors Report.

Your Directors have pleasure in presenting the fifty-eighth Annual Report on the business and operations of Phillips Carbon Black Limited and the Audited Accounts for the financial year ended 31st March 2019.

FINANCIAL HIGHLIGHTS (STANDALONE)
(Amount in ? Crore)
Year ended 31.03.19 31.03.18
Revenue from operations 3528.56 2611.27
PBDIT 639.91 424.08
Less: Finance and hedging cost 34.73 59.73
PBDT 605.18 364.35
Less: Depreciation 66.38 60.52
PBT 538.80 303.83
Tax expense 150.27 74.04
PAT 388.53 229.79
Balance brought forward 885.37 684.78
Re measurement of post employment benefit obligation, net of tax (1.20) (1.94)
Gain /(loss) on fair valuation of Preference Shares (12.07) (2.37)
Profitavailable 1260.63 910.26
Dividend, including tax on dividend (97.65) (24.89)
Balance carried forward to the Balance 1162.98 885.37
Sheet

The financial statements for the year ended 31st March 2019 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 as amended by the Companies (Amendment) Act, 2017 (hereinafter referred to as "the Act") read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.

DIVIDEND

The Board of Directors, at its Meeting held on 16th January, 2019, declared an interim dividend of 175% i.e. ? 3.50 /- per equity share on the face value of ? 2/- per equity share. This interim dividend was paid during FY19.

PERFORMANCE OVERVIEW Carbon Black

Your Companys FY19 EBITDA rose to ? 640 crore as against ? 424 crore in the previous year. PAT for the year was ? 389 crore, which is around 1.7 times that of previous years PAT of ? 230 crore.

Power

Your Companys power segment revenue (excluding inter segment revenue) was at ? 97 crore, higher by ? 13 crore, as compared to ? 84 crore in FY18, on the back of higher sales volume as well as improved realisation.

A detailed review of the operations of the Company for the financial year ended 31st March 2019 is given in the Management Discussion and Analysis Report, which forms a part of this Report.

MANUFACTURING

Carbon Black production during FY19 rose to 4,10,798 MT as compared to 3,99,904 MT in the previous year.

During the year, the Company completed its brownfield expansion at its Mundra plant, thereby increasing capacity by 56,000 MT taking the total capacity to 5,71,000 MT. Project work on brownfield specialty lines of 32,000 MT is progressing satisfactorily and is expected to be commissioned by the end of FY20. With its strategically located four plants and seamless ability to switch 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.

CREDIT RATINGS

During the year under review, the Company had received its credit ratings from the agencies ICRA and CARE. The Credit Rating received from CARE dated 20th December, 2018 stated that the rating for long term bank facilities of ? 550 crore was CARE AA-; Positive (pronounced as Double A Minus; Outlook - Positive)- Reaffirmed with Outlook Revised from Stable and Credit Rating for the long term/short term bank facilities of ? 1850 crore was CARE AA-; Positive/A1+ (pronounced as Double A Minus; Outlook Positive/A1Plus) -, Reaffirmed with Outlook Revised from Stable. Further, Credit Rating received from ICRA dated 27th March, 2019 stated that the Rating Committee, after due consideration, re-affirmed the long-term rating for the Term Loan of? 400 crore at [ICRA] AA- (pronounced as ICRA Double A Minus) - ; Outlook Revised from Stable to Positive.

SUBSIDIARY COMPANIES

The Company has three subsidiaries as on date, namely, Phillips Carbon Black Cyprus Holdings Limited, PCBL Netherlands Holdings B.V. 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 Holdings Limited, PCBL Netherlands Holdings B.V. 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 2018-19 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.

The Company does not have any material subsidiary in the immediately preceding accounting year. However, and material as per Regulation 16 of the SEBI Listing Regulations, the Company has adopted the revised 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 Revised 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 2019 stood at ? 34.47 crore. 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 2019, 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 the Annual Return in Form MGT-9 as required under Section 92(3) of the Act read with 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 posted on the website of the

Company at www.pcblltd.com and may be accessed 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 2019.

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 2019 and the date of this Boards Report.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS AND TRIBUNALS order has been passed by the No significant 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 2018-19, the Company has undertaken the CSR initiatives in the fields of promoting education, promoting healthcare, 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 details of the CSR Policy is also posted on the Companys website and may be accessed at the link: https://www.pcblltd.com/policies/.

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 new 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 victimisation 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

Pursuant to the provisions of the Act, SEBI Listing Regulations and Circulars and Guidance Notes issued by SEBI in this regard, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report which is annexed hereto. The Company also has a Board Diversity Policy in place which recognises the importance and benefits of having a diverse Board to enhance the quality of its performance.

At a separate meeting of Independent Directors, the performances of Non-Independent Directors, the Board as a whole and the Chairman were evaluated, taking into account the views of Executive Directors and Non-Executive Directors. The same was also discussed in the Board Meeting. In keeping with the Companys belief that it is the collective effectiveness of the Board that impacts the Companys performance, the evaluation of the Board and functioning of the various Committees was carried out based on discussions amongst the Board and Committee

Members. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

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 Revised 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 capitalise 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. Any Member interested in obtaining such particulars may write to the Company Secretary of the Company. The said information is also available for inspection at the Registered Office during normal business hours (10 a.m. to 6 p.m.) on all working days, up to the date of the Annual General Meeting and shall also be available at the venue of the Annual General Meeting 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 2019-20.

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 Annexure forming part of this Annual Report.

NUMBER OF MEETINGS OF BOARD OF DIRECTORS

During the year 2018-2019, the Board of Directors met four times. The details of the number of meetings of the Board of Directors held during FY 18-19 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 year ended 31st March 2019, 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 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

Pursuant to the provisions of Section 139 of the Act, read with the Companies (Audit and Auditors) Rules, 2014 and pursuant to the recommendation made by the Audit Committee of the Board of Directors of the Company, the Members of the Company at its fifty-sixth Annual General Meeting (AGM) held on 21st September, the2017 approved the appointment of M/S. S R Batliboi and Co. LLP, as the Statutory Auditors of the Company, having Registration No. 301003E/E300005, 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, subject to the ratification of their appointment by the Members at every AGM of the Company. The requirement to place the matter relating to appointment of Auditors for ratification by Members at every AGM has been done away by the Companies (Amendment) ACT 2017 w.e.f. 7th May, 2018. Accordingly, no resolution is being proposed for ratification of appointment of Statutory Auditors at the ensuing AGM and a note in respect of same has been included in the Notice of the AGM.

The Report given by M/S. S R Batliboi & Co. LLP, Chartered Accountants on the financial statements of the Company for the year 2018-2019 is annexed hereto and forms a part of the Annual Report.

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 care has been in Kerala, Mundra and Palej in taken for the 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 19-20 at a remuneration of ? 4,50,000/- (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 Meetinge 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. 6 of the Notice convening the AGM.

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

SECRETARIAL AUDIT AND AUDITORS

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Anjan Kumar Roy & Co., Company Secretaries (Membership No. FCS 5684) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report for the financial year ended 31st March 2019 is marked as ‘Annexure F, which is annexed hereto and forms a part of the Boards Report.

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.

SUSTAINABILITY REVIEW – SHARED VISION, SHARED VALUE

As a responsible corporate citizen, your Company continuously strives to improve performance in the areas of environment, social and economic commitments through the delivery of operations and active engagement superior products, flawless with all stakeholders

The Companys first Sustainability Review is posted on the Companys website at www.pcblltd.com and may be accessed at the link: https://www.pcblltd.com/sustainability-review/.

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

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

Mrs. Preeti Goenka, was appointed by the Board of Directors at its Meeting held on 27th July, 2018 as an Additional Director of the Company upto the date of the ensuing Annual General Meeting. The Company has received a notice u/s 160 of the Act from a Member of the Company signifying his intention to propose the office of the Director candidature Mrs.PreetiGoenkaforthe of the Company.

As per provisions of Sections 149, 150, 152, 178 and any other applicable provisions of the Act and the Rules made thereunder, your Directors are seeking re-appointment of Mrs. Kusum Dadoo, whose current period of office is expiring on 31st March, 2020, as an Independent Director of the Company, not liable to retire by rotation, for a second term of 5 (five)consecutive years with effect from 1st April, 2020.

Details of the proposal of appointment/re-appointment of the afore-mentioned Directors are mentioned in the Explanatory Statement u/s 102 of the Act in the Notice of the 58th AGM of the Company.

During the year under review, Mr. O P Malhotra, Mr. K S B Sanyal, Mr. Paras K Chowdhary and Mr. Pradip Roy were re- appointed as Independent Directors of the Company by the Members of the Company by passing of Special Resolution by way of Postal Ballot and E-voting on 9th March, 2019. Mr. Kaushik Roy was also re-appointed as Managing Director of the Company by the Members of the Company by passing of Special Resolution by way of Postal Ballot and E-voting on 9th March,2019.

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.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

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, 2019, 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 in the previous years, this year too, we are publishing only the statutory disclosures in the print version of the Annual Report. The electronic copies of the Notice and Annual Report for FY 2018-19 have been sent to all the Members whose email IDs are registered with the Companys Registrar and Share Transfer Agent / Depository Participants for communication purposes. For Members who have not registered their email addresses, physical copies of the Notice and the Annual Report are being sent in the permitted mode.

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.

ACKNOWLEDGEMENT

Your Directors record their grateful appreciation for the encouragement, support and co-operation 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

Sanjiv Goenka

Chairman

(DIN : 00074796)

Kolkata 20th May, 2019