Premier Explosives Ltd Directors Report.

Dear Members

Your directors are pleased to present the 41st annual report including the audited financial statements of your company for the financial year ended March 31,2021.

1. Financial summary (Rs. in lakhs)
Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Profit / (Loss) for the year
Operating revenue 15,194.05 15,650.80 15,220.30 16,452.09
Other income 87.15 140.00 93.46 146.18
Total revenue 15,281.20 15,790.80 15,313.76 16,598.27
EBIDTA 664.10 (516.70) 632.11 (545,73)
% to Operating revenue 4.37% -3.3% 4.00% -3.3%
Profit / (Loss) before tax (1,489.06) (1,450.94) (1,514.70) (1,501.53)
Profit / (Loss) after tax (1,074.47) (958.24) (1,091.64) (992.96)
% to Total revenue -7.07 -6.12% -7.17% -6.03%
EPS (Rs.) (9.99) (8.91) (10.19) (9.32)
Appropriations
Retained earnings at beginning of the year 9,336.46 10,644.68 9,328.24 10,671.18
Profit / (Loss) for the year (1,074.47) (958.24) (1,091.64) (992.96)
Dividend paid for previous year and tax thereon 0.00 (349.98) 0.00 (349.98)
Retained earnings at end of the year 8,261.99 9,336.46 8,236.60 9,328.24

2. State of affairs

During the year, your company continued to face the challenges like lower demand from defence and commercial customers, un-remunerative prices from SMS , generally lower construction / quarrying activities and finally the continuous impact of COVID-19. Resultantly, turnover has come down to 15,194.05 lakhs from 15,650.80 lakhs during previous year. However, Operating EBIDTA has turned positive at 664.10 lakhs compared to ( 516.70 lakhs) in previous year which was mainly due to the favorable product mix and cost control efforts. Profit after tax has been negative ( 1,074.47 lakhs) compared to ( 958.24 lakhs) for the year 2019-20, mainly due to the Voluntary Retirement scheme (VRS) offered by the company which costed 908.01 Lakhs. The Benefits out of this will be seen in coming years.

3. Operations

As your company has withdrawn from supplies to Coal India in second half Financial Year 2019-20, production of bulk explosives declined to 10,047 tonnes from previous years 23,989 tonnes.

Production of detonators was 19.06 million pieces as against 20.29 million pieces in previous year.

Operations & maintenance contracts at Sriharikota and Jagdalpur have been satisfactory during the Financial Year 2020-21. O&M contract at Solid Fuel Complex, Jagdalpur has come to an end on first week of July 2021.

4. Capital expenditure

During the year the company incurred the capital expenditure of 1,184.47 lakhs on fixed assets, 270.76 lakhs on intangible assets . Most of the capital expenditure has been towards Katepally Greenfield project which was completed and capitalized during the year. The katepally Greenfield project commenced commercial operations during the last Quarter of 2020-21.

5. Dividend

Considering the challenges in financial performance during the year 2020-21 and to preserve the financial resources towards de-risking COVID-19 impact, your Board has not recommended any dividend for the financial year under review.

6. Share capital and reserves

a) Share capital

Your companys equity share capital as on March 31,2021 stood at 1075.22 lakhs, same as at the end of last year.

b) Transfer to Reserves

Your company has not proposed to transfer any amount to the general reserve.

7. Deposits

The company has not accepted any deposits from the public in terms of Section 73 of the Companies Act, 2013

8. Change in the nature of business, if any

During the year, there was no change in the nature of business of the company.

9. Material changes and commitments after the reporting period

There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report.

10. Subsidiary companies, Jointly controlled entity and consolidated financial statements

a) PELNEXT Defence Systems Private Limited, a 100% subsidiary company

Incorporated on July 15, 2016 PELNEXT is expected to be operated as a special purpose vehicle in defence explosives business. The company incurred a net loss of 0.81 lakh during 2020-21 ( 0.64 lakh during 2019-20).

As on 31st March, 2021, Premier Explosives Limited held 10,000 Equity shares in PELNEXT representing 100% of equity share capital.

b) Premier Wire Products Limited (PWPL), an 80% subsidiary company

PWPL is engaged in manufacture of Galvanised Iron (GI) Wire catering to the requirements of detonator- manufacturers including Premier Explosives Limited. The companys revenue for the year 2020-21 was 26.25 lakhs and there was a loss of 20.45 lakhs (Revenue of 715.45 lakhs and loss of 43.80 lakhs during previous year). Turnover of the company has been affected by lower demand for GI wire from detonator-manufacturers and also during the year the company moved to contract- manufacture of GI wire.

As on 31st March, 2021, Premier Explosives Limited held 52,00,000 Equity shares in PWPL representing 80% of their equity share capital.

c) BF Premier Energy Systems Private Limited (BFPES), a 50% jointly controlled entity

This joint venture is yet to commence commercial operations. The company incurred a net loss of 0.44 lakh during 2020-21 ( 0.43 lakh during 2019-20).

Your company and Kalyani Strategic Systems Limited, each hold 1,00,000 equity shares in the share capital of BFPES, as on 31st March, 2021.

d) Consolidated financial statements

Pursuant to Section 129(3) of the Companies Act, 2013 (Act) and SEBI Listing Regulations the Consolidated Financial Statements prepared in accordance with the Indian Accounting Standards, notified under the Act is attached to this report.

Details of consolidated entities are given in the Annexure1, Form AOC-1: Statement containing salient features of the financial statements of subsidiaries / associate companies / joint ventures

11. Impact of COVID-19

The outbreak of COVID-19 pandemic had its impact over the health of people and world economy.

The Government of India had imposed a nationwide lockdown with effect from March 25, 2020 and this has impacted your companys manufacturing activities also. Though explosives manufacturing was exempted from the lockdown measures, operations continued to be on low scale with restrictions on factory hours, transport of goods, decline in demand, etc.

The second wave of COVID during April -May has also affected our billings to some extent.Your company witnesses gradual return to normalcy from second quarter of the year 2021-22.

12. Future outlook

Your company places priority on defence explosives and continues commercial explosives on feasibility basis.

At the macro level, Make in India is transforming into Atmanirbhar Bharat in the wake of COVID-19 and more specifically in defence supplies in the aftermath of Galwan clashes with China.

Allowing automatic route for Foreign Direct Investment up to 74% of equity in defence companies is expected to attract foreign investors to infuse necessary capital into manufacture of defence supplies in India.

Push for private coal mining also is expected to change the way of supply chain for explosives and accessories giving more emphasis for quality and performance of explosives in mining operations.

Such proactive actions of the Government are expected to create more business opportunities for companies engaged in high energy materials.

13. Board matters

A. Directors responsibility statement pursuant to section 134 of the Companies Act, 2013

Your directors confirm that

a) the applicable accounting standards have been followed in preparation of annual accounts;

b) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2021 and of the loss of the company for the year ended on that date;

c) 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;

d) the annual accounts have been prepared on a going concern basis;

e) adequate internal financial controls have been laid down, have been followed and have been operating effectively;

f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and those systems have been adequate and operating effectively.

B. Declaration of independent directors

All the independent directors confirmed that they have met the criteria of independence as required u/s 149 of the Companies Act, 2013.

C. Board meetings

During the financial year 2020-21 there were 5 (five) Board meetings held on 29th June, 2020, 11th September, 2020, 23rd October, 2020, 8th February, 2021 and 15th March, 2021.

D. Board evaluation

Criteria and other details of Board evaluation have been provided in the Annexure -2, Report on Corporate Governance.

E. Directors and Key Managerial Personnel

There is no change in the composition of the Board of Directors of the Company during the year under review.

Lt. Gen P R Kumar was appointed as an Independent Director on the Board of Directors of the Company for the first term till November 1,2021 pursuant to the provisions of Section 149 of the Act, read with the Companies (Appointment and Qualification of Directors) Rules, 2014. The Nomination and Remuneration Committee (NRC) of the Board of Directors, based on the report of performance evaluation of Independent Directors, has recommended the re-appointment of Lt. Gen P R Kumar as an Independent Director for a second term of five consecutive years on the Board of the Company from November 2, 2021 to November 2, 2026.

Mr. Y. Durga Prasad Rao, Director (Operations) retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

The resolutions seeking approval of the Members for the reappointment of Mr. Y. Durga Prasad Rao as Director and re-appointment of Lt Gen P R Kumar as an Independent Director of the Company have been incorporated in the Notice to the AGM of the Company along with brief details about them.

The disclosures required pursuant to Regulation 36 of the SEBI Listing Regulations and Clause 1.2.5 of the Secretarial Standard are given in the Notice of AGM, forming part of the Annual Report.

Changes in Key Managerial Personnel

During the year under review, Ms. K. Vijayasree has resigned as Company Secretary w.e.f. 22nd May, 2020 and Mrs. K. Jhansi Laxmi has been appointed as the Company Secretary w.e.f. 11th September, 2020.

Further, after the end of the financial year 2020-21, Mr. C. Subba Rao has retired as Chief Financial Officer w.e.f. 30th April, 2021 and later the Board has appointed Mr. Srihari Pakalapati as the Chief Financial Officer w.e.f. 24th May, 2021.

Pursuant to the provisions of Section 2 (51) & 203 of the Companies Act, 2013, the following are the Key Managerial Personnel of the Company as on the date of this report.

Dr. Amarnath Gupta - Chairman & Managing Director Mr. Srihari Pakalapati - Chief Financial Officer Mrs. K. Jhansi Laxmi - Company Secretary

F. Companys policy on appointment and remuneration of directors

a) Criteria for appointment of directors

Director must have relevant experience in finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to companys business.

Director should possess the highest personal and professional ethics, integrity and values.

Director must be willing to devote sufficient time and energy in carrying out their duties and responsibilities.

Nomination and Remuneration Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as director and recommend to the Board his / her appointment or re-appointment.

The committee has discretion to decide whether qualification, expertise and experience possessed by a person are sufficient or satisfactory for the concerned position.

While appointing an independent director, Nomination and Remuneration Committee shall consider the independence of the person also in addition to the above.

b) Policy on directors remuneration

i. Policy

The Company shall remunerate its directors, key managerial personnel, senior management, other employees and workers appropriately to retain and motivate them as well as to attract new talent when required.

ii. Components of remuneration

Remuneration package shall include fixed component for all employees and variable component to the extent desirable and practicable.

iii. Fixed remuneration

It shall be competitive and based on the individuals education, experience, responsibilities, performance, industry benchmark in the area, etc.

Fixed remuneration shall comprise of basic salary and other allowances like house rent allowance, conveyance allowance, etc. which are calculated as certain % of basic salary.

iv. Variable remuneration

It is paid to encourage the employees to achieve set targets and variable remuneration shall be determined on the following basis:

Category Nature Basis of variable remuneration
Whole time Directors Commission X% of Profit in a year during the contract period (% as recommended by Board and approved by Shareholders.
Management Team (CFO, President, Vice President, Company Secretary, GM) Profit sharing bonus X% of Profit divided among them in proportion of their basic salary (% as decided by Committee of Whole time Directors)
Officers (Below GM level) Profit sharing bonus X% of Profit divided among them in proportion of their basic salary.(Minimum period of services and other conditions for eligibility are decided by Committee of Whole time Directors)
Staff and Workers Production incentive Quantity of production, as per the Wage Agreement revised every 3 years at Peddakandukuru (Those who are engaged in production and allied activities are eligible.

v. Statutory benefits

Employee benefits like Contribution to Provident Fund, Gratuity, Bonus, Employees State Insurance, Workmen Compensation, etc. shall be provided to all eligible employees as per the respective Acts.

vi. Perquisites and other benefits

Perquisite Amount
Reimbursement of medical expenses for self and family / Medical allowance Up to one month basic salary in a year to whom ESI is not applicable
Mediclaim and personal accident insurance Reasonable coverage to whom ESI is not applicable
Leave travel allowance Workers - as per wage agreement
Use of Company car with driver or reimbursement of driver salary, fuel, maintenance and insurance For Directors-as recommended by Board and approved by Shareholders
Telephone at home, Club fee For Management team-as approved by Committee of Whole time Directors
Gas, electricity, water, servant, security, gardener and soft furnishing.(Up to 10% of basic salary)

vii. Increments

Increments are made taking into account the individual performance, inflation and company performance.

Workers are given Variable Dearness Allowance as per Consumer Price Index semi-annually on 1st of April and 1st of October.

Wages of workers at Peddakandukuru are revised every 3 years as per the agreement between the management and unions.

Increments of other employees are made effective 1st April every year, as approved by Committee of Whole time Directors upon recommendation of heads of departments.

Mid-year increments are given in exceptional cases, as approved by CMD upon recommendation of concerned director and head of department.

viii. Remuneration to independent and non-whole time directors

Remuneration consists of sitting fee in respect of the Board and Committee meetings attended, at the rates approved by the Board and within the applicable provisions of the Companies Act, 2013.

ix. Service contracts, notice period and severance fees:

Executive directors have entered into a service contracts with the company. The tenure of the contract is three years. Reappointment is done by the Board based on the recommendation of the Nomination and Remuneration Committee. Notice period is as mutually agreed between the director and the Board.

None of the directors is eligible for severance pay.

G. Formal annual evaluation by the Board

The Board has evaluated its own performance and of individual directors. The details as required u/s 134(3) (p) of the Companies Act, 2013, are mentioned in the Annexure 2: Report on Corporate Governance.

14. Committees

As on March 31, 2021, the Company has Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee. Detailed note on the composition of the Board and its Committees are provided in the Corporate Governance Report attached as Annexure 2 to this Report.

15. Transfer of shares and unclaimed dividend to IEPF

As required under Section 124 of the Companies Act, 2013, during the financial year 2020-21, the Company transferred 8,252 equity shares, in respect of which dividends have not been claimed by the members for seven consecutive years or more, to the Investor Education and Protection Fund Authority (IEPF). Details of shares transferred have been uploaded on website of the Company.

Unclaimed dividend amount aggregating to 3,62,285 pertaining to the financial year 2012-13 lying with the Company for a period of seven years was transferred during the financial year 2020-21 to the Investor Education and Protection Fund (IEPF).

16. Auditors

a) Independent auditors

The Members at the 37th Annual General Meeting of the Company held on September 27, 2017, had appointed M/s. Majeti & Co., Chartered Accountants (Firm Registration No. 015975S) as the Statutory Auditors of the Company to hold office for a term of five years, i.e., from the conclusion of the said Annual General Meeting until the conclusion of 42nd Annual General Meeting of the Company to be held in 2022, subject to ratification of their appointment by the shareholders, every year.

The Ministry of Corporate Affairs vide its Notification dated May 7, 2018, has dispensed with the requirement of ratification of Auditors appointment by the shareholders, every year. Hence, from that date onwards, there is no requirement of shareholders resolution for ratification of Auditors appointment.

b) Internal auditors

M/s M. Venkata Ratnam & Associates, Chartered Accountants were the internal auditors for the year 202021 and they being eligible, the Board has re-appointed them for the year 2021-22.

c) Cost auditors

The Company has been preparing cost records for relevant products prescribed under the Companies Act, 2013 and Companies (Cost Records and Audit) Rules, 2014 and these records have been being audited by Cost Accountant.

M/s S. S. Zanwar & Associates, Cost Accountants were cost auditors for 2020-21 and they being eligible, the Board has re-appointed them for the year 2021-22. Board recommends the resolution for members ratification of remuneration of the Cost Auditors, as required under the provisions of Section 148(3) of the Companies Act, 2013.

d) Secretarial auditor

Mr. K.V. Chalama Reddy, a practicing company secretary, was the secretarial auditor for the financial year 2020-21 and he being eligible, the Board has re-appointed him for the year 2021-22.

17. Independent auditors report

There are no qualifications, reservations or adverse remarks made by the Independent auditors in their report.

18. Credit Ratings

ICRA has revised the long-term credit rating to [ICRA] BBB+ (Stable) from [ICRA] A- (Negative) and short-term credit rating has been revised to [ICRA] A2 from [ICRA] A2+.

19. Management discussion and analysis

A report on management discussion and analysis is placed as a separate section in the annual report.

20. Corporate governance

Pursuant to Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a detailed report is given at Annexure-2 along with the auditors certificate as in the Annexure-3 and CEO and CFO certificate as Annexure-4 to this report.

21. Secretarial audit report

In accordance with Section 204 of the Companies Act, 2013, the Secretarial Audit report for the financial year ended March 31, 2021 in Form No.MR-3 is attached as Annexure 5 to this Report. The Secretarial Audit report contains an observation. The observation and reply thereto is as under:

Observation:

The Company has not obtained the approval of shareholders of the Company by way of special resolution for continuation of the directorship of Dr.(Mrs.) Kailash Gupta as a NonExecutive, Non-Independent director of the Company, who has attained the age of 75 years as on 30.01.2021as required under Regulation 17(1A) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Boards Response:

The Company has obtained the approval of shareholders of the Company, for continuation of the directorship of Dr.(Mrs.) Kailash Gupta, who has attained the age of 75 years on 30.01.2021, as a Non-Executive, Non-Independent director of the Company, by passing a special resolution through postal ballot on 26.06.2021 and further explained that the delay in obtaining the members approval is due to the circumstances beyond the control of the Company i.e. Covid-19 pandemic and the lockdown/restrictions imposed by the Governments in terms of the Disaster Management Act, 2015.

22. Conservation of energy, technology absorption and foreign exchange earnings and outgo

Information required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in Annexure- 6 to this Report.

23. Particulars of loans, guarantees or investments in terms of section 186 of the Companies Act, 2013

Your company

a) has not given any loan to any person or other body corporate other than usual advances for supply of materials and services

b) has not given any guarantee or provide security in connection with a loan to any other body corporate or person and

c) has not acquired the securities of any other body corporate by way of subscription, purchase or otherwise, exceeding sixty percent, of its paid-up share capital, free reserve and securities premium account or one hundred percent of its free reserves and securities premium account whichever is more.

24. Particulars of contracts or arrangements with related parties

Contracts or arrangements with related parties referred in section 188(1) of the Companies Act, 2013 have been at arms length and the particulars are reported in the Annexure - 7.

25. Risk management policy

Your company recognizes Risk Management as a very important part of business and has kept in place necessary policies, procedures and mechanisms. The company proactively identifies monitors and takes precautionary and mitigation measures in respect of various risks that threaten the operations and resources of the company.

The Risk Management Policy of the company is available at the link http://www.pelgel.com/prm.htm.

26. Vigil mechanism policy

Pursuant to the provisions of Section 177 (9) and (10) of the Companies Act, 2013 a Whistle Blower policy has been established. The policy is available at the website link http:// www.pelgel.com/pwb.htm.

27. Corporate social responsibility (CSR) activities

During the year 2020-21, your company has spent an amount of 15.68 lakhs ( 39.49 lakhs in previous year) on CSR activities, against the minimum mandatory amount of 15.67lakhs ( 39.15 lakhs in previous year), being 2% of average profit for the last three years.

Details of CSR activities are given in Annexure - 8.

28. Disclosure under the Sexual Harassment of Women at

Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Nirbhaya Act)

There are 67 women employees in your company as on March 31, 2021 (90 a year ago) and your company has formulated an anti harassment policy to ensure safe working environment. Your company also has set up an Internal Complaint Committee to redress complaints of women employees.

Details of awareness programmes and complaints are listed in Annexure - 9.

29. Disclosure of significant and material orders passed by regulators etc. under Rule 8(5)(vii) of the Companies (Accounts) Rules 2014

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future.

30. Disclosure of internal financial control systems and their adequacy Rule 8(5)(viii) of the Companies (Accounts) Rules 2014

The company has in place adequate internal financial controls with reference to financial statements through

- reviews of operations by Board and committees

- vetting of various reports by management

- periodical internal audits

- setting and implementing financial policies

- checks and balances in the ERP system and other measures.

31. Annual Return

Pursuant to the provisions of Section 92 and Section 134 of the Companies Act, 2013, as amended from time to time, the Annual Return as on March 31,2021 in form MGT-7 is available on the Companys website on www.pelgel.com

32. Remuneration of directors and employees and related disclosures

Remuneration is paid to directors and employees in accordance with the remuneration policy of the company and applicable statutory provisions.

Particulars required u/s 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given as Annexure-10.

33. Listing on stock exchanges

Your Companys shares are listed on the Bombay Stock exchange (BSE) and National Stock Exchange (NSE).

During the year under review, your companys share price on BSE had moved between a maximum of 177 and a minimum of 60.85. The price closed at 156.85 on March 31, 2021, a increase of 60% over the price of 62.30 on March 31,2020.

On NSE, your companys share price had moved between a maximum of 175.75 and a minimum of 59.40. The price closed at 153.10 on March 31,2021, a increase of 60% over the price of 61.50 on March 31,2020.

34. Industrial relations

Your directors thank all the employees for their cooperation and the contribution towards harmonious relationship and progress of the company.

35. Acknowledgements

Your directors place on record their appreciation of the continued support and cooperation from all employees, customers, suppliers, financial institutions, banks, regulatory authorities and other business associates.