Punjab Chemicals & Crop Protection Ltd Directors Report.

TO THE MEMBERS,

1. Your Directors have pleasure in presenting the 43rd Annual Report of the business and operations along with the Audited Standalone and Consolidated Financial Statements of the Company for the financial year ended on March 31, 2019.

2. FINANCIAL RESULTS:

The financial performance of the Company for the year ended March 31, 2019 is summarized below:

(Rs. In lac)

Particulars Consolidated* Standalone
2018-19 2017-18 2018-19 2017-18
Revenue from Operations and Other Income 64950 50692 65073 50219
Earnings before Interest, Depreciation & Tax & Exceptional item (EBIDTA) 7300 5262 7625 4567
Depreciation/Amortisation 1860 1394 1860 1394
Finance Cost 1726 1768 1706 1751
Profit / (Loss) before Tax & Exceptional item 3714 2100 4059 1422
Exceptional (Expenses) / Income (838) 326 (838) 326
Profit / (Loss) before Tax (PBT) 2876 2426 3221 1748
Income Tax Expenses:
Current Tax 542 297 542 297
Adjustment of tax pertaining to earlier periods 38 (51) 38 (51)
Deferred Tax 616 462 616 462
Total Income Tax Expenses 1196 708 1196 708
Profit / (Loss) after Tax (PAT) 1680 1718 2025 1040
Other Comprehensive income / expense not to be reclassified (11) (336) (118) (14)
to profit or loss in subsequent period
Total comprehensive income for the period 1669 1382 1907 1026
Earnings per share (EPS) 13.70 14.01 16.51 8.48
Basic and diluted (in Rs.) (not annualized)

Notes:

a) *Consolidated accounts consist of standalone and SD AgChem (Europe) NV, Belgium, wholly owned overseas subsidiary Company.

3. IND-AS:

As mandated by the Ministry of Corporate Affairs, the financial statements for the year ended on March 31, 2019 has been prepared in accordance with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) Amendment Rules, 2016 notified under section 133 of Companies Act, 2013 and other relevant provisions of the Act.

The estimates and judgements relating to the Financial Statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Companys state of affairs, profits and cash flows for the year ended March 31, 2019. The Notes to the Financial Statements adequately cover the standalone and consolidated Audited Statements and form an integral part of this Report.

4. STANDALONE RESULTS:

The Directors are happy to state that during the year under review, total revenue of the Company increased to Rs. 651 crore with Profit before Tax of Rs. 32.21 crore against the revenue of Rs. 502 crore and Profit before Tax of Rs.17.48 crore in the previous year.

The increase in profit is due to running of the plants at full capacity and increase in the sale of profitable products. The revenue of Agro Chemicals Division, Derabassi has increased to Rs. 495 crore against Rs. 371 crore of previous year which is 77% of the total revenue. The revenue of Specialty and Other Chemicals Division, Lalru has also increased to Rs. 115 crore from Rs. 92 crore of previous year. Industrial Chemical Division Punes revenue was Rs. 28 crore against Rs. 25 crore of previous year.

The overall increase in the revenue and profit is attributed to increase in production and sale. Job work income is 6% of the total revenue, which was 10% in the previous year.

5. SUBSIDIARY COMPANIES:

During the year under review, STS Chemicals (UK) Limited (STS) was dissolved on 15th May, 2018 as there was no commercial activity in the Company. There was no further plan for doing business in that Company.

As on 31st March, 2019, the Company has only one wholly owned overseas subsidiary namely SD AgChem (Europe) NV, Belgium. The total income of SD Agchem (Europe) NV was Rs. 11.24 crore with net loss of Rs. 2.32 crore as compared to the Income of Rs. 16.14 crore and net profit of Rs. 3.70 crore in the previous year.

In compliance with Section 129 of the Act, a statement containing requisite details including financial highlights of the operation of the subsidiaries in Form AOC-1 is annexed to the report as Annexure 1.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements including the consolidated financial statements and related information of the Company and audited accounts of the subsidiaries are available on the website of the Company www.punjabchemicals.com. These documents will also be available for inspection during business hours at the Registered Office of the Company. The Policy for determining material subsidiaries, adopted by the Board of Directors, pursuant to Regulation 16 of the SEBI (LODR) Regulations, 2015 (herein after called as "Listing Regulations") can be accessed on the Companys website www.punjabchemicals.com.

6. CONSOLIDATED RESULTS:

The Consolidated Financial Statements of the Company including its wholly owned subsidiary have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (India Accounting Standards) Amendment Rules, 2016 notified under Section 133 of Companies Act, 2013, and other relevant provisions of the Act. The consolidated financial statements of the Company as at and for the year ended on 31 March 2019 comprise the financial statements of Company and its subsidiary (together referred to as "the Group").

As per the consolidated account, the total revenue risen to Rs. 650 crore with a profit before tax of Rs. 29 crore against the total income of Rs. 507 crore and profit before tax of Rs. 24 crore in the previous year.

7. REPORTING OF FRAUDS:

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act and Rules framed thereunder.

8. DIVIDEND:

After reviewing the financial results your Directors are pleased to recommend a dividend of Rs. 1.50 per equity share (15%) for the financial year under review. The total dividend amount for the financial year 2018-19 shall be Rs. 183.93 lac (excluding Dividend Distribution Tax). The dividend on equity shares is subject to the approval of the Shareholders at the ensuing Annual General Meeting of the Company. The dividend once approved by the Shareholders will be payable to those members whose name appear in the Register of members as on the date of Book Closure. The Register of Members and Share Transfer Books of the Company will remain closed from August 5, 2019 to August 13, 2019 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2019 and the Annual General Meeting.

9. RESERVES:

The Board of Directors has decided to retain the entire amount of profits in the profit and loss account and not to transfer any amount to the general reserve.

10. SHARE CAPITAL:

The paid up Equity Share Capital as at March 31, 2019 stood at Rs. 12.26 crore consisting of 1,22,62,185 equity shares of Rs. 10 each. During the year under review, the Company has not issued shares or convertible securities or shares with differential voting rights nor has granted any stock options or sweat equity or warrants. As on March 31, 2019, none of the Directors of the Company hold instruments convertible into Equity Shares of the Company.

11. STATE OF AFFAIRS OF THE COMPANY:

The State of Affairs of the Company is presented as part of the Management Discussion and Analysis Report in a separate section forming part of this Report, as required under the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015.

12. OUTLOOK:

The main business of your Company is manufacturing Performance Chemicals which includes Agro Chemicals and other Specialty Chemicals. We are present in both domestic and export markets. The Company has also an arrangement with few multinational Companies for contract manufacturing and sale of its products.

In view of the scenario described in the management discussions your Company is expected to grow with wide range of products and manufacturing expertise barring unforeseen circumstances.

13. FINANCE:

As stated in the Annual Report of last year, the Management has taken various steps to improve the liquidity position of the Company. The steps viz. sale of non-performing assets and non-profitable business, taking up toll manufacturing in a large scale and tie up with major customers to minimise the credit period have helped in running the business more efficiently.

During the year the Company has paid the dues of all the Banks after settlement with each Bank. Further the Company has not raised any additional borrowing from banks or financial institutions. However, Inter Corporate Deposits were taken from the Promoter Group and other Companies for repayment of debts and other Corporate needs in addition to lease arrangement with NBFCs for financing of assets.

In view of increased operations, the Company is exploring various options for working capital and long term funds from Banks to upgrade the plants.

14. PUBLIC DEPOSITS:

Your Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014.

15. DIRECTORS AND KEY MANAGERIAL PERSONNEL

a) Independent Directors:

The term of appointment of Shri Mukesh Dahyabhai Patel and Shri Vijay Dilbagh Rai as Independent Directors of the Company will expire on the ensuing 43rd Annual General Meeting of the Company on completion of their term of five (5) years.

The Nomination and Remuneration Committee at their meeting held on 10th May, 2019 and the Board of Directors at their meeting held on the same day have recommended the re-appointment of Shri Mukesh Dahyabhai Patel and Shri V ijay Dilbagh Rai, as Independent Directors to hold office for another term of five (5) years upto the conclusion of 48th Annual General Meeting to be held in the year 2024 on the basis of evaluation of their performance, rich experience and vast knowledge.

The Company has received the following documents from both of them: i) consent in writing to act as Director in Form DIR-2 pursuant to Rule 8 of the Companies (Appointment & Qualification of Directors) Rules, 2014; ii) intimation in Form DIR-8 pursuant to terms of the Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that they are not disqualified as per Section 164(2) of the Companies Act, 2013; and iii) a declaration to the effect that they meet the criteria of independence as provided under Section 149 of the Companies Act, 2013.

Thereafter, the Company will continue to have three Independent Directors on the Board of the Company namely Shri Mukesh Dahyabhai Patel (DIN:00009605), Shri Vijay Dilbagh Rai (DIN:00075837) and Shri Sheo Prasad Singh (DIN:06493455) as required under the Companies Act, 2013 and SEBI (LODR).

All the Independent Directors have given the required undertaking for compliance of the criteria of independence as laid down in Section 149(7) of the Companies Act, 2013 and a declaration that they have complied with the Code for Independent Directors prescribed in Schedule IV to the Act. The same was received and placed before the Board in its meeting held on 10th May, 2019.

Shri Vijay Rai will attain the age of seventy five years during the second tenure of five years on October 13, 2021. Pursuant to Regulation 17(1A) of SEBI LODR, no listed Company shall appoint a person or continue the directorship of any person as a Non-Executive Director who has attained the age of seventy five years unless a Special Resolution is passed to that effect. Therefore the approval of his re-appointment is being sought by a Special Resolution.

b) Retirement by Rotation:

In terms of Section 152 of the Companies Act, 2013 and the provisions of the Articles of Association of the Company, Shri Avtar Singh (DIN:00063569), Director retires by rotation at the forthcoming Annual General Meeting. He being eligible, has offered himself for reappointment. The Board has recommended his reappointment as Director, liable to retire by rotation.

c) Continuation of directorship of Capt. S.S. Chopra (Retd.) (DIN:00146490) as a Non-Executive Non Independent Director of the Company, who has attained the age of 75 years.

Pursuant to Regulation 17 (1A) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended vide SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company took the approval of the Members by way of Special Resolution vide Postal Ballot Notice dated 25th January, 2019 for continuation of Directorship of Capt. S.S. Chopra (Retd) (DIN:00146490), (aged around 79 years) on the Board of the Company as a Non Executive Non Independent Director, liable to retire by rotation.

d) Revision of remuneration of the Managing Director and Whole Time Director:

The shareholders of the Company, on February 2, 2018 by means of special resolution passed through Postal Ballot, have given their approval for:

1. Re-appointment of Shri Avtar Singh (DIN:00063569) as the Whole Time Director of the Company for a period of three (3) years from 14.11.2017 to 13.11.2020 on the terms and conditions including revision in the remuneration.

2. Re-appointment of Shri Shalil Shashikumar Shroff (DIN: 00015621) as the Managing Director of the Company for a period of three (3) years from 15.01.2018 to 14.01.2021 on the terms and conditions including revision in the remuneration.

The Board of Directors on the recommendation of the Nomination and Remuneration Committee in their meeting held on 19th September, 2018 had revised the remuneration and the scale of Shri Avtar Singh (DIN:00063569), Whole Time Director and Shri Shalil Shashikumar Shroff (DIN: 00015621), Managing Director of the Company.

The remuneration to both the Executive Directors is within the ceiling provided in the Companies Act, 2013.

e) Relationship / Transaction with Company:

The Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than taking sitting fees, commission and reimbursement of expenses incurred by them to attend meetings of the Company.

Details and brief resume of the Directors seeking reappointment/appointments required by Regulation 26 (4) and 36 (3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations) and as required under Secretarial Standards – 2 on General Meetings issued by The Institute of Company Secretaries of India are furnished in the Notice convening the Annual General Meeting forming part of the Annual Report.

Other details of the Directors have been given in the Corporate Governance Report attached to this Report.

f) Number of meetings of the Board:

The Board meetings of your company are planned in advance in consultation with the Board Members. The Board met six (6) times during the Financial Year 2018-19, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013.

g) Board Evaluation:

In line with the provisions of the Companies Act, 2013 and SEBI Guidance Note on Board evaluation issued on January 5, 2017 read with relevant provisions of the SEBI Listing Regulations, 2015, the Board has carried out an annual evaluation of the directors individually, of the Chairman and of the Board as a whole performance through the separate meeting of independent directors and the Board as a whole. The Board evaluated the effectiveness of its functioning, that of the Committees and of individual directors, after taking feedback from the directors and committee members. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

The performance of the independent directors was evaluated by the entire Board except the person being evaluated, in their meeting held on March 26, 2019. A separate meeting of Independent Directors was held on March 26, 2019, to review the performance of Non-Independent Directors, performance of the Board and Committee as a whole and performance of the Chairman of the Company, taking into account the views of Executive Directors and the Non-Executive Directors.

h) Details of Familiarization Programme:

The details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, the business model and related matters are posted on the website of the Company at www.punjabchemicals.com/ Investors/Company Policies.

i) Committees of the Board:

The Companys Board has constituted the following Committees prescribed under the Companies Act and the Listing Regulations:

a. Audit Committee

b. Stakeholders Relationship Committee

c. Nomination & Remuneration Committee

d. Corporate Social Responsibility (CSR) Committee

e. Risk Assessment Committee The details of Composition of the Committees, number of meetings held and attendance of the Committee Members in the meetings is given in the Corporate Governance Report forming part of this Annual Report.

j) Key Managerial Personnel (‘KMP)

In terms of the provisions of Section 2(51) and Section 203 of the Act, the Board of Directors has nominated following as KMP of the Company:

• Shri Shalil Shashikumar Shroff, Managing Director

• Shri Avtar Singh, Director (Operations & Business Development)

• Shri Vipul Joshi, Chief Financial Officer

• Shri Punit K Abrol, Sr. V.P. (Finance) & Company Secretary

• Shri Jain Parkash, Sr. V.P. (Works)

16. LISTING WITH STOCK EXCHANGES:

The Companys shares continue to be listed at the National Stock Exchange of India Limited and BSE Limited. The Annual Listing fee for the fiscal year 2018-19 has been paid to these Exchanges.

17. ENVIRONMENT / POLLUTION CONTROL, HEALTH AND SAFETY:

The Company is conscious of the importance of environmentally clean and safe operations. The Companys policy requires conduct of operations in such a manner so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources.

The effluent and emissions generated from the plants are regularly monitored and treated. The Company has an Effluent Treatment Plant with incinerator to treat the waste materials. In addition to this, for the solid waste, the Company has tied up with Common Effluent Treatment Plants set up in the nearby areas of the manufacturing sites. The Company commits for the clean and healthy environment in and around of its manufacturing sites.

18. WELFARE ACTIVITIES AND CORPORATE SOCIAL RESPONSIBILITY:

i) Welfare Activities:

The Company through SDS Memorial Trust has taken up various social works for the betterment of the society.

The Company continues to organize a ‘Blood Donation Camp in the memory of Late Shri S.D. Shroff on 18th December every year. Around 103 employees donated blood this year.

ii) Corporate Social Responsibility:

Companys Corporate Social Responsibility (CSR) Policy has been posted on the website at www.punjabchemicals.com in compliance with the disclosure about CSR Policy Rules, 2014.

During the year under review, the Company had to spend Rs. 50.87 lac based on the average net profit of the last three years on various activities for social welfare. Accordingly, the amount was spent on activities like upgradation of infrastructure of schools, preventive healthcare by way of medical camps in villages including eye operations, providing sanitation and required study material in the schools.

The detailed report as per Section 135 of the Companies Act, 2013 read with the Companies (CSR Policy) Rules, 2014 has been attached as Annexure 2. For other details regarding the CSR Committee, please refer to Corporate Governance Report, which forms part of this Report.

19. RESEARCH & DEVELOPMENT AND QUALITY CONTROL:

The activities of R&D consists of improvement in the processes of existing products, decrease of effluent load and to develop new products and by-products.

The Quality Control is the strength of the Company. All raw materials and finished products pass through stringent quality checks for better results.

20. INSURANCE:

The Company has taken adequate insurance policies for its assets against the possible risks like fire, flood, public liability, marine, etc.

The Company has also taken Directors and Officers Liability insurance policy.

21. MANAGEMENT DISCUSSION AND ANALYSIS & CORPORATE GOVERNANCE REPORT:

(i) MANAGEMENT DISCUSSION AND ANALYSIS:

In terms of Regulation 34 (2) (e) of the Listing Regulations, 2015 read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Managements Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this report.

(ii) CORPORATE GOVERNANCE REPORT:

The Company strives to maintain the required standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has complied with the Corporate Governance Code as stipulated under the Listing Regulations. The Report on Corporate Governance in accordance with Rules 34(3) read with para C of Schedule V of SEBI (LODR) Regulations, 2015 forms integral part of this Report.

The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of corporate governance is attached to the Report on Corporate Governance.

22. EXTRACT OF THE ANNUAL RETURN:

The information required under Section 134 (3) (a) of the Companies Act, 2013 (the Act) read together with Section 92 (3) of the Act regarding extract of the Annual Return is appended hereto as Annexure 3 and forms part of this Report. A copy of the same is available on the website of the Company at www.punjabchemicals.com.

23. REGISTRAR AND SHARE TRANSFER AGENT:

M/s Alankit Assignments Ltd., Alankit Heights, 1E/13, Jhandewalan Extension, New Delhi, are the Registrar and Share Transfer Agent of the Company for the Physical as well as Demat shares. The members are requested to contact the Registrar directly for any of their requirements.

24. AUDITORS REPORTS: a. Statutory Auditor Report:

The Audit Report on Standalone Financial Statements does not contain any qualification, reservation or adverse remarks.

However the Statutory Auditors have "Qualified Opinion" in the Auditors Report of Consolidated Financial Statements as follows: "We draw attention to note 44 of the Consolidated Financial Statements which explains that the Holding company had during the previous year (ending 31st March 2018) sold its entire stake in an overseas step down subsidiary on 28th September 2017. However, the holding Company did not have the financial information pertaining to the aforesaid subsidiary for the period 1st April 2017 to 28th September 2017 (the date of sale). In view of this , the holding Company did not consolidate the profit and loss account of the aforesaid subsidiary till the date of sale and computed the loss or gain on sale with reference to the position of the subsidiary as at 1st April 2017. This was not in compliance with Indian Accounting Standard 110 "Consolidated Financial Statements". Basis above, our audit opinion on the consolidated financial statements for the year ended 31st March 2018 was disclaimed. Our opinion on the current periods financial statements is also modified because of the possible effect of this matter on the comparability of the current periods figures with the corresponding figures particularly with regard to the corresponding figures in the profit and loss account." The Board after consideration has given the following explanations and comments on the "Qualified Opinion": Since Sintesis Quimica (SQ) was sold in the previous year and the Company could not get partial financial information for the period upto the date of disposal.

Hence, the Company was not able to consolidate SQ for the partial period in accordance with IND AS 110 "Consolidated Financial Statements". It may be noted that the modification had no impact on consolidated net profit and other comprehensive income for the year ended 31st March, 2018. Similarly on the same basis no possible effect of this matter on the comparability of the current figures and the corresponding figures for the year ended 31st March, 2019 particularly with regard to the corresponding figures in the profit and loss account.

b. Secretarial Audit Report:

The Secretarial Audit Report for the financial year 2018-19 is annexed to this Report as Annexure 4 and forms part of this Report.

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

25. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186:

Particulars relating to loans and guarantees or investments under section 186 of the Companies Act, 2013 are provided in the Note 45 to the standalone financial statement.

26. RELATED PARTY TRANSACTIONS:

There are no material related party transactions made by the Company with 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 that were entered into during the financial year were on an arms length basis and werein the ordinary course of business. A statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors on a quarterly basis. Prior omnibus approval of the Audit Committee is obtained on yearly basis for the transactions which are of repetitive nature. The transactions entered into pursuant to the omnibus and specific approval are reviewed periodically by the Audit Committee. As required under SEBI (LODR), detailed related party disclosures as per Accounting Standards, please refer Note 42 of the Standalone and Consolidated Financial statements.

The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website at www.punjabchemicals.com.

None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company. Form AOC-2 pursuant to clause (h) of sub-section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure 5 and forms part of this Report.

27. MATERIAL CHANGES AND COMMITMENTS, IF ANY:

No material changes and commitments have occurred between the end of the financial year and the date of the Report which has effect on the Financial Statements.

28. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

The information on conservation of energy, technology absorption and foreign exchange earnings and out go as 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 6 and forms part of this Report.

29. EMPLOYEES AND INDUSTRIAL RELATIONS:

The Company takes pride in the commitment, competence and dedication of its employees in all areas of the business. The relation between the management and employees are healthy and cordial. There is a transparency in the dealings and on matters relating to the activities of the Company and its employees.

The Welfare Schemes viz. preventive health check up, medical facilities in the factory premises, Co-operative stores, etc. are used extensively by all categories of the employees. The Company organises Sports events for the employees for healthy environment and developing the quality of sportsmanship among them.

The Board of Directors are pleased and appreciate the sincere efforts, their belongingness and commitment of all categories of the employees which has brought the turn around in the Company.

The disclosure in terms of the provisions of Section 197(12) of the Act read with Rules 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and the name and details of employees in terms of remuneration drawn and every persons employed throughout the year, who were in receipt of remuneration in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 other details of the concerned employees is annexed as Annexure 7 and forms an intergral part of this annual report.

30. RISK MANAGEMENT:

Pursuant to Schedule V of SEBI (LODR) Regulation, 2015, the Company has voluntarily constituted a Risk Assessment Committee. The details of the Committee and its terms of reference are set out in the Corporate Governance Report, forming part of the Boards Report.

The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Company has formulated Risk Management Policy which is posted on the website of the Company at www.punjabchemicals.com. The Audit Committee also oversees the area of financial risks and controls.

31. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION:

The current policy is to have an appropriate mix of Executive and Independent directors to maintain the independence of the Board and separate its function of governance and management. As on March 31st, 2019, the Board consists of 8 Members, 2 of whom are Executive Directors, 2 Non Executive Non Independent Directors, 3 Independent Directors and 1 Woman Director. The Board periodically evaluates the need for change in its composition and size. The Nomination and Remuneration Committee has formulated a Nomination and Remuneration Policy under Section 178 (3) of the Companies Act, 2013 which lays down criteria for determining qualifications, positive attributes and independence of a Director and remuneration for the Directors, Key Managerial Personnel and senior management level including the appointment of personnel one level below the Key Managerial Personnel. The same can be viewed at www.punjabchemicals.com.

32. VIGIL MECHANISM / WHISTLE BLOWER POLICY:

Regulation 22 of the Listing Regulations & Sub-section (9 & 10) of Section 177 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, interalia, provides, for all listed companies to establish a vigil mechanism called "Whistle Blower Policy" for directors and employees to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct or ethics policy.

As a conscious and vigilant organization, the Company believes in the conduct of the affairs of its constituents in a fair and transparent manner, by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In its endeavour to provide its employee a secure and a fearless working environment, the Company has established the "Whistle Blower Policy".

The Whistle Blower policy and establishment of Vigil Mechanism have been appropriately communicated within the Company. The Whistle Blower Policy is also posted on the website of the Company. The purpose of the policy is to create a fearless environment for the directors and employees to report any instance of unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct or Ethics Policy. It protects directors and employees wishing to raise a concern about serious irregularities within the Company.

During the year, the Company has not received any complaint under Vigil Mechanism / Whistle Blower Policy.

33. INTERNAL FINANCIAL CONTROLS:

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/revised standard operating procedures. The Companys internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to M/s. B.M. Varma & Co., Chartered Accountants, Chandigarh.

The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides bench marking controls with best practices in the industry. The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism.

The Audit Committee, Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

34. POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORK PLACE:

Your Company is committed in creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation. To empower women and protect women against sexual harassment, a policy for prevention of sexual harassment had been rolled out and Internal Complaints Committee as per legal guidelines had been set up. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair inquiry process with clear time lines. The Policy on Prevention of Sexual Harassment is also posted on the website of the Company.

During the year ended 31st March, 2019, no complaints pertaining to sexual harassment was received by the Company.

35. CEO/CFO CERTIFICATION:

In terms of the Listing Regulations, the Certificate duly signed by Shri Shalil Shashikumar Shroff, Managing Director(CEO) and Shri Vipul Joshi, Chief Financial Officer (CFO) of the Company was placed before the Board of Directors along with the annual financial statements for the year ended on March 31, 2019, at its meeting held on 10th May 2019. The said Certificate is also annexed to the Corporate Governance Report.

36. AUDITORS:

a) STATUTORY AUDITORS:

M/s. B S R & Co. LLP, Chartered Accountants, Mumbai (Firm Registration No. 101248W/W-100022), Statutory Auditors of the Company were appointed as Auditors of the Company, for a term of 5 (five) consecutive years, at the Annual General Meeting held on September 14, 2017 on a remuneration mutually agreed upon by the Board of Directors and the Statutory Auditors. Their appointment was subject to ratification by the Members at every subsequent AGM held after the AGM held on September 14, 2017. Pursuant to the amendments made to Section 139 of the Companies Act, 2013 by the Companies (Amendment) Act, 2017 effective from May 7, 2018, the requirement of seeking ratification of the Members for the appointment of the Statutory Auditors has been withdrawn from the Statute. Hence the resolution seeking ratification of the Members for continuance of their appointment at this AGM is not being sought. They have confirmed that they are not disqualified from continuing as Auditors of the Company.

b) SECRETARIAL AUDITORS:

The Board upon recommendation of the Audit Committee has reappointed M/s. P.S. Dua & Associates, Company Secretaries (CP No. 3934), as the Secretarial Auditor to undertake the Secretarial Audit of the Company for the financial year 2019-20, in terms of Section 204 of the Companies Act, 2013 and Rules there under.

c) COST AUDITORS:

As per the requirements of the Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company is required to maintain cost records and accordingly, such accounts are made and records have been maintained. The Board of Directors upon recommendation of the Audit Committee appointed M/s Khushwinder Kumar & Co. Cost Accountant, Jalandhar (Firm Registration No.100123) as the Cost Auditor of the Company to conduct audit of the cost accounts of all the Divisions of the Company for the financial year 2019-20. They have submitted a certificate of eligibility for the appointment. In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors has to be ratified by the shareholders of the Company. Accordingly, consent of the members is sought in the ensuing Annual General Meeting. The Cost Audit Report for the financial year 2017-18 has been filed and the report for the year under review will be filed before the due date.

37. TRANSFER OF EQUITY SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

Pursuant to the provisions of Section 124 of the Act read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended (‘IEPF Rules), all the shares on which dividends remain unpaid /unclaimed for a period of 7 (seven) consecutive years or more has to be transferred to the demat account of the IEPF Authority as notified by the Ministry of Corporate Affairs. Accordingly, the Company has transferred 1,09,179 Ordinary Shares of the face value of Rs. 10 per share to the demat account of the IEPF Authority during the financial year 2017-18. During the year 2018-19, no equity shares or dividend was required to be transferred to IEPF.

The Company had sent individual notice to all the shareholders whose shares were due to be transferred to the IEPF Authority and has also published newspaper, advertisement in this regard. The details of such dividends/ shares transferred to IEPF are uploaded on the website of the Company at www.punjabchemicals.com. The members/claimants whose shares and unclaimed dividend have been transferred to the IEPF Authority can claim the same by making an application to the IEPF Authority in Form IEPF- 5 along with requisite documents (available on www.iepf.gov.in) and sending duly signed physical copy of the same to the Company along with requisite documents prescribed in Form IEPF-5. Member/claimant can file only one consolidated claim in a financial year as per the IEPF Rules. No claims shall lie against the Company in respect of the dividend/shares so transferred.

Shri Punit K Abrol, Sr. V.P. (Finance) & Company Secretary is appointed as the Nodal Officer of the Company under the provisions of IEPF. The shareholders may send their requests regarding release of equity shares from IEPF Authority at the following email ID: investorhelp@punjabchemicals.com.

38. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:

There are no significant material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company its future operations.

39. CHANGE IN THE NATURE OF BUSINESS:

There is no change in the nature of business of the Company.

40. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the requirement under sub section 3 (c) of Section 134 of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that: a) in the preparation of the annual accounts for the year ended March 31, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) the Directors have selected such accounting policies and applied them consistently and 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 as at March 31, 2019 and of the profit and loss of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care 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 and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts of the Company on a ‘going concern basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

41. SECRETARIAL STANDARDS:

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

42. ACKNOWLEDGEMENT:

The Directors express their gratitude to the Banks, and various other agencies for the co-operation extended to the Company. The Directors also take this opportunity to thank the shareholders, customers, suppliers, lenders and other stakeholders for the confidence reposed by them in the Company.

Your Directors wish to place on record their appreciation for the contribution made by the employees at all levels. The Companys turnaround would not have been possible without their hardwork and continuous support

For and on behalf of the Board of Directors
MUKESH DAHYABHAI PATEL
Place: Mumbai CHAIRMAN
Date: 10th May, 2019 DIN:00009605

FORM AOC.1

(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of the Companies (Accounts) Rules, 2014)

Statement containing salient features of the financial statement of Subsidiaries/Associate Companies/Joint Ventures

Part "A": Subsidiaries

(Rs. In lac)
Sl. No. Name of the subsidiary SD Agchem (Europe) NV STS Chemicals (UK) Limited*
1. Reporting period for the subsidiary concerned, if different from Same Reporting Period Same Reporting Period
the holding companys reporting period Current Year Previous Year Current Year Previous Year
2. Reporting Currency Euro Euro Sterling Pounds Sterling Pounds
3. Exchange rate as on 31.03.2019 76.36 79.80 - 91.45
4. Share capital 7000 7000 - 2
5. Reserves & Surplus (8690) (8530) - (136)
6. Total Assets 415 444 - -
7. Total Liabilities 2105 1974 - 134
8. Investments - - - -
9. Turnover 1120 1614 - -
10. Profit/(loss) before Taxation (232) 371 - (1)
11. Provision for Taxation - - - -
12. Profit/(loss) after Taxation (232) 371 - (1)
13. Proposed Dividend - - - -
14. % of Shareholding 100 100 - 100
15. Country Belgium Belgium U.K. U.K.

Note:

*During the year, STS Chemicals (UK) Ltd was dissolved on 15th May, 2018.

Part "B" Associates and Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act, 2013 related to Associate Companies and Joint Ventures:

Sl. No. Name of Associates/Joint Ventures Not Applicable
1. Latest audited Balance Sheet Date
2. Shares of Associate/Joint Ventures held by the company on the year end
Number
Amount of Investment in Associates/Joint Venture
Extend of Holding %
3. Description of how there is significant influence
4. Reason why the associate/joint venture is not consolidated
5. Networth attributable to Shareholding as per latest audited Balance Sheet
6. Profit /Loss for the year
i) Considered in Consolidation
ii) Not Considered in Consolidation

PARTICULARS OF CONTRACTS/ ARRANGEMENTS MADE WITH RELATED PARTIES

FORM AOC-2

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

This Form pertains to the 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 arms length transactions under third proviso thereto.

1. Details of contracts or arrangements or transactions not at arms length basis:
a) Name(s) of the related party and nature of relationship There were no contracts or arrangements or transactions entered into during the year ended March 31st, 2019, which were not at arms length basis.
b) Nature of contracts/arrangements/transactions
c) Duration of the contracts / arrangements / transactions
d) Salient terms of the contracts or arrangements or transactions including the value, if any
e) Justification for entering into such contracts or arrangements or transactions
f) Date(s) of approval by the Board
g) Amount paid as advances, if any
h) Date on which the special resolution was passed in General Meeting as required under first proviso to Section 188
2. Details of material contracts or arrangement or transactions at arms length basis :
a) Name(s) of the related party and nature of relationship There were no material contracts or arrangements or transactions entered into during the year ended March 31, 2019.
b) Nature of contracts/arrangements/transactions
c) Duration of the contracts / arrangements / transactions
d) Date(s) of approval by the Board
e) Amount paid as advances, if any
f) Date on which the special resolution was passed in General Meeting as required under first proviso to Section 188

 

For and on behalf of the Board of Directors
MUKESH DAHYABHAI PATEL
Place : Mumbai CHAIRMAN
Date : 10th May, 2019 DIN:00009605

ANNEXURE 6 TO THE DIRECTORS REPORT

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO IN ACCORDANCE WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.

A) CONSERVATION OF ENERGY a) Steps taken for Conservation of Energy and Impact:

• Modifications of the processes, wherever feasible along with re-engineering of the plants were carried out to reduce power and steam consumption.

• 7 new VFD were installed on equipment with average running of 15 hour per day to save power.

• Old Air Compressors replaced with new oil free Air Compressors of high efficiency.

• Use of cooling water instead of chilled water in winter season.

• Reduced running hours of Bore Well pump due to recycling of treated effluent.

• Continue to use LED lamps instead of CFL lamps. b) Steps taken by the Company for utilizing alternate sources of energy:

The working was done on a proposal to use pet coke in existing husk/coal fired boilers to reduce cost of generation of steam but could not implement due to stringent norms of emission monitored by Pollution Boards. However, continuous study is being carried out to find out the alternate source of energy. c) Capital investment on energy conservation equipments:

The Company spent Rs. 35 lac (approx.) specifically on energy conservation items and equipments.

The Company regularly monitors the energy consumption and wherever possible the required investment is done to conserve / reduce energy consumption.

Above efforts and monitoring helps in energy conservation and to save cost. B. TECHNOLOGY ABSORPTION:

(i) The efforts made towards technology absorption;

To improve upon the raw material efficiency and better quality of the finished products, continuous upgradation of the technology is undertaken.

(ii) Benefits derived as a result of the above efforts, e.g. Product improvement and cost reduction, product development, import substitution etc.

The simplified and improved processes reduce the cost of production with better quality. Environment friendly processes are tried/developed.

Various foreign and domestic customers have carried out the audit of manufacturing sites and approved the same to get the products manufactured.

(iii) Technology imported during the last 3 years:

The Company has not imported any technology.

(iv) The expenditure incurred on Research and Development: (Rs. in lac)
2018-19 2017-18
a) Capital 98 56
b) Recurring 59 79
c) Total 157 135
d) Total R&D expenditure as %age of total turnover 0.25% 0.28%

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows.

(Rs. in lac)
2018-19 2017-18
i) Earned 41115 28955
ii) Used 6693 9231

For and on behalf of the Board of Directors

MUKESH DAHYABHAI PATEL

Place : Mumbai CHAIRMAN

Date : 10th May, 2019 DIN:00009605

ANNEXURE 7 TO THE DIRECTORS REPORT

DISCLOSURE REQUIRED UNDER SECTION 197 (12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Sl. No. Requirements
1. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2017-18 and percentage increase / decrease in the remuneration of each Director. Directors Name Disclosure Remuneration Rs. in lac Ratio to MRE % increase/ (decrease) in remuneration in 2018-19 over 2017-18
Shri M.D. Patel 5.14 1.28 80.35%
Shri Shalil Shroff* 134.00 33.34 40.55%
Managing Director
Shri Vijay Rai 5.10 1.27 100.00%
Capt. S. S. Chopra 2.30 0.57 155.56%
Smt. Aruna R. Bhinge 1.80 0.45 NA
Shri Sheo Prasad Singh 3.50 0.87 112.12%
Shri S. S. Tiwari 2.05 0.51 127.78%
Shri Avtar Singh* 112.00 27.87 20.92%
Whole Time Director

*Paid & Provided within the Ceiling as per the Companies Act, 2013

During the year 2018-19, the Directors are paid Commission for the year 2017-18, which is subsequntly increasing the remuneration of Directors for the year 2018-19. Smt. Aruna R. Bhinge was appointed during the year. Hence no commission was paid to her for the year 2017-18.

2. The percentage increase in remuneration of Chief Financial Officer and Company Secretary in the financial year 2017-18. Name Designation Remuneration % increase in
(Rs. in lac) remuneration
Shri Punit K Abrol Company Secretary 65 18.16%
Shri Vipul Joshi Chief Financial Officer 81 19.82%

 

3. The percentage increase in the median remuneration of employees in the financial year. Median FY 2018-19 Median FY 2017-18 % increase/ decrease
(In Rs.) (In Rs.)
401,888 495,896 -18.96%
4. The number of permanent employees on the roll of the Company. As on 31.03.2019 As on 31.03.2018
971 943

 

5. Average percentile increase already made in the salaries of employees other than the managerial remuneration in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration. Aggregate of remuneration paid to Employees in FY 2018-19 (Rs. in lac) Aggregate of remuneration paid to Employees in FY 2017-18 (Rs. in lac) % increase / decrease
5,748 4,443 29.37%
The average increase in salary of employees other than managerial personnel is 29.37 percent from the previous year. The increment given to each individual employee is based on his experience, performance, market trend and contribution to the Companys progress. The increase in managerial remuneration is as per the remuneration approved by the Members, based on various parameters like market trend, financial position of the Company and the responsibilities.
6. Affirmation that the remuneration is as per the remuneration policy of the Company. Remuneration paid to Directors, KMPs and other employees during the year is as per the Remuneration Policy of the Company.

Note:

1. The Median salary of the staff Members is arrived by taking into account the gross salary of the employees who worked through the year. The employees who joined or left in any part of the year have not been considered for computing the median.

2. No Stock option was granted to Directors.

Statement showing the detail of employees drawing aggregate remuneration exceeding one crore and two lakh rupees as per Rule 5 of Chapter XIII, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Employee name, designation and age Educational Qualification Remuneration (In Rs.) Date of joining and experience Previous employment and designation Relation with any other Director/ Manager
Shalil Shroff - Managing Director Management Diploma from U.S.A. and B.Com 13,361,283 15.01.1992 STS Chemicals Son in law of Capt. S. S. Chopra Limited
54 years 30 years
Avtar Singh - Director (Operations) & Business Development B.Sc. 11,207,926 20.12.1980 Gharda Chemists (P) Ltd. Jr. Chemist NA
60 years 38 years