Shaily Engineering Plastics Ltd Directors Report.

Dear Members,

Your Directors have pleasure in presenting their 38th Annual Report together with the Audited statement of Accounts for the year ended on 31st March, 2018.

Financial Summary & Highlights

FY 2017-18 FY 2016-17
Net Total Income 32,195.90 25,545.36
Gross Operating Profit (Profit before Interest, Depreciation &Tax) 5,544.83 4,390.91
Finance Cost 672.73 738.15
Depreciation & amortization expense 1,449.34 1,335.10
Profit before Tax 3,422.76 2,316.66
Provision for Tax 1,033.60 731.10
Total Comprehensive Income (3.93) (15.58)
Profit after Tax 2,386.22 1,569.98

The above figures are extracted from the financial statements prepared in accordance with Indian Accounting Standards (Ind AS) as specified in the Companies (Indian Accounting Standard) Rules, 2015, as amended in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015 and SEBI circular dated July 05, 2015. The Company has for the first time adopted Ind AS for the financial year commencing from April 01, 2017 with a transition date of April 01, 2015.

# Equity shares are at par value of flO per share

Indian Accounting Standards (Ind AS)

The Ministry of Corporate Affairs (MCA) vide its Notification in the Official Gazette dated February 15, 2015, notified Indian Accounting Standards (Ind-AS) applicable to certain class of companies. Ind AS has replaced the exisiting Indian GAAP prescribed under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. For Shaily, Ind AS is applicable from April 01, 2017, with a transition date of April 01, 2016 and IGAAP as the previous GAAP.

Key IND AS adjustments

• Actuarial gain/loss arising on measurement of gratuity provision has been reclassified to OCI.

• Upfront fees paid with regards to term loan has been considered as deferred liability payment and will

be amortized over the term of the loan equally.

• Investment in toolings for specific customers re-classified as Finance Lease, thereby changing depreciation and amortization rates & schedules, resulting in differential margins.

• Finance lease receivables has been accrued in the books with regards to recovery schedule of moulds.

• Borrowings are measured at Amortized Cost using Effective Interest Rate.

The effect of the transition from IGAAP to IND AS on equity, comprehensive income and cash how have been provided in Note 42 in the notes to accounts in the financial statements.

Appropriations

Transfer to Reserves

The Company does not propose to transfer amounts to the general reserve out of the amount available for appropriation.

Dividend

Your Directors recommend a dividend of f 7.5/- per equity share of f 10/- each.(i.e. 75 %) .(P.Y. 50%).

The proposal is subject to approval of members at the ensuing 38th Annual General Meeting (AGM).

The Register of Members and Share Transfer Books will remain closed from 06th August, 2018 to Monday, 13th August, 2018 (both days inclusive) for the purpose of payment of final dividend for the financial year ended on 31st March, 2018. The AGM is scheduled to be held on Monday, 13th August, 2018.

Operations & State of Affairs

The Companys total revenue has been f 319.7 cr in the current year, an increase of 29.4 % year on year.

• EBITDTA for the year has been f 55.4 cr.

• Profit before Tax (PBT) for the year is f 34.2 cr.

• PAT for the year is f 23.9 cr.

Change in Logo - New Branding

“Growth is the only evidence of life.”

This year, the Company has adopted a new branding with change of logo. Our business has grown and evolved over the years, and we felt it was a time for a change. We have refreshed our logo to reflect who we are today and to symbolise our future. Shailys new logo signifies the vibrancy of the organization with its modern business processes and open work culture, while still being humble in its approach to any work and keeping quality as its fundamental goal.

The new logo also differentiates the different sectors, the company operates in, giving Shaily a new brand identity.

Participation at Global Events

The Company, in this year, participated at Global Events namely;

• CpHI Worldwide at Germany, one of the largest global pharmaceutical trade fair.

• Pharmapack Europe 2018 at France, a key trade fair for the pharmaceutical packaging and drug delivery sectors.

The Company garnered a good response at the events.

Awards and Recognition

The Company continues its quest for excellence in its chosen area of business. The Company, this year, was awarded with:

• “Gold Winner” for outstanding export of finished plastic goods by PlastIndia Foundation on 7th Feb 2018 at Plasticon Awards, 2018.

• Top Exporter Award (1st Position) for exports out of RCT, Vadodara by Container Corporation of India Ltd on 17th November, 2017 at Concor Awards, 2017.

Management Discussion and Analysis

In terms of the provisions of Regulation 34 of the SEBI Listing Regulations, the Management discussion and analysis is set out in this Annual report at Annexure A.

Analyst & Investor Meets

Conference Calls

The Company, hosts Earnings Call to discuss the financial, operational and business performance with Investors/Analysts, every quarter, after declaration of the results. Result presentations and transcripts of the earnings call held till date is available on the website of the Company at www.shaily.com at http:// www.shaily.com/investor-presentation.aspx

The Company, also participated in various Institutional Investor/Analyst meets during the year.

The details of the participation(s) is available on the website of the Company www.shaily.com.

Investor/Analyst Meet Organized by the Company.

The Company hosted its 1st Investor/Analyst meet on 26th February, 2018 at Mumbai wherein the Company witnessed an attendance of 175+ participants. Presentation and the transcript of the said meet is available at http://www.shaily.com/investor-presentation.aspx.

Quality accreditations

The Company continues its focus on quality and strives to exceed customer expectations at all times.

SEPL is certified under various standards to meet client demands and enhance value delivery.

Shaily is accredited with the following certifications:

TUVRheinland - ISO 9001:2008

Scope: Design, Development and manufacturing of plastic molded components and assemblies.

Automotive - TUVRheinland - ISO/TS 16949:2009

Scope: Manufacture of Plastic Molded components for interiors, seating systems, lightning systems, radiator tanks and guide bush for the automotive industry without product design and development.

Medical Devices - TUVRheinland - ISO 13485-2003

Scope: Manufacturing of Plastic molded components and assemblies used in Medical Devices.

Primary Packaging - ISO 15378 certification

Scope: Quality management system for manufacturers of pharmaceutical and medical device primary packaging materials.

Conservation of Energy,

Technology absorption and Foreign Exchange earnings and outgo

The information required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure B.

Credit Rating

CARE continues to accord the ratings on the bank facilities of the Company as under:

Long term facilities - CARE A-; Stable

Short term facilities - CARE A2+

On total bank facilities of f 142.22 cr.

Directors & Key Managerial Personnel

As per the provisions of the Companies Act, 2013,

Mr. Mahendra Sanghvi, Executive Chairman (DIN: 00084162), retires by rotation at the ensuing AGM and being eligible, seeks re-appointment.

The Board recommends his re-appointment.

Key Managerial Personnel

Mr. Mahendra Sanghvi, Executive Chairman, Mr. Laxman Sanghvi, Executive Director, Ms. Tilottama Sanghvi, Whole Time Director, Mr. Amit Sanghvi, Managing Director,

Mr. Sanjay Shah, CFO & Vice President - Finance and Ms. Preeti Sheth, Asst. Company Secretary are Key Managerial Personnel of the Company as on 31st March, 2018, in accordance with Companies Act, 2013.

Note: Mr. Sanjay Shah is designated as Chief Strategy Officer effective from 01st April, 2018 and Mr. Chintan Shah is appointed as Chief Financial Officer effective from 01st April, 2018.

Meetings of Board

The Board met four times during the financial year. The meeting details are provided in the Corporate Governance Report that forms part of this Annual Report. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013.

Policy on Directors Appointment and Remuneration

The existing policy is to have an appropriate mix of executive and independent directors to maintain independence of the Board and separate its functions of governance and management. As of 31st March,

2018, the Board had 8 members, 4 of whom are executive directors and four are independent directors.

The policy of the Company on directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under subsection (3) of Section 178 of the Companies Act,

2013, is available on our website www.shaily.com at http://www.shaily.com/investors-details.aspx?id=10

There has been no change in the policy since the last financial year. We affirm that the remuneration paid to the directors is as per the terms laid out in the Nomination and Remuneration policy of the Company.

Declaration by Independent Directors

The Independent Directors of the Company have given the declaration to the Company that they meet the criteria of independence as required under the Act and the Listing Regulations.

Familiarization Programme

All new independent directors inducted into the Board attend an orientation program. At the time of the appointment of an independent director, the Company issues a formal letter of appointment outlining his / her role, function, duties and responsibilities. The format of the letter of appointment is available on our website www.shaily.com.

The Board members are provided with necessary reports, internal policies, periodical plant visits to enable them to familiarize with the Companys procedures and practices.

Periodic presentations are made at the meetings of the Board and the committees, on business and performance updates, global business environment, business strategy and risks involved.

The details of familiarization programme for Independent Directors are available at our website. www.shaily.com at http://www.shaily.com/investors-details.aspx?id=10.

Board Evaluation

Pursuant to the provisions of the Companies Act,

2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out the annual performance evaluation of the Board and of individual directors on an evaluation framework as adopted by the Board.

The framework includes evaluation of directors on various parameters such as:

• Board dynamics and relationships

• Information flows

• Decision - making

• Company performance and strategy

• Tracking board and committees effectiveness

• Peer evaluation

The outcome of the Board Evaluation for FY 2017-18 was discussed by the nomination and remuneration committee and the Board meeting held on 14th May, 2018.

Committees of the Board

Currently, the Board has four committees, namely;

• Audit Committee

• Nomination & Remuneration Committee

• Stakeholders Relationship Committee

• Corporate Social Responsibility Committee

A detailed note on the composition of the Board, its committees is provided in the Corporate Governance Report.

Corporate Governance

The Company believes in adopting best practices of corporate governance. Corporate governance principles are enshrined in the spirit of the Company, forming its core values. These guiding principles are also articulated through the Companys code of business conduct, corporate governance guidelines, charter of various sub-committees and disclosure policy.

Our Corporate Governance Report for FY 201718 forms part of this Annual Report.

Audit Reports and Auditors

Audit Reports

• The Auditors Report for FY 2017-18 does not contain any qualification, reservation or adverse remark. The Auditors Report is enclosed with the financial statements in this Annual Report.

• The Secretarial Auditors Report for the FY 2017-18 does not contain any qualification, reservation or adverse remark. The Secretarial Auditors Report is enclosed as Annexure F to the Boards Report in this Annual Report.

• As required by the SEBI Listing Regulations, the auditors certificate on corporate governance is enclosed with the Corporate Governance Report in this Annual Report. The auditors certification for FY 2017-18 does not contain any qualification, reservation or adverse remark.

Auditors

Statutory Auditors

Under Section 139 of the Companies Act, 2013, and the Rules made thereunder, it is mandatory to rotate the statutory auditors on completion of the maximum term permitted under the said section. The Audit Committee of the Company has proposed, and on May 14, 2018, the Board of Directors of the Company has recommended the appointment of M/s B S R & Associates LLP (Firm Registration number 116231W/W-100024 (“BSR”) as the statutory auditors of the Company. BSR will hold office for a period of five consecutive years from the conclusion of the 38th Annual General Meeting of the Company scheduled to be held on Monday, August 13, 2018, till the conclusion of the 43rd Annual General Meeting to be held in the year 2023, subject to the approval of the shareholders of the Company at the ensuing Annual General Meeting.

The first year of audit will be of financial statements for the year ending March 31, 2019, which will include the audit of quarterly financial statements from Q2FY19.

Secretarial Auditor

The Board has appointed M/s Samdani Shah & Kabra, Company Secretaries, as Secretarial Auditor of the Company for the FY 2018-19, in terms with Section 204 of the Companies Act, 2013 with rules thereunder.

Cost Auditors

M/s Y.S. Thakar & Co., Cost Accountants, Vadodara are appointed as Cost Auditors of the Company to conduct audit of cost records of the Company for FY 2018-19.

Based upon the declaration on their eligibility, consent and terms of engagement, the Board has appointed them and recommend the ratification of remuneration to be paid to the Cost Auditors for FY 2018-19.

Internal Auditors

The Board has appointed M/s Shah Jain &

Hindocha, Chartered Accountants as Internal Auditors of the Company for FY 2018-19.

Risk Management

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company.

Vigil Mechanism

The Company has a well-defined “Whistle Blower Policy” and has established a robust Vigil Mechanism for reporting of concerns raised by employees and to provide for adequate safeguards against victimisation of Directors and employees who follow such mechanism and has also made provision for direct access to the Chairman of Audit Committee in appropriate cases.

The Vigil Mechanism Policy of the Company is available on the Companys website at www.shaily.com

Internal Financial Control & its Adequacy

The Companys internal control procedures which includes internal financial controls, ensure compliance with various policies, practices and statutes and keeping in view the organisations pace of growth and increasing complexity of operations. The internal auditors team carries out extensive audits throughout the year across all plants and functional areas and submits its reports to the Audit Committee of the Board of Directors.

Contracts & Arrangements with Related Parties

All contracts/arrangements entered by the Company during the financial year with related parties were in ordinary course of business and on arms length basis. During the year, the Company did not enter into any contracts/arrangements/transaction with related parties which could be considered material.

The Directors draw attention to the members to Note no. 32 to the financial statement in this Annual Report, which sets out related party disclosures.

The Board has approved a policy for related party transactions which is available on the companys website at www.shaily.com at http:// www.shaily.com/investors-details.aspx?id=10.

Particulars of Loans,

Guarantees or Investments

Loan, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

Fixed Deposits

The 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 during the financial year 2017-18.

Corporate Social Responsibility (CSR)

Being an Indian company, we are motivated by the Indian ethos of Dharma as a key plank for organisational selfrealisation. The Company recognizes that its operations impact a wide community of stakeholders, including investors, employees, customers, business associates and local communities and that appropriate attention to the fulfillment of its corporate responsibilities can enhance overall performance. The Company continues its spend to support local initiatives health/ medical, education and sanitation/ cleanliness purpose as Corporate Social Responsibility initiatives.

Guided by the prevailing regulatory requirements, the Company has constituted a ‘Corporate Social Responsibility (CSR) Committee and framed a Policy on CSR, summary of which together with details of CSR activities undertaken by the Company during the financial year 2017-18, have been covered in separate report on CSR, annexed as Annexure C.

The Policy on Corporate Social Responsibility is available on the Companys website. www.shaily.com at http:// www.shaily.com/investors-details.aspx?id=10.

Extract ofAnnual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the annual return in the prescribed format is appended as Annexure D.

Secretarial Standards

The Company complies with all the applicable secretarial standards.

Particulars of Employees and Related Disclosures

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as Annexure E.

Obligation of Company under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has in place a Policy against Sexual Harassment at workplace in line with the requirement of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding Sexual Harassment. All employees (permanent, contractual, temporary and trainees) are covered under this Policy.

No Complaint has been received by the Committee during the year.

Listing of Shares

The Equity shares of the Company are listed on the BSE Ltd. (BSE) with scrip code 501423 and scrip ID - SHAILY. The Company confirms that the annual listing fees to the stock exchange for the FY 2018-19 has been paid.

Material Changes

There have been no material changes and commitments affecting the financial position of the Company since the close of financial year i.e. since 31st March, 2018. Further, it is hereby confirmed that there has been no change in the nature of business of the Company.

Significant/Material Orders Passed by Regulators/Courts/Tribunal

There are no significant and material orders passed by the Regulators or Courts or Tribunals that may impact the going concern status of the Companys operation.

Green Initiative

Electronic copies of the Annual Report 2017-18 and the Notice of the 38th Annual General Meeting are sent to all members whose email addresses are registered with the Company/depository participant(s). For members who have not registered their email addresses, physical copies are sent in the permitted mode.

Directors Responsibility Statement

In terms of the provisions of Companies Act, 2013, the Directors confirm that;

i. in preparation of the annual accounts for the financial year ended 31st March, 2018, the applicable accounting standards have been followed;

ii. They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and profit and loss of the Company for that period;

iii. They have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. They have prepared the annual accounts on a going concern basis.

v. They have laid down internal financial controls, which are adequate and are operating effectively.

vi. They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Acknowledgements

We thank our customers, vendors, investors, bankers for their continued support during the year.

We place on record our appreciation of the contribution made by our employees at all levels. Our consistent growth is made possible by their hard work, solidarity, cooperation and support.

We also thank our suppliers, customers, business partners and others associated with the Company. We look upon them as partners in its progress. It will be Companys endeavor to build and nurture strong links with the trade based on mutuality of benefits, respect to and co-operation with each other, consistent with consumer interests and looks upon all the stakeholders for their continued support in future.

For and on behalf of the Board of Directors

Mahendra Sanghvi Amit Sanghvi
Executive Chairman Managing Director
Vadodara
May 14, 2018