Shaily Engineering Plastics Ltd Directors Report.

Dear Members,

Your Directors have pleasure in presenting their 39th Annual Report together with the Audited Statement of Accounts for the year ended on 31st March, 2019

Financial Summary & Highlights र in lakhs
FY 2018-19 FY 2017-18
Net Total Income 34,012 14 32,195 90
Gross Operating Profit (Profit before Interest, Depreciation & Tax) 5,440 03 5,544 83
Finance Cost 952 94 672 73
Depreciation & amortization expense 1,491 64 1,449 35
Profit before Tax 2,995 45 3,422 75
Provision for Tax 1,067 38 1033 60
Profit after Tax 1,928 07 2,389 15
Other Comprehensive Income -7 19 -3 93
Total Comprehensive Income 1920.88 2,385.22

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

Appropriations

Transfer to Reserves

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

Dividend

The Company is looking at expansion of its facilities, for new business of carbon steel and existing line of business. Significant amount of capex will be required for funding of such expansion.

Hence, the Company will be utilizing the surplus funds available towards such expansion In view of the same, your Directors do not recommend dividend for this financial year.

The Register of Members and Share Transfer Books will remain closed from Monday, August 05, 2019 to Thursday, August 08, 2019 (both days inclusive) for the purpose of 39th Annual General Meeting scheduled to be held on Thursday, August 08, 2019

Operations & State of Affairs

The Companys total revenue has been 340.12 cr in the current year, an increase of 5 64 % year on year

• EBITDA for the year has been 54.40 cr.

• Profit before Tax (PBT) for the year is 29.95 cr.

• PAT for the year is 19.28 cr.

Management Discussion and Analysis

In terms of the provisions of Regulation 34 of the SEBI Listing Regulations,2015 the Management discussion and analysis is set out in this Annual report at Annexure A.

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.

Directors & Key Managerial Personnel

Demise of Independent Director

The Company sadly intimates the demise of Independent Director, Mr Dilip G Shah, on 22nd February, 2019

Company had benefitted from his valuable expertise and significant experience during his association with the Company The Board takes on record the invaluable contributions made by Late Mr Dilip G Shah as an Independent Director of the Company during his association with Shaily

Resignation of Independent Director

Mr Pushp Raj Singhvi, Non-Executive Independent Director, has tendered his resignation from the Board of the Company & from various committees of the Board, in which he was a member, effective from close of business hours on March 31, 2019

The resignation was made owning to change in the regulatory regime of SEBI Listing Regulations, 2015 of age criterion for non-executive directors

Mr Pushp Raj Singhvi was associated with the Company since the year 2012 He contributed immensely towards achievement of growth of the Company with his valuable expertise and experience, which added to Shailys success story The Management places on record deep appreciation for his valuable association with the Company

Retirement by Rotation

As per the provisions of the Companies Act, 2013, Mr Amit Sanghvi, Managing Director, (DIN : 00022444), retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, seeks re-appointment The Board recommends his re-appointment

Change in Designation

Ms Tilottama Sanghvi, had vide request letter dated 31st March, 2019, expressed her intention to retire from the post of Promoter & Whole Time Director of the Company, effective from 02nd April, 2019

Pursuant to the same, upon recommendation of the Nomination & Remuneration Committee, the Board of Directors have in their meeting held on 18th May, 2019, re-designated Ms Tilottama Sanghvi as Non-Executive Non-Independent Director, effective from 02nd April, 2019

Re-appointment

The below directors, being eligible, seek re-appointment The Board in its meeting held on 18th May, 2019, have accorded approval for re-appointment of below directors, subject to approval of shareholders in the context The Board recommends re-appointment of below mentioned Directors at the ensuing Annual General Meeting (AGM) of the Company

1 Re-appointment of Mr Mahendra Sanghvi [DIN : 0084162] as an Executive Chairman for a term of 3(three) years, effective from 01 04 2019 to 31 03 2022

2 Re-appointment of Mr Laxman Sanghvi [DIN : 00022977] as an Executive Director for a term of 3(three) years, effective from 01 04 2019 to 31 03 2022

3 Re-appointment of Mr Sarup Chowdhary [DIN : 00004439] as a Non-Executive Independent Director for a second term of one year effective from closure of ensuing 39th AGM of the Company till the conclusion of 40th AGM of the Company for the financial year 2019

20 to be held in the calendar year 2020

4 Re-appointment of Mr Milin Mehta [DIN : 01297508] as a Non-Executive Independent Director for a second term of five (5) consecutive years effective from 08th November, 2019 till 07th November 2024

Appointments

The Board in its meeting held on 18th May, 2019, appointed below Directors as Non-Executive Independent Director, subject to approval of members in the context It recommends appointment of below Directors at the ensuing 39th AGM of the Company :

1 Appointment of Mr Jiten Mathuria [DIN : 00297090] as a Non-Executive Independent Director of the Company for a period of 5(five) consecutive years to hold office from 18/05/2019 till 17/05/2024

2 Appointment of Mr Ranjit Singh- [DIN : 01651357] as a Non-Executive Independent Director of the Company for a period of 5(five) consecutive years to hold office from 18/05/2019 till 17/05/2024.

Detailed profile of the Directors alongwith other details, as required under prevailing law, forms part of the Explanatory statement to the notice of 39th AGM of the Company

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 Chintan Shah, Chief Financial Officer and Ms. Preeti Sheth, Asst. Company Secretary & Compliance Officer are Key Managerial Personnel of the Company as on 31st March, 2019, in accordance with Companies Act, 2013

Note : Ms Tilottama Sanghvi is designated as Non- Executive Non – Independent Director effective from 02nd April, 2019, hence, she ceases to be Key Managerial Personnel, effective from 02 04 2019, pursuant to applicable provisions of the Companies Act, 2013

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, 2019, the Board had 7 members, 4 of whom are executive directors and 3 are independent directors One of the Director is a Woman Director The constitution of the Board reduced from 8 Directors to 7 Directors, as on 31st March, 2019, due to sad demise of Mr D G Shah, Independent Director on 22nd February, 2019

The Company, however, has appointed new directors on the Board of the Company as on the date of this report

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, as revised in accordance with SEBI Listing Regulations, 2015, is available on our website at https://shaily com/investors/corporate-governance

The policy was amended, effective from 01st April, 2019, pursuant to changes in the regulatory regime of SEBI Listing Regulations, 2015

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 at https://shaily com/investors/corporate-governance

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 https:// shaily com/investors/corporate-governance

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, its Committees 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 2018-19 was discussed by the Nomination and Remuneration committee and the Board meeting held on 18th May, 2019

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 F Y 2018-19 forms part of this Annual Report

Audit Reports and Auditors

Audit Reports

• The Independent Auditors Report for F Y 2018-19 does not contain any qualification, reservation or adverse remark The Independent Auditors Report is enclosed with the financial statements in this Annual Report.

• The Secretarial Auditors Report for the FY 2018-19 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, 2015 the auditors certificate on corporate governance is enclosed with the Corporate Governance Report in this Annual Report The auditors certification for F.Y. 2018-19 does not contain any qualification, reservation or adverse remark.

Reporting of fraud by auditors

During the financial year 2018-19, neither of the auditors viz , Statutory Auditors, Secretarial Auditors, Corporate Governance Auditors, have reported to the Audit Committee, under Section 143(12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Boards Report

Auditors

Statutory Auditors

M/s B S R & Associates LLP, Chartered Accountants (Firm Registration number 116231W/W-100024 are the Statutory Auditors of the Company till the conclusion of the 43rd AGM of the Company to be held in the year 2023

Details of fees paid to the Statutory Auditors for all service provided by the Statutory Auditor for the FY 2018-19, forms part of the Corporate Governance Report and financials of the Company, included in this Annual Report.

Secretarial & Corporate

Governance Auditors

The Board has appointed M/s Samdani Shah & Kabra, Company Secretaries, as Secretarial & Corporate Governance Auditors of the Company for the F Y 2019-20, in terms with Section 204 of the Companies Act, 2013 with rules thereunder

Cost Auditors

M/s YS Thakar & Co , Cost Accountants, Vadodara are appointed as Cost Auditors of the Company to conduct audit of cost records of the Company for F Y 2019-20

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 2019-20

Internal Auditors

The Board has appointed M/s Shah Jain & Hindocha, Chartered Accountants, based at Vadodara, Gujarat as Internal Auditors of the Company for FY 2019-20

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 https:// shaily com/investors/corporate-governance

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. 33 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 https://shaily com/investors/corporate-governance

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.

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 2018-19.

Corporate Social Responsibility (CSR)

Being an Indian company, we are motivated by the Indian ethos of Dharma as a key plank for organisational self-realisation 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 to local initiatives health/ medical, education and sanitation/ cleanliness, promotion of traditional art 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 2018-19, have been covered in separate report on CSR, annexed as Annexure C

The Policy on Corporate Social Responsibility is available on the Companys website at https:// shaily com/investors/corporate-governance

Extract of Annual 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

Copy of Annual Return as prescribed under Section 92(3) for the FY 2018-19 will be placed on the website of the Company at https:// shaily com/investors/corporate-governance

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 strongly believes in providing a safe and harassment free workplace for each and every individual working for the Company 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

The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

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 2019-20 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, 2019. 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 operations in future

Green Initiative

Electronic copies of the Annual Report 2018-19 and the Notice of the 39th 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, 2019, 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; and

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
18 May, 2019

Report on Conservation of Energy,

Technology Absorption, Foreign Exchange Earnings and Outgo

Information required under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts), Rules, 2014 pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange earnings and outgo:

a Conservation of Energy

Shaily is committed to transform energy conservation into a strategic business goal alongwith technological sustainable development of Energy Management System The Company constantly endeavours to reduce energy consumption in all its operations

Shaily has in its credit an in-house Research & Development accreditation recognized by the Department of Scientific & Industrial Research Technology, New Delhi, Ministry of Science & Technology

i Steps taken or impact on conservation of energy

The Company has installed a number of devices in its plants for conservation/reducing the energy requirements In this year, we were able to use more than 50% of our energy requirement from renewable sources

Monitoring of energy parameters viz , maximum demand, power factor, load factor, TOD tariff utilization on regular basis

Use of higher cavitation moulds which can provide same output with lesser energy consumption

Use of "Stack moulds" which produces different components of the same product at a single time in a single machine, which were earlier manufactured in different machines This resulted into higher machine utilization rate, reduction in cycle time, enhanced production and better efficient usage of energy.

Installation of pneumatic auto shut-off valves in in-let pipes at moulding area, thereby achieving reduction in idle time power losses

Replacement of individual portable chillers with Centralized chilling plant for moulding shop floors, thereby achieving reduction in overall power consumption

Periodical conduct of safety audits to ensure efficiency of safety measures adopted across all facilities

ii Steps taken for utilizing alternate sources of energy

Company is using renewable power from a biomass power producer for part of its power requirements Our goal is to constantly improve our processes in a way that results in reduction of power, water and other natural resources Company has also adopted "rain water harvesting system" This system provide valuable assistance in collection & storage of rain water for varied end application requirements

iii Capital investment on energy conservation equipments

The Company continuously endeavors to discover usages on new technologies and tools to save the energy and reduce consumption The Company has installed such energy efficient machinery and devices to improve the power factor

b Technology Absorption

i Efforts made towards technology absorption

Research and Development:

• The Company has developed and manufactured several dies and moulds and has also developed several plastic components, which were earlier imported The activities in development are carried out by technicians and the expenditure thereon, is debited to the respective heads

• Development of new design, processes and products from conceptualization to manufacture, for some customers

• Development of complex designs for components of medical devices

• Successful in conversion of products manufactured from virgin material to recycled and bioplastics material

• Development and set up of assembly machine and assembly line for injector pens to detect manual errors, thereby increase in productivity

• Installation of "Harmonic Arresters" in electrical circuits, which reduces damages due to electricity fluctuations, thereby reduction in repairs & maintenance and overall power consumption

Technology absorption, adaption and innovation:

• The Company has manufactured varied plastic components of international standard/quality, which are import substitutes for diverse applications Kaizen and Lean Sigma forms a significant part of our strategy, resulting in improvement across business landscape

• Use of Robotics in the production process, yielding into reduced cycle time, improvement in productivity and process efficiencies.

ii Benefits derived like product improvement, cost reduction, product development or import substitution:

• Continuous upgradation and adoption of new technology for better productivity and yield

• Company has through its own research and development activities, developed several dies and moulds; which serves as an import substitution

• Such varied plastic components of international standard/quality, are import substitutes for diverse applications

• Improved performance of machines and its utilization

• Enhanced global presence/visibility

iii Information regarding technology imported, during last 3 years:

• Nil

iv Expenditure incurred on Research & Development:

• During the year, the expenditure incurred on R&D had been Rs 257 58 lacs

c Foreign Exchange

Earnings and Outgo

The Company continues to keep its focus on widening of new geographical area to augment its exports We are participating in major overseas exhibitions, which are very helpful in improving visibility of the services/ products, we offer, in the International Market

The details of foreign exchange earned in terms of actual inflows during the year and the foreign exchange outgo during the year in terms of actual outflows are as under:

in crores
Foreign Exchange FY 2018-19
Earnings 233 30
Expenditure 115 21

For and on behalf of the Board

Mahendra Sanghvi

Executive Chairman

Vadodara 18 May, 2019

Annexure E

Particulars of Employees

As per the provisions of Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company is required to disclose following information in the Boards Report

1 Ratio of Remuneration of each director to the median remuneration of the employees of the Company for the financial year 2018-19

Name of Director Designation Ratio to Employees
Mahendra Sanghvi Executive Chairman 64 02:1
Laxman Sanghvi Executive Director 36 81:1
Tilottama Sanghvi Whole Time Director 16 00:1
Amit Sanghvi Managing Director 64:02:1

2 Percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, during the financial year 2018-19

Name Designation % Increase
Mahendra Sanghvi Executive Chairman 0
Laxman Sanghvi Executive Director 0
Tilottama Sanghvi Whole Time Director 0
Amit Sanghvi Managing Director 0
Chintan Shah Chief Financial Officer 0
Preeti Sheth Asst Company Secretary 11%

3 Percentage increase in median remuneration of employees in the financial year 2018-19.

The median remuneration of employees was increased by 1 65 % during the Financial Year 2018-19

Number of permanent employees on the roll of the Company:

Staff 421
Permanent Workers 181

4 Average percentile increase already made in the salaries of employees other than the managerial personnel 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:

Non - Managerial Personnel 5 22%
Managerial Personnel (excluding Directors) 13 45%

There are no exceptional circumstances for increase in the managerial remuneration

5 Affirmation

We affirm that the remuneration paid to the Managerial and Non-Managerial personnel is as per the remuneration policy of the Company

For and on behalf of the Board

Mahendra Sanghvi

Executive Chairman

Vadodara 18 May, 2019