SI Group - India Ltd Directors Report

The Directors have pleasure in presenting the Fifty-second Annual Report together with the Audited Accounts of the Company for the year ended March 31, 2014.

1. FINANCIAL RESULTS

	RS. LAKHS
	Year ended	Year ended
	31.3.2014	31.3.2013
Revenue from operations (Gross)	1,27,984	1,16,354
Other Income	359	603
	1,28,343	1,16,957
Gross (Loss)/Profit	6,319	5,174
Less: Provision for Depreciation & Amortization	(1,678)	(1,723)
Profit/(Loss) Before exceptional items and Tax	4,641	3,451
Add: Exceptional items	2,971
Profit before Tax	7,612	3,451
Less: Provision for taxation (including for prior years)	(1,762)	(1,238)
(Less)/Add: Deferred Tax (Charge)/Credit	(765)	110
Profit after Tax	5,085	2,323
Add: Balance in profit and Loss Account	24,304	23,689
Disposable Profit	29,389	26,012
Less: Transfer to General Reserve	509	232
Interim dividends on Equity shares	1,270	1,270
Tax on Dividend	216	206
Surplus carried forward	27,394	24,304

2. DIVIDEND

Your Company paid two interim dividends of Rs. 1.50 (15%) each per equity share during the financial year 2013-14. The total dividend declared by your Company for the financial year 2013-14 is Rs. 3/- (30%) per equity share (previous year Rs. 3/- per equity share).

The total dividend payout for the financial year 2013-14 (including Dividend Distribution Tax of Rs. 2.16 Crores) was Rs. 14.86 Crores (previous year Rs. 14.76 Crores including Dividend Distribution Tax of Rs. 2.06 Crores).

3. OPERATIONS REVIEW

The sales turnover during the year was Rs. 1,274 Crores which was higher by 10% compared to that of the previous year.

The financial performance during the year under review improved over last year resulting into higher margins due to various initiatives including cost saving measures taken by the Company.

4. PRODUCTION

The combined production at the Navi Mumbai, Rasal, Lote and Ranjangaon units for the year ended March 31, 2014 was 174,237 MT as against 173,145 MT in the previous year, a marginal increase of 1 %.

Production during the year ended March 31, 2014 at the Navi Mumbai unit was 133,933 MT, marginally lower by 2% compared to 136,265 MT during the previous year.

Production at the Rasal unit was 13,565 MT as against 12,098 MT during the previous year, an increase of 12%.

Production at the Lote unit was 8,141 MT as against 7,784 MT during the previous year, an increase of 5%.

Production at the Ranjangaon unit was 18,598 MT as against 16,998 MT during the previous year, an increase of 9%.

5. SALES AND EXPORTS

During the financial year, we were able to increase the prices of finished goods which enabled us to recover the increases in raw material prices.

During the year Company continued its emphasis on the downstream products and high end derivatives to serve the strategic market segments and further improve the market share.

The Company had applied for reinstatement of levy of Anti Dumping Duty (ADD) on import of Phenol from USA and

Taiwan. The Government of India has levied an interim duty on these imports from May 16, 2014.

During the year under review, exports aggregated to Rs. 216 Crores FOB (previous year Rs. 213 Crores) a marginal increase of 1% over the previous year.

6. FINANCE

During the year under review, the Company did not accept any fresh deposits or renew any existing deposits from the public or shareholders. As of March 31, 2014, deposits aggregating Rs. 0.44 lakhs had matured for payment but not paid/deposited with the concerned authority under regulatory advice.

As per the Order issued by the Ministry of Corporate Affairs (MCA), Cost Audit Branch on January 24, 2012, cost accounting records of Organic & Inorganic Chemicals falling under specified chapters of Central Excise Tariff Act, 1985 are required to be audited by a Cost Auditor. As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956, cost audit is carried out of cost records maintained by the Company in respects of all its products falling under the category of Organic Chemicals. Subject to the approval of the Central Government, the Company has appointed Mr. Kishore Bhatia, Cost Accountant as Cost Auditors to audit the cost accounts of the Company for the financial year 2014-15. The Cost Audit report for the financial year 2012-13, which was due to be filed with the Ministry of Corporate Affairs upto September 27, 2013, was filed on September 27, 2013.

7. AUDIT COMMITTEE

During the year under review, the Audit Committee was re-constituted by the Board consisting of Mr. Frank Bozich, Mr. Richard Barlow, Mr. Emmanuel Hess and Mr. G. C. Vasudeo. The Committee met periodically to discuss and review the areas specified under the provisions of the Companies Act, 1956.

8. EMPLOYEE RELATIONS

Employee relations during the year continued to be cordial. A long term settlement was signed between the Management and Employees Union at Ranjangaon unit in July 2013.

As part of its employee development programme, the Company conducted various training programmes for its employees at all four sites aggregating 5,320 man hours during the year.

9. PARTICULARS OF EMPLOYEES

Information to be provided under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, is s#t out in Annexure A and forms part of this report.

10. COMMUNITY WELFARE

Your company continues to demonstrate its commitment to Responsible Care initiatives in the area of Community

Welfare. The following community service programs were organized in this regard during the year:

• Three Medical camps were arranged at, Pen, Taloja, Panvel etc. Vave, Pali and Belwadi. Total 913 needy villagers were benefitted from the camp.

• Health Awareness lectures on various topics like diabetic, blood pressure, orthopedic issues and Eye Care were organized for the benefit of employees.

• Blood donation camps was organized in the factory by Occupational Health Center (OHC) and 102 bottles of blood was collected.

11. ENVIRONMENT, HEALTH AND SAFETY (EHS)

Your Company continues to be committed to high standards of Safety, Health and Environment. Its systems continue to be certified under ISO 9001, OHSAS 18001 (2007) and ISO 14001 (2004) by Bureau Veritas Certification. Further, in view of the continual efforts in the area of Responsible Care, the Company continues to be permitted to use the RC logo by the Indian Chemical Council (ICC).

The quality of stack emissions, ambient air, noise levels and liquid effluents continues to be closely monitored. They have consistently met the norms set by Maharashtra Pollution Control Board (MPCB) in its consent to operate the plants. New National Ambient Air monitoring Standards (NAAQS) are being followed.

During the year, your Company took the following initiatives in the area of EHS for risk reduction:

(a) Institutionalization of Near Miss monitoring system:

Near Miss reporting system which was developed, is being religiously followed. Internal audits conducted periodically and monitored for near misses for their closure after taking proper corrective actions. Employees at all levels are encouraged, using this system, to observe and report near misses. The initiative will lead to a better awareness towards safety, further reducing the Incidence Occurrence Rate.

(b) General:

Periodic medical examination of all employees including contractors workmen was carried out. Training programs were conducted for Phenol and Acetone customers. Two Refresher training programs for drivers carrying hazardous good were organized. A special program on "Defensive driving" was conducted during the "Road Safety Week". The company provided help in outside chemicals transit emergency incidents and our efforts in this regards were appreciated by media and police. The Company is an active member of Mutual Aid Response Group (MARG) and is involved in many activities of MARG.

The Company had organized a special training program on "Handling Ammonia leak emergency" during the Fire Services Week for employees of nearby ice manufacturing and cold storage industries.

12. ENERGY CONSERVATION

Information required under sub-section (A) of Rule (2) of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is set out in Annexure B and forms a part of this report.

13. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956, the Board of Directors of the Company hereby state and confirm that:

(a) In the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(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 at the end of the financial period and of the profit of the Company for that period;

(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, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The Directors have prepared the annual accounts on a going concern basis.

14. DIRECTORS

Mr. Frank Bozich and Mr. Pankaj Chadha were appointed as Additional Directors of the Company with effect from October 10, 2013. Mr. Frank Bozich and Mr. Pankaj Chadha hold office up to the ensuing Annual General Meeting. The Company has received requisite notice in writing from members proposing the candidature of each of them, for the office of Director.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Companys Articles of Association, Mr. Richard Barlow and Mr. Emmanuel Hess will retire by rotation at the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

Mr. Paul Tilley resigned from the Board with effect from October 10, 2013. The Board places on record its appreciation for the valuable services rendered by Mr. Paul Tilley during his tenure as Director of the Company.

Mr. B. Rajagopal stepped down from the position of Managing Director with effect from October 10, 2013 and also ceased to be a Director of the Company from that date. The Board places on record its appreciation for the valuable services rendered by Mr. B. Rajagopal during his tenure as Managing Director of the Company.

The Board, subject to the approval of the members has appointed Mr. G. C. Vasudeo as Managing Director of the Company with effect from October 10, 2013 upto December 31, 2014.

The Board, subject to the approval of the members has appointed Mr. Pankaj Chadha as Whole-time Director designated as Executive Director - Operations & Strategy for a term of 3 years with effect from October 10, 2013 upto October 9, 2016.

15. AUDITORS

M/s. B S R and Co, the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are recommended for reappointment to audit the accounts of the Company for the financial years 2014-15. As required under the provisions of section 139 of the Companies Act, 2013, the Company has received a written confirmation from M/s. B S R and Co, that their appointment, if made would be in conformity with the limits specified in the said section.

Members are requested to appoint Auditors of the Company and authorise the Board to fix their remuneration.

By Order of the Board
G. C. Vasudeo	Emmanuel Hess
Managing Director	Director
Registered Office:
Plot No. 2/1, TTC Industrial Area
Thane-Belapur Road
Navi Mumbai 400 705
Date: May 27, 2014

Information required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1989.

Conservation of Energy

(a) Energy Conservation measures taken during the year 2013-14:

• Installation of a liquid jet ejector replacing conventional steam ejectors in Phenol plant at Navi Mumbai unit.

• Installation of a liquid jet ejector replacing conventional steam ejectors in AMSD plant at Navi Mumbai unit.

• Continual trap management program leading to condensate recovery from FB-241 & FB-241A (Crude Phenol Storage tanks) external heating coil in Phenol plant at Navi Mumbai Unit.

• Close monitoring and control of energy generation, supply and use of energy in plant at Rasal Unit.

• Operational Excellence to reduce changeover or set up time in plant at Rasal Unit.

• Continual process optimization and process development of major products to reduce cycle time and energy consumption at Lote Unit.

• Continual monitoring of cycle times and energy waste points to reduce energy consumption at Lote Unit.

• Innovative process development to reduce steam consumption at Ranjangaon Unit.

• Optimization of recipes for pure grade of raw material to increase productivity and reduce fuel consumption at Ranjangaon Unit.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy:

The following Energy Conservation projects are proposed for implementation by end 2014:

To recover waste heat from HRSG exhaust flue gases at Navi Mumbai Unit.

• Optimization of refrigeration system at Navi Mumbai Unit.

• Installation of condensate recovery system for Utility and offsite area at Navi Mumbai Unit.

• Installation of efficient cooling towers at Rasal Unit.

• Office Air conditioners replacement at Rasal Unit.

(c) Impact of measures in (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

• Implementation proposals in (a) above has resulted in annualized savings close to Rs. 13.8 MM equivalent to reduction in 22037 MMBTU of energy consumption.

• Implementation of the proposal in (b) above will result in annualized savings of around Rs. 60.9 MM equivalent to reduction in 64002 MMBTU of energy consumption.

Total energy consumption per unit of production is as per Form A.

FORM A

Form for disclosure of particulars with respect to conservation of energy from April 2013 to March 2014

Power & Fuel Consumption	Current year ended March 31, 2014 Total	Previous year ended March 31, 2013 Total
1. Electricity (a) Purchased
Unit (Kwh)	1,53,58,064	1,14,93,285
Total amount (Rs.)	11,57,58,064	8,91,70,531
Rate per unit (Rs./Kwh)	7.54	7.76
(b) Own generation
Through DG set
Unit (Kwh)	2,39,079	3,48,779
Units/litre of diesel	2.77	2.93
HSD Consumption (Ltrs)	86,454	1,18,880
HSD Consumption (Rs.)	58,78,228	55,56,545
Electricity Duty	99,167	1,32,121
Cost per unit (Rs./Kwh)	25.00	16.31
Through GTG
Unit (Kwh) using RLNG	2,62,58,910	3,17,14,300
RLNG used in GTG (MMBTU)	3,58,115	4,33,725
Units/MMBTU of RLNG	73.33	73.12
Electricity Duty	78,77,673	95,14,290
Cost per unit (Rs./Kwh)	7.04	6.16
(c) Through CPP at Rasal
Unit (Kwh)	1,33,862	1,59,765
Units/Kg of Fuel	0.34	0.57
„ Fuel (Kg)	3,94,450	2,80,134
Cost (Rs.)	16,57,801	12,97,007
Electricity Duty	99,167	1,32,121
Cost per unit (Rs./Kwh)	13.13	8.95
2. Coal
Quantity (MT)	7,883	7,329
Total Cost (Rs.)	4,03,98,052	3,77,57,152
Average Rate (Rs./MT)	5,125	5,152
3. Furnace Oil/LSHS/LDO (purchased)
Quantity (MT)	4,035	1,578
Total Cost (Rs.)	20,14,14,406	7,75.70,926
Average rate (Rs./MT)	49,911	49,164
4. RLNG Purchased
Quantity (MMBTU)	7,31,532	9,40,836
Total Cost (Rs.)	77,14,26,194	84,42,98,954
Average rate (Rs./MMBTU)	1,055	897
RLNG used in GTG (MMBTU)	3,58,115	4,33,725
RLNG used in HRSG (MMBTU)	2,52,236	4,03,798
RLNG used in HRSG (MMBTU)	1,21,181	1,03,313
5. Other fuels (internally generated)
Residues quantity (MT)	3,841	3,937
Waste gases quantity (MT)	2,380	2,864
Waste Heat from GTG
Equivalent (MT)	4,080	4,854
6. Production of petrochemicals/
chemicals (MT)	1,74,237	1,73,145
7. Electricity consumed (Units/MT)	241	252
8. Specific fuel consumption
(MT/MT of product)	0.18	0.19

FORM B

I. Research and Development (R&D)

1. Specific areas in which R&D is being carried out by the Company:

The work of the R&D Centre is aimed at improving/ developing new processes to maximize efficiencies as also developing new products and technologies based on commercial inputs. The R&D team works in close interaction with SI Group globally.

2. R&D Benefits derived as a result of the above R&D:

Several new industrial resins products were developed for Ranjangaon unit. The end application of these resin were in coated abrasives, bonded abrasives as well as friction material inclusive sponge & brake as well as clutch liners. Some of them have already been approved by major customers and regular production is in process. Few are under approval.

R&D has worked to develop new product and process which are cost effective and EHS friendly. Recycle of waste streams of formaldehyde impacted both on cost and effluent treatment at Lote unit.

R&D is also instrumental is supporting PICA project and provide technical support in case of customer complaints. R&D team also work closely if there is change of raw materials required.

3. Future Plan of Action:

The focus of R&D will be on expanding the industrial resins portfolio of the Company to become leader in Abrasive Friction and refractory resins in India. Work is being continued to develop Low free monomer resin which are environment friendly.

The other initiate is to develop center of excellence for hydrogenation platform.

4. Expenditure on R&D for the year ended March 31, 2014:

	Rs. Lakhs
(a) Capital
(b) Recurring	225.93
(c) Total	225.93

(d) Total R&D Expenditure as a percentage of total turnover 0.20%.

II. Technology Absorption, Adaptation and Innovation

1. Efforts in brief, made towards technology absorption, adaptation and innovation:

The technologies acquired by the Company in the past for the production of Cumene, Phenol, Acetone, Phthalic Anhydride, Diacetone Alcohol, Isophorone, Alkyl Phenols and Phenolic Resins have been fully absorbed. The technologies have been further upgraded over the years through in-house innovation and knowledge engineering to achieve better material and energy efficiencies.

2. Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, product development, import substitution etc.

Full understanding of the Chemistry helped the Company identify and develop schemes for the recovery of by-products. Better process knowledge and simulation facilitated achievement of higher production volumes, quality improvement and energy conservation.

3. Information in case of technology imported during the last five years reckoned from the beginning of the financial year:

(a) Technology Imported:

Manufacture of Cumene

(b) Year of Import:

2005-06 and 2006-07

(c) Has technology been fully absorbed?

Yes

(d) If not fully absorbed, the areas where this has not taken place, reasons thereof and future plans of action:

Not Applicable

III. Foreign Exchange earnings and outgo:

(a) The Companys export are mainly of chemical intermediates and specialty chemicals. These cover several destinations, including South East Asia, the Far East, the U.S.A., Western Europe, Australia, the Middle East and South Africa. The Company already has the status of Two Star Export House.

(b) The information of total Foreign Exchange used and earned is contained in Note Nos. 12 to 15 of Schedule 27 (B).