Tanfac Industries Ltd Directors Report.

To

The Members,

Your Directors are pleased to present the report on the Companys business operations together with the audited statement of accounts for the financial year ended 31st March, 2020, for your review.

FINANCIAL RESULTS [ in Crores]

Particulars Financial Year Financial Year
2019 - 20 2018 – 19
Sales 164.80 221.71
Other Income (including operating income) 1.16 0.94
Operating Expenditure 138.86 169.96
Profit before Depreciation, Finance Cost and Taxation (PBDIT) 27.10 52.69
Finance Cost 0.84 3.04
Depreciation/Impairment/Amortization 4.64 8.02
Profit before Tax (PBT) 21.62 41.63
Current Tax / Deferred Tax (Net of MAT Credit Entitle ent) 4.65 5.66
Profit After Tax (PAT) 16.97 35.97
Other Comprehensive Income / (Loss) 0.31 0.10
Total Comprehensive Income 17.28 36.07
Add: Balance brought forward (0.53) (35.92)
Profit/(Loss) available for appropriation 16.65 (0.53)
Transferred from General Reserves - -
Balance Carried forward to Balance Sheet 16.65 (0.53)

OPERATIONS AND OVERALL PERFORMANCE:

During the year under review, company had posted good performance despite the abasence of the tail winds that had enabled your Company to register all-time high performance during the last financial year.

The Companys sales performance had decreased by 26% due to reduction in sale and price of Sulphuric Acid. This was partially compensated by higher sales realization in HF acid due to continuous focus on niche / value added segments and also successfully passing through the increase in raw material price. Last year your Company benefitted from significant increase in Sulphuric Acid price due to sudden change in market dynamics and demand – supply gap. Despite the reduction in profitability due to decrease in Sulphuric Acid prices in the absence of the tail winds that had benefitted during the last year, your Company had registered good performance during the year owing to process optimization (particularly in Sulphuric Acid Plant), better market penetration resulting in further optimization of product / customer mix, and the ongoing initiatives explained under the section Management Discussion and Analysis. The Company continued its strategy of sourcing Fluorspar from diverse sources / geography.

Profit before Depreciation, Finance Cost and Taxation (EBIDTA) was lower by 49% at 27.10 Crores during the year as compared to 52.69 crores in the previous year mainly due to the absence of the tail winds that had benefitted the Company during the previous year. Though your Company continues to face stiff competition from China which affects the sales realization and margin in HF from both domestic and overseas markets, these were offset by the steps taken by the company as explained above.

Judicious utilization of Cash Flow from operation through tight control on Working Capital and availing cheaper financing avenues helped in significantly reducing the debt by 5.83 crores during the year. This has helped in reducing the overall finance cost to 0.84 crores during the year from 3.04 crores during the previous financial year. The Company has achieved debt free and cash surplus status.

Total Comprehensive Income (TCI): Total Comprehensive Income for the year was lower at 17.28 crores during the year compared to 36.07 crores during the previous year.

DIVIDEND:

Though the financial performance and reserve position of the company had improved significantly during the last few years, your Directors have not recommended any dividend on equity shares for the year 2019-20 considering significant capital expenditure planned during the coming years.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, no unclaimed or unpaid Dividend is due for remittance to the Investor Education and Protection Fund established by the Central Government during the financial year 2019-20.

REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS:

As briefed under Management Discussion and Analysis section, the ongoing initiatives and steps taken by the company during the past few years to turn around the operations have helped in continuous improvements in the operations of the company across all spheres These steps have helped the company to post record performance during the current financial year.

Your company has made penetration in the market for some of its new products which had resulted in significant contribution to the revenue and bottom line of the current financial year. The company aims to further increase the market penetration of these products during the next financial year. The Company plans to focus on increasing the volume of value added products during the coming years.

Your Board of Directors is optimistic of continuous improvements in the operational performance of the company in the coming years.

ALUMINIUM FLUORIDE:

Your company continues with its strategy of reduced focus on Aluminum Fluoride due to its lower contribution. However, your company will continue to serve its long-term customers while keeping an eye on the overall bottom-line.

HYDROFLUORIC ACID & SPECIALTY FLUORIDES:

Your company continues to widen the Customer base and has also made significant progress in stringent specialty applications. The markets remain oversupplied and your company will embark upon identification of value added downstream products. This will also reduce our over dependence on traditional markets which are getting increasingly competitive.

SULPHURIC ACID:

Your company had robust performance in Sulphuric Acid. The efforts made to improve the productivity and overall operational efficiencies will lead to better performance in the coming years too.

EXPORTS:

Export turnover had come down by 31% to 13.94 Crores against 20.15 crores in the previous year. Your Company endeavors continuously to increase export revenues in the coming years by expanding the customer base in the current market and penetrating to new markets.

MATERIAL CHANGES AND COMMITMENT IF ANY:

No material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year and the date of this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required under Section 134 (3)(m) of The Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished as Annexure – A to the Annual Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013:

Your Company has not provided any loan(s), guarantee(s) to any person or body corporate and has not made any investment(s) during the year under Section 186 of the Companies Act, 2013.

PUBLIC DEPOSITS

The Company has not accepted any deposits from Public within the meaning of Section 73(1) of The Companies Act, 2013, during the year under review.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:

In line with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has formulated a Policy on Related Party Transactions which is available on Companys website www.tanfac.com. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and the Related Parties.

The Company has obtained necessary prior omnibus approval from the Board pertaining to Related Party Transactions which were in the ordinary course of business and on an arms length basis. All such transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arms Length are placed before the Audit Committee on a quarterly basis for its review and approval.

AUDITORS & AUDITORS REPORT:

M/s. Khimji Kunverji & Co LLP Chartered Accountants, Mumbai were appointed as Statutory Auditors of the Company by the Members at their Annual General Meeting held on 28th September, 2016 for a term of five years and be ratified at every Annual General Meeting till completion of their tenure..

The Report given by the Auditors on the financial statements of the Company forms part of the Annual Report. There were no qualifications, reservations or adverse remarks made by the Auditors in their report.

Section 40 of the Companies Amendment Act, 2017 (amending Section 139 of the Companies Act, 2013) was notified on May 7, 2018 whereby ratification of Statutory Auditors appointment is not required at every Annual General Meeting. Accordingly, resolution for ratification of appointment of Statutory Auditors is not proposed.

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Compliance Certificate on Corporate Governance given by the Statutory Auditors, viz., M/s.Khimji Kunverji & Co LLP is forming part of the Annual Report.

COST AUDITOR

The Board of Directors of the Company has, on recommendation of the Audit Committee, approved the appointment of Shri N. Krishna Kumar, Cost Accountant, Cuddalore (Membership No.27885) for conducting the audit of cost records of the Company pertaining to Inorganic and Organic products manufactured by the Company covered under Central Excise Tariff Heading Chapter Nos. 28 and 29 respectively in compliance with The Companies (Cost Records and Audit) Rules, 2014.

The Board of Directors at their meeting held on 23rd June, 2020, have appointed Shri N. Krishnakumar, Cost Accountant as cost auditor for the Financial Year 2020-21 and necessary filing has been made with the Central Government.

SECRETARIAL AUDIT REPORT

The Board has appointed Ms. Kalyani Srinivasan (Practicing Company Secretary, Chennai (C.P. No.3109 & FCS No.5854), to conduct Secretarial Audit for the Financial Year 2019-20, which, inter alia, includes audit of compliance with the Companies Act, 2013, and the Rules made under the Act, Listing Agreement and Regulations and Guidelines prescribed by the Securities and Exchange Board of India.

The Secretarial Audit Report as required under Section 204 of The Companies Act, 2013 read with Rule 9 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is furnished under Annexure – C, does not contain any qualification, reservation or adverse remark.

RISK MANAGEMENT POLICY

The Company has internally constituted a Risk Management Committee to define its roles and responsibilities and laid down the procedure to assess the risk and minimization procedures. The Risk Management includes identifying types of risks and its assessment, risk handling & monitoring and reporting. The Board shall also be responsible for framing, implementing and monitoring the risk management plan for the company. The details of identified risk and mitigation plan would be reviewed by the Committee every quarter and forwarded to the Board with their recommendation, if any, and the same will be reviewed and discussed by the Board in their meeting.

The details of Risk Management as practiced by the Company are provided as part of Management Discussion and Analysis Report.

POLICIES

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandated the formulation of certain policies for all listed entities. The policies are reviewed periodically by the Board and updated based on need and new compliance requirements and are available in the Companys official website viz., www.tanfac.com.

Name of Policy Brief description Web URL
Related Party Transaction The policy to regulate all transactions between the Company and its Related Parties in compliance with various applicable laws, including under The Companies Act, 2013/SEBI (LODR) Regulations, 2015 http://www.tanfac. com/documents/ policy_ Materiality_Of_Related_ Party_Transactions.pdf
SEBI (prohibition of Insider Trading) Regulations, 2015 The Policy provides for fair disclosure of unpublished price sensitive information in dealing with securities of the Company. http://www.tanfac.com/ documents/policy_sebi. pdf
Whistle Blower Policy (vigil mechanism) The Company has established a vigil mechanism for its Directors and Employees to report their genuine concerns or grievances or violation of the Companys code of conducts and ethics, which will be monitored by the Audit Committee http://www.tanfac. com/documents/policy_ Whistle_Blower.PDF
Criteria for making payment to Non Executive Directors Except sitting fee for attending Board, Audit Committee and Stakeholders Relationship Committee meetings NO other remuneration paid to Directors. http://www.tanfac.com/ documents/who_non_ executive_directors.pdf
Policy for determi-nation of materiality of information or event Policy on Archival of documents Policy on preservation of documents This Policy facilitating prompt disclosure of material price sensitive information to the listed Stock Exchange(s) prepared in terms of SEBI (LODR) Regulations, 2015. http://www.tanfac.com/ documents/policy_matrl_ event.pdf
The policy framed for archival of the Companys records as required under SEBI (LODR) Regulations, 2015 http://www.tanfac. com/documents/policy_ archival_policy.pdf
The policy deals with retention of documents in permanent nature and not less than eight years after completion of the relevant transactions., http://www.tanfac. com/documents/policy_ preservation_Doc.pdf

DIRECTOR RETIRING BY ROTATION:

In terms of Articles of Association of the Company, Mr. R.Karthikeyan, Director, retires by rotation and being eligible, offers himself for reappointment.

DECLARATION BY INDEPENDENT DIRECTORS:

The Independent Directors of your Company have given their certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Companies Act, 2013. The details of the training and familiarization programmes and the Annual Board Evaluation process for Directors have been provided in the Corporate Governance Report.

The terms and conditions of appointment of Independents Directors, in line with the provisions of Schedule IV of the Companies Act, 2013 are available in the Companys official website link viz.., http://www.tanfac.com/documents/who_ appointment_independent_directors.pdf

BOARD EVALUATION:

The evaluation of Board of Directors and the Board, as required under Section 149(8) of The Companies Act, 2013, read with Schedule IV under Chapter VIII were done through selected parameters related to their roles, responsibilities and obligations of the Board and functioning of the Committee.

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the key function of the Board of Directors includes –

• To review and guide Corporate Strategy, major Plan of Action, Risk Policy, Annual Budgets & Business Plans, setting Performance Objectives.

• Monitoring the effectiveness of the Companys governance practices.

• Ensuring the integrity of the Companys Accounting and Financial Reporting Systems, including the Independent Audit.

• To provide strategic guidance.

• To maintain high ethical standards in the interest of the stakeholders.

• To exercise objective independent judgement on corporate affairs.

Accordingly, the performance of the board was evaluated by the board after seeking inputs from all the directors on the basis of the criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc. Similar evaluation was carried out by the Committee of the Board of Directors after seeking their inputs.

SEPARATE INDEPENDENT DIRECTORS MEETINGS:

The Independent Directors met once during the year in the absence of Non-Independent Director and discussed inter alia the performances of Non-Independent Directors, Senior Management including Key Managerial persons and the Board as a whole. They have also reviewed the quality, quantity and timeliness of the flow of information between the Company management and the Board.

FAMILIRISATION PROGRAMME:

The Familiarization Programme as required under SEBI (LODR) Regulations, 2015, aims at providing insights into the Company to enable Independent Directors to understand their roles, rights, responsibilities as Directors of the Company, the nature of the industry in which the Company operates, business model of the Company. The details of training programme are provided in the Companys website under URL –http://www.tanfac.com/documents/who_ directors_familiarization_programme.pdf

NUMBER OF MEETINGS OF THE BOARD

During the Financial Year 2019 - 20, the Board met four times and the details of which are given in the Report on Corporate Governance that forms part of this Annual Report. The time gap between two meetings as required under the listing agreement was well within the period.

BOARD COMMITTEES

Presently, the Board has four Committees, viz., Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and CSR Committee comprising of the required combination of Non-Independent and Independent Directors. Committee-wise details are furnished in the Report on Corporate Governance section of the Annual Report.

EXTRACT OF ANNUAL RETURN

The details forming part of the extracts of Annual Return under Form MGT-9, pursuant to the provisions of Section 92 Read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished in the Annexure – D.

INTERNAL FINANCIAL CONTROL (IFC) :

The Internal Financial control (IFC) stipulates a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The observations by the Internal Auditors and corrective actions thereon are presented at the Audit Committee which also oversees and evaluates the IFC periodically.

The Directors Responsibility Statement required under Section 13(3)(c) of The Companies Act, 2013, are available elsewhere in the Directors Report.

CORPORATE GOVERNANCE:

Your Company is strongly committed towards its philosophy of Corporate Governance. The Corporate Governance Report, along with the Auditors certificate regarding compliance of the conditions of the Corporate Governance as stipulated in Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with listing agreement with BSE Limited is forming part of the Annual Report.

A Certificate of the CEO and CFO of the Company, in terms of Regulation 17(8) as specified in Part B of Schedule II read with SEBI (LODR) Regulations, 2015, confirming the correctness of the Financial Statements, adequacy of the Internal Control measures and reporting of matters to the Audit Committee, is annexed.

Your Directors are pleased to report that the Company has fully complied with the SEBI guidelines and corporate governance as on Financial Year ended 31st March, 2020 and will continue to comply with the same.

INSURANCE

The Companys properties, Fixed Assets (including Building, Plant and Machinery & other insurable assets) and Currents Assets (including stock of Raw Materials, Finished Goods, Stores and Spares etc.,) are adequately insured.

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

As required under Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, read with the listing agreement with the stock exchanges, the Managements Discussion and Analysis Report for the year under review has been made & forming part of the Annual Report.

PERSONNEL:

Except sitting fees for attending the Board, Audit Committee and Stakeholders Grievance Committee meetings, no other remuneration is being paid to the Directors.

Pursuant to Section 197(12) of The Companies Act, 2013, read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of disclosure of remuneration paid to employee(s) are covered under the specified ceiling of drawing remuneration of 8.50 Lakhs per month are furnished in Annexure – D.

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are furnished in Annexure - D.

INDUSTRIAL RELATIONS:

Employee relations continued to be cordial throughout the year. The whole-hearted support of employees in the implementation of WCM, ISO-9002 systems and ISO 14001 amply demonstrate the high level of team work, sense of belonging to the organization, and solidarity with the Management.

PUBLIC DEPOSIT

The Company has not accepted any deposits from the public during the year and there was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2020.

RESEARCH AND DEVELOPMENT:

Your company has made the following efforts in Research & Development.

• R&D Teams Continuous efforts, helped to improve Quality of HF Acid for high end application. More work is in progress to further improve the Quality meeting very stringent customer Specifications.

• Your R&D Team implemented innovative ideas to increase productivity of Specialty Fluorides and achieved breakthrough in getting one of the Specialty Product qualified from Overseas Customer meeting their stringent product Quality requirements.

• Your R&D engineers have made changes in design of the kiln which is expected to improve specific consumption norms of Inputs.

• Continuous efforts and Out of box thinking by Engineers towards Energy conservation measures have resulted in reduction in Average Power Cost and also overall Fuel Cost.

• Your Company is dialoguing with Research Institutions and also with leading global players for technology tie up for forward integration products.

SAFETY, HEALTH AND ENVIRONMENT PROTECTION (SHE):

Your Company is committed to Safety, Health and Environmental Management System and processes.

Your Company in line with ABG Sustainability Frame work implements various Technical and Management standards related to Safety, Health and Environment through Enablon Software.

Your Company has an Integrated Management System (IMS) Certified by Intertek Certification Limited, UK for ISO 9001–2015-Quality Management System(QMS),ISO14001-2015 -Environmental Management System(EMS) and this year upgraded OHSAS18001:2007 to ISO 45001:2018 for Occupational Health and Safety Management Systems.

Additional measures taken to fight COVID19:Your Company has conducted wide awareness Campaign on COVID-19 to its employees including Contract employees and Residential Colony members. This includes frequent talk by Factory Medical Officer on various preventive and protective measures to be adopted by the individual employee and hourly announcement through Public Addressing System (PAS) Your Company has Constituted Corona Action Response Entity (CARE) with Cross functional members headed by Factory Medical Officer. This Committee along with other Functional Heads has prepared TANFAC Restart on Ultimate Safe Tracks (TRUST) -Corona Management Manual covering various Standard Operating Procedures starting from awareness to Employees about Corona Virus, Importance of body Temperature recording, Social distancing, Sanitization, Self declaration and Scenario Planning, Preparation for Monitoring, Responding, and assist Employees. You Company ensures stringent implementation of Safety and Environment Protection measures and the Board has mandated accordingly. Safety visuals, pictorials and sign boards are implemented across the plant areas Your Company Periodically Conducts Safety Audit and Risk Assessment to monitor risks and to have action plan for countering the risks. Your Directors also periodically reviews the safety Performance.

Your Company periodically conducts onsite mock drills and actively coordinates with the local Government and other nearby companies & Customers.

Your company has entered in to an agreement with neighboring companies for mutual sharing of safety resources during mock drill and during emergencies.

Your Company motivates employees, workers and contract workmen through training and retraining on safety aspects and also rewards best performers in Safety & Environmental aspects. Your company maintains green belt inside and outside of factory premises.

MANAGEMENT POLICY

We at Tanfac Industries Limited are committed to continual improvement of the processes of Management System affecting Quality, Cost, and Delivery along with Environmental Impact to prevent pollution and to comply with requirements of customers and interested parties and public.

SUSTAINABLE DEVELOPMENT – COMMUNITY DEVELOPMENT INITIATIVES – CORPORATE SOCIAL RESPONSIBILITY (CSR):

Your company has come under the ambit of mandatory CSR spending for the first time during the current financial year. The Board of directors have duly constituted the CSR Committee in their meeting held on 9th August 2018. The composition of the committee is given under Corporate Governance Report.

CSR is a continuing commitment by business to behave ethically and contribute to economic development of the local community and society at large. Creating value for the society is one of the major initiatives of CSR.

Projects are identified in consultation with the community and arriving their basic needs. Then take to the participatory appraisal process and based on consensus and discussion with the village panchayat, projects are implemented.

Focused areas are Education, Health, Sustainable Livelihood, Infrastructure development and social empowerment. All our CSR activities are carried out under the support and guidelines of Aditya Birla Centre for Community Initiatives and Rural Development. Your company is carrying out its community welfare activities in and around Cuddalore for more than a decade to underserved communities.

ADITYA BIRLA GROUPS VISION :

"To actively contribute the social and economic development of the communities in which we operate. In doing so, build a better ,sustainable way of life for weaker sections of society and raise the countrys human development index." Your company focuses on the specific initiatives which include –? Girl Child education.

? Education support to nearby schools.? Downtrodden women empowerment projects? Health Management including family welfare? Linking with Government agencies, NGO,s and other partners? Implementing activities for upliftment of communities involving government departments, Village panchayats so as to benefit for the society in the specific areas of Education, health, sustainable livelihood and health cater the needs of Children, women, old aged and physically challenged to the overall development of communities. Your company motivates and encourages its employees to actively participate in the various community development and CSR activities. A detailed report on CSR initiatives is annexed as Annexure ‘F to this report.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

Your Company has zero tolerance for sexual harassment at workplace. The Company has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act) and the Rules framed thereunder. Your Company has complied with provisions relating to the constitution of Internal Complaints Committee under the POSH Act. During the year under review your Company did not receive any complaint of sexual harassment.

HUMAN RESOURCES DEVELOPMENT:

Human resources play a significant role in your Companys growth strategy. Your Company believes that its knowledge capital will drive growth and profitability. The ongoing focus is on attracting, retaining and engaging talent with the objective of creating a robust talent pipeline at all levels. Your Companys Employee Engagement Score reflects high engagement and pride in being part of the organization.

The Groups Corporate Human Resources plays a critical role in your Companys talent management process. Initiatives like robust talent reviews, career development conversations and best-in-class development opportunities will help enhance the employee experience at your Company Your Company is engaged in a constructive relationship with employees with an emphasis on productivity and efficiency and underlining safe working practices. As on 31st March, 2020, your Companys employee strength was 144 employees (previous year 139 employees).

AWARDS AND ACCOLADES:

Your Company received the following awards during the year:? ‘Asias Most Trusted Fluorine Chemical Manufacturing Company Award from IBC Info Media, USA

? ‘Indias Most Trusted Brand and Companies Award - 2019 from IBC Info Media, USA.

ACKNOWLEDGEMENT:

Your Directors wish to express their appreciation for the continued assistance and cooperation of the consortium banks, Government authorities, customers, vendors and members during the year under review.

On behalf of the Directors and all shareholders, I would like to place on record my sincere appreciation of the committed services by the entire TANFAC family, comprising officers, staff and workers.

Finally, I look forward to your continued understanding and support in taking your Company forward in these challenging times.

For and on behalf of the Board
Chennai (R. KARTHIKEYAN)
7th August, 2020. Director