TO THE MEMBERS OF AARTI INDUSTRIES LIMITED
The Directors are pleased to present this Thirtieth Annual Report and
the Audited Statement of Accounts for the year ended 31st March'' 2013.
During the year'' your Company has merged the manufacturing operations
of its Associate Company'' Anushakti Chemicals and Drugs Limited (ACDL)
into Aarti Industries Limited (AIL) with efect from 1st April'' 2012 in
terms of Scheme of Arrangement duly approved by the High Courts of
Bombay and Gujarat at Ahmedabad. Your Company has allotted 94''71''614
equity shares of 5/- each to the shareholders of ACDL in terms of the
said Scheme of Arrangement'' whereby the Paid up Share Capital of the
Company has increased by about 12% to 44''29''58''435 divided into
8''85''91''687 equity shares of 5/- each fully paid up.
Upon the Scheme of Arrangement having become efective'' the merged
accounts have been drawn up for FY 2012-13 w.e.f. 1st April'' 2012.
Hence to this extent'' the fnancials for FY 12-13 may not be comparable
with previous year. ACDL had manufacturing units at Bhachau in the
State of Gujarat'' Tarapur and Dombivali in the State of Maharashtra
which are now merged into the Company. Apart from synergies derived in
respect of common products'' the said restructuring has increased the
volumes of existing range of products and would also facilitate
addition of newer products with diverse end usages into Fuel Additives''
etc. having high growth possibilities. Restructuring has also helped
spread of overall products and markets specifc risks and improve
operating margin as well.
Net Sales: 205''764 163''226
Other Operating Income 3''861 4''105
Total Income from Operations (Net) 209''625 167''331
a) Cost of Material Consumed 126''120 97''926
b) Purchases of Stock-in-trade 9''312 14''049
c) Changes in inventories of
Finished Goods'' Work-in-progress
and Stock-in-trade (7''107) (2''354)
d) Employee Benefts Expenses 6''538 4''705
e) Depreciation and
Amortisation Expenses 8''284 5''485
f) Other Expenses 38''641 28''078
Total Expenses 181''788 147''889
Proft/(Loss) from Operations before
Finance Costs and Exceptional Items 27''837 19''442
Other Income 376 361
Proft/(Loss) before Finance Costs 28''213 19''803
Finance Costs 9''537 7''184
Proft/(Loss) before Tax 18''676 12''619
a) Provision for Taxation-Current 4''624 3''356
b) Provision for Deferred Tax 752 260
Total Tax Expenses 5''376 3''616
Net Proft/(Loss) after Tax 13''300 9''003
Share of Proft/(Loss) of Associates 241 1''431
Minority Interest (100) (108)
Net Proft/(Loss) after consolidation 13''441 10''326
Earnings Per Share 15.17 13.45
Book Value Per Share 85.36 74.59
Your Company had declared and paid Interim Dividends of Rs. 2.75 (@ 55%)
per share (of Rs. 5/- each). Your Directors are pleased to recommend a
Final Dividend of Rs. 1.25 (@ 25%) per share (of Rs. 5/- each) for FY
2012-13'' thereby total Dividend aggregating to Rs. 4/- (@ 80%) per share
(of Rs. 5/- each) for FY 12-13 compared to the total Dividend of Rs. 3.50
(@ 70%) per share (of Rs. 5/- each) for FY 2011-12. The total amount of
Dividend pay-out for the year would be Rs. 35.44 crs (previous year Rs.
Company has transferred Rs. 13.15 Crores to General Reserve (PY Rs. 8.80
During the year'' your Company has achieved multiple milestones.
Standalone Net revenues of the Company crossed Rs. 2000 Crores mark and
ended at Rs. 2096 Crores (previous year Rs. 1673 Crores). Similarly Exports
had also crossed Rs. 1000 Crores and closed at Rs. 1060 Crores. Hence with
these record breaking performance'' our exports now constitute over 50%
of the total revenues of the Company. The EBIDTA margins for the
Company also improved from 14.6% for FY 11-12 to 17% in FY 12-13.
Operating proft before Interest'' Depreciation and Tax for FY 12-13 was
at Rs. 356 crs (Previous Year Rs. 245 Crores) Proft before tax for FY12-13
was at Rs. 184 Crores (Previous Year Rs. 122 Crores) Proft after Tax and
Deferred Tax grew to Rs. 131 Crores for FY 12-13 from Rs. 87 Crores for FY
Consolidated Income increased by 25% to Rs. 2096 Crores as compared to Rs.
1673 Crores for last year. Consolidated EBIDTA also grew by about 45%
to Rs. 365 Crores as against Rs. 253 Crores last year. Net Proft after
Consolidation also recorded a growth of 30% at Rs. 134 Crores as against
Rs. 103 Crores for last year. Consolidated EPS for FY 2012-13 was at Rs.
15.17 as against Rs. 13.45 for FY 2011-12.
During last year'' with introduction of various high growth and high
margin export oriented products'' the share of Exports Revenue to Total
Revenue have crossed the 50% benchmark. The ability to provide
products with required specifcations at desired intervals have added to
the increase in volumes from Global customers over longer term period.
Your Company has entered into various long term supply agreement with
its key customers thereby further strengthening its Global market
positions. Signifcant volume growth is coming from our customers in
Europe and America and in few of the products the demand is more than
the production capabilities of the Company. Exports now'' accounts for
51% of the total revenue and have increased by over 46% to Rs. 1060
Crores for FY 12-13 from Rs. 727 Crores for FY 11-12.
CHEMICAL INDUSTRY – STRUCTURE & DEVELOPMENT
Chemical Industry is one of the fastest growing industries in the
Indian Economy. At the same time it is also one of the oldest domestic
industry of India which started working soon after India’s Independence
in 1947. It accounts for 18% of the Indian manufacturing sector output
and is expected to grow by about 12% annually. It constitutes for about
15% of India’s Exports and has around 8% share in India’s Imports. From
those early years'' the Chemical Industry in India continued to
contribute to the Economic Growth of Indian Economy. At present'' the
Chemical Industry accounts for almost 13% of Indian GDP.
A network of over 200 national laboratories and 1300 R&D Centres
provide a strong base for further innovations and growth of Indian
Chemical Industry. Government Initiatives in the form of Port based
Chemical Parks in SEZ'' Improvement in Infrastructure'' Tax concessions''
reduction and rationalization of Duty Structure'' FDI relaxation'' etc.
plough the road for further growth of the Indian Chemical Industry into
a major Chemical hub. End user Industries like Agro-Chemicals''
Automotives'' Biotechnology'' Electronics'' Packaging'' Pharmaceuticals''
Pigments'' Polymers'' Surfactants'' etc have been witnessing good demand
and are poised for faster growth.
Thus'' Indian Chemical Industry holds potential to produce quality
chemicals for global consumers because of its diversifed manufacturing
base'' strong IPRs'' availability of qualifed work force'' proximity to
ports'' availability of feedstock'' etc.
With concerns on environmental impact'' the Indian Government has been
working towards ensuring stricter compliance of efuent norms''
categorizing alert zone'' identifying and restricting the operation of
the polluting units. This has made Indian companies to scale up their
units in parity with international standards. In this process'' while a
lot of units have been closed down'' we are also witnessing the
emergence of Indian Global Chemical Companies capable of competing with
the other Asian players'' while also adopting safer and greener
Your Company is a leading manufacturer of Speciality Chemicals with
diversifed end-uses into Agrochemicals'' Pharmaceuticals'' High
Performance Polymers'' Paints'' Pigments'' Printing Inks'' Rubber
Chemicals'' Additives'' Surfactants'' Dyes'' Oil & Gas additives'' Flavours
& Fragrances'' Home & Personal Care applications'' etc. Your Company’s
derisking by diversifcation has helped it withstand the volatilities &
downturns of a specifc end-user segment and also helps to capitalize on
the growth opportunities in other end-user segments.
Your Company believes that the long term growth and proftability from
the business cannot be sustained without a framework considering the
elements of Safety'' Health'' Environment Impact and Energy Efciency
initiatives. With these principles'' your Company have stepped up its
eforts for the sustainable growth of its businesses. Your Company is
committed to increase the process safety and increasing the level of
automation in its existing areas of operation. This will help in
reducing the manual handling and shopfoor manpower. Your Company has
adopted the 3R Principle'' i.e.'' Reduce – Recover – Reuse. Over last 18
months'' your Company has made substantial Investments into upgrading
the ETP setup and had upgraded two of its Manufacturing Units into Zero
Discharge Unit and also has put in places various processes to
control/limit of generation of efuents and improve on the treatment of
the same. Your Company plans to invest further in these areas to ensure
providing greener and safer manufacturing environment.
Your Company is a multi-product and multi-faceted one. Depending on
these product categories we divided our businesses into four segments.
The profle/composition of these business segments is presented:
We present below the breakup of key segmental fnancials:
euticals Home &
Chemicals & Fertilizers Care
Sales 1319 438 187 152 2096
Total Sales 62.93% 20.90% 8.92% 7.25% 100.00%
Export 739 207 92 22 1060
% of Sales 56.03% 47.26% 49.20% 14.47% 50.57%
EBIT 236 83 9 5 333
% of Sales 17.89% 18.95% 4.81% 3.29% 15.89%
While Performance Chemicals and Agri-intermediates segments continues
to account for over 80% of operations'' it may be noted that the growth
in the business this year is mainly driven by the fact that the exports
across all the segments has increased signifcantly. Your Company’s
market position as a major global manufacturer of Chloro Benzenes &
Nitro Chloro Benzenes and their derivatives with committed and
customized delivery solutions have helped us cross Rs. 1000 Crores mark
of global revenues. Your Company’s USP of having highly integrated
operation with process fexibility adds to the growth in customer’s
confdence which is translated into consistent volume growth even in
times of adversities. Your Company’s diversifed product mix spread
across stream of end user industries catering to smaller as well as
larger MNC conglomerates in each segment / sub-segments have helped the
Company to insulate itself against global economic cycle.
Interchangeable Performance & AgroChemicals manufacturing operations.
The Manufacturing units for these two segments are majorly
interconnected/interlinked at the common manufacturing units located at
Vapi'' Sarigam'' Jhagadia and Bhachau in the State of Gujarat and at
Dombivali & Tarapur in the State of Maharashtra. A signifcant portion
of your Company’s production capabilities are process driven and not
based on a particular product. This gives your Company the fexibility
to change its input mix and manufacture diferent products'' thereby
resulting into optimum utilization of production capabilities as well
as provides fexibility to change the product mix amongst diferent
end-user applications based on market dynamics.
Your Company manufacturers various isomers as well as their downstream
products. Because of the vertical integration'' your Company enjoys
natural insulation against short supply of precursor raw materials.
Thus'' consistent supply of products results into customer confdence and
helps your Company to gain more market share. Your Company has also
been able to convert its by-product from various processes into
commercially viable products'' thereby contributing to the proftability
of the Company.
Hydrogenation Facility at Jhagadia:
Your Company had pioneered by adopting Greener Hydrogenation process
based Swiss Technology in India and have scaled up the capacities to
3000 tpm in Q3FY12-13. This expanded / additional hydrogenation unit
shall help the Company to cater to the growing'' high margin and niche
demand in the segments of Polymers'' Agrochemicals'' Pigments'' etc. in
global markets. This shall also facilitate introduction of export
oriented further value added range of products. Hence with these
expanded capacities coupled with strong market position'' the Company
expects to post signifcant growth in revenues and margins in coming
years. The Company had recorded the production of over 1550 tpm of
hydrogenated products in the quarter ended 31st March 2013. Annual
average production for FY 12-13 was 1390 TPM as compared to 1165 TPM
for FY 11-12. Also'' with the commissioning of the backward integrated
Hydrogen Gas Generation Plant'' your Company is also assured for
continuous supply of the feed raw material for the above mentioned
Hydrogenation Unit. Thus this increase in hydrogenation capacities has
enabled your Company to cater to the growing'' high margin & niche
demand segments of Performance and Agro ingredients in the global
market. Your Company now targets to produce around 2000-2200 tpm of
Hydrogenated products in FY 2013-14.
Key Expansion Activities:
During last fnancial year'' a major German manufacturer had closed down
and discontinued the manufacturing of Nitro Chloro Benzenes due to
lower captive demand. This has opened up a large market (both domestic
as well as for exports) for Nitro Chloro Benzenes. Considering this
your Company has already taken up the expansion of its Nitro Chloro
Benzenes (NCBs) capacities on fast track. Against the present capacity
of about 57000 MT'' the production achieved in FY 12-13 was about 48072
MT (previous year about 42696 MT). Your Company now proposes to expand
the existing capacities of 57000 MT to about 75000 MT with an estimated
capital outlay of about 25 to 30 Crores and expects to commission the
same by end of current fnancial year.
Your Company is in the process of upgrading its 6 Batch Nitration
capacities and consolidate the same into 4 Continuous Nitration units.
While this will increase the level of automation of the process'' it
will also facilitate overall increase in production capabilities. It
will also result in increasing the consistencies & yields of various
products and simultaneously help to reduce the consumption of fuel and
other utilities. This would thus also entail higher volumes with
signifcant cost savings with more safer and highly automated
New Investment at Dahej SEZ:
Your Company had set up a new venture in 2012 under the name of
Anushakti Specialities LLP in which your Company holds 90% stake and
the balance 10% stake was held by ACDL which stake has since merged
with the Company upon the restructuring as aforesaid.
This LLP has purchased a plot of about 50''000 sq. mtrs at Dahej SEZ and
is in the process of setting up an Ethylenation unit for manufacturing
ethylene based products with end-user application as Agro Chemicals and
Speciality Chemicals'' majorly in Global Markets. Your Company is in the
process of fnalizing the newer technologies which shall be commissioned
at this unit. The unit is expected to be commissioned in FY 2014-15.
With availability of key raw materials in Dahej'' we propose to purchase
the same by pipeline. Considering the niche product segment'' growing
global demand'' and the benefts available at SEZ'' this unit is expected
to signifcantly add to turnover and proftability of the Company.
Upon the Scheme of Arrangement with ACDL being efective'' your Company
now holds 100% stake in Anushakti Specialties LLP. Your Company
proposes to absorb this entity into itself subject to regulatory
approvals as may be specifed.
With the merger of manufacturing division of Anushakti Chemicals &
Drugs Ltd. (ACDL) becoming efective'' products of ACDL having
applications as Polymer Additives and Oil & Gas Additives had been
added to the segment of Performance Chemicals. With the additions of
ACDL’s products'' the Performance Chemicals now provides for a
consistent and sustained growth to Company’s operations.
We present below the key fnancials for Performance Chemicals:
Key Financeal FY 2012-13 FY 2011-12 FY 2010-11
Sales 1319 968 1030
% of Total Sales 62.93% 57.85% 70.89%
Export 739 496 412
% of Segment Sales 56.03% 51.27% 39.99%
Segment EBIT 236 142 145
EBIT % 17.89% 4.65% 4.07%
(* Figures for 12-13 may not be comparable as the same are inclusive of
the fgures of ACDL after adjusting the same for interse transactions
between AIL and ACDL)
As you would note'' this segment accounts for about 63% of the total
revenues (previous year 58%) of the Company. Exports of Performance
Chemicals accounts for 70% of the total exports of the Company and
constitute over 56% of the segment revenue.
The diversity in end user segments from High Performance Polymers''
Paints'' Pigments'' Printing Inks'' Rubber Chemicals'' Additives''
Surfactants'' Dyes'' Oil & Gas Additives'' Flavours & Fragrances'' etc. is
the inherent strength and de-risks the segment from individual end-user
downturns. The wider customer base from varied industry also reduces
the credit risk and thus provides sustainability and stability to the
Performance Chemicals segment broadly comprises of Speciality Chemicals
with applications into
a. Polymers & Additives''
b. Dyes'' Pigments'' Paints'' Printing Inks''
c. Oil & Gas Additives'' Rubber Chemicals'' Flavours & Fragrances'' Water
Treatment'' Construction Chemicals'' Resins'' etc.
On account of the wide diversity in product applications'' the segment
on an overall basis is expected to grow with Key driving industries for
growth of Performance Chemicals are summarised below.
- Polymers & Additives:
Usage of High Performance Polymers has been increasing as a replacement
of metal parts in various mode of transportation worldwide'' as an
endeavor to reduce the weight and improve the fuel efciency. In
addition to this'' these polymers are also used in high growth segments
such as electronic media & telecommunication devices and various other
Electrical Instruments. With the availability of additional
Hydrogenation Capacities'' your Company expects to increase the volumes
of these Polymer intermediates to cater the growing international
With a view to capitalize on the by-product Hydro Chloric Acid by
converting it into a gainful product'' a Calcium Chloride Granulation
unit was set up by ACDL at Bhachau which unit has since been merged
with the Company. Your Company has for the frst time in India'' imported
this technology for granulation of Calcium Chloride. This unit improves
the quality of end product and will be able to manufacture high grade
granules'' which are used into Oil Exploration and de-icing activities.
This products will be mainly exported and is expected to fetch
signifcant higher margins.
- Dyes'' Paints'' Pigments and Printing Inks:
This sector has witnessed a shift in the consumption pattern of
Printing Inks based applications. While the demand for Printing inks in
developed economies are reducing'' the same is increasing in developing
economies on account increasing per-capita income & consumption
(along-with changes in consumption profle)'' growth in education and
healthcare facilities'' etc.
The global replacement of usage of Organic Pigment vis-ŕ-vis Metal
Pigments has been the driving force behind the signifcant growth of
Pigment applications globally and shall continue further going forward.
With a signifcant Japanese player having ofcially closed production of
a key Pigment & Printing Ink intermediate in the frst quarter'' an
opportunity has opened up for increasing our presence in the Pigment
application. Your Company has immediately taken steps to increase the
capacities for this application. The Company has already supplied these
products to the prospective customers and is in the process of
qualifying with these new customers for these products. This enhanced
new capacity is presently under commissioning. We expect further volume
growth in these products from FY 13-14 onwards so as to meet the supply
gap arising as aforesaid.
While the demand from global markets for Pigments and Paint application
has been increasing'' the demand from the dyes sector is still afected
by downturn. Your Company is monitoring this situation and shall take
adequate steps for product realignment once the demand picks up.
Your Company’s strong position in this segment will help further to
capitalize on the global growth opportunities.
Agri-Intermediates and Fertilizers
India’s Agrochemicals Industry valued at about US$ 2 bn'' is the fourth
leading producer of Agrochemicals after USA'' Japan and China and has
been growing annually at about 7.5%. Emphasis on achieving foodgrain
self-sufciency'' limited farmland availability and growth in
horticulture and foriculture have been the reasons for the growth of
Exports account for over 60% of India’s Agrochemicals produce and are
expected to have a double digit growth in years to come. Many foreign
companies are tying up with local manufacturers to expand into this
sector for domestic & global requirements.
The launch of nutrient based subsidy programme for more efective scheme
of distribution of the subsidy directly to the end users would beneft
the direct end-users in long term and it will also ensure has
distribution of the subsidy to the eligible people at large. In
addition to these administrative reforms'' the Government has also
rolled out a series of tax incentives to further promote the growth of
this high growing Fertilizer and Agro based-businesses in India.
Your Company is a leading global manufacturer of various Agrochemicals
Intermediates and has presence across all the sub-segments viz.
herbicides'' insecticides'' and other agrochemicals.
We present below the key fnancials for Agri Chemicals & Fertilizers
( in Crores)
Key Financeal FY 2012-13 FY 2011-12 FY 2010-11
Sales 438 382 198
% of Total Sales 20.90% 22.85% 13.60%
Export 207 143 92
% of Segment Sales 47.26% 37.52% 46.46%
Segment EBIT 83 75 41
EBIT % 18.95% 19.73% 20.71%
P.S: A major part of domestic sales is used to manufacture products for
Your Company has been focusing on the growth opportunities for these
products in global markets and has been closely working with the Global
Leaders in this space to cater to their customized requirements of
agrochemicals. After years of eforts to develop this market'' the
Company has been witnessing consistent growth in the exports of these
products. Your Company’s products are now being sold across all markets
such as NAFTA'' Asia'' Europe'' Latin America'' and other territories.
This has also helped to de-risk the business from various local
climatic changes as also across the world. This is witnessed by y-o-y
growth in exports of these products as shown in the table above.
Your Company is also manufacturing Single Super Phosphate (SSP) (a
widely used fertilizer). It is a gainful usage of the by-product Dilute
Sulphuric Acid (generated by other Chemical units) and is marketed
under the guidelines prescribed by Government of India. The production
of SSP also saves the Company from the hassles of management and
disposal of the said by-product. India is amongst the largest
manufacturer and consumer of SSP across the world. An area wise
consumption data of SSP is presented below:
State Consumption %
Rajasthan 1242 28.11%
Madhya Pradesh 852 19.28%
Maharashtra 631 14.29%
West Bengal 479 10.85%
Gujarat 298 6.75%
Uttar Pradesh 258 5.83%
Andhra Pradesh 228 5.16%
Chattishgarh 168 3.80%
Tamilnadu 168 3.80%
Karnataka 56 1.26%
Assam 32 0.73%
Haryana 6 0.14%
Total 4417 100.00%
Source: Fertilizer Association of India
States of Maharashtra'' Gujarat'' Madhya Pradesh and Rajasthan accounts
for over 68% of India’s total consumption of SSP. Your Company thus
enjoys the locational benefts of having manufacturing unit in Gujarat''
thereby also benefting from the reduced freight costs as compared to
other States. During FY 2012-13'' there had been a drought situation in
major parts of India. As a result the sale for SSP (Fertilizer) had
been afected. Inspite of having lower volumes in frst half'' our sales
of SSP for FY 2012-13 was around 65446 MT as compared 63266 MT in FY
2011-12. Considering our existing capacity of 100''000 MT'' we account
only about 2% of India’s Production Capacities and about 1.4% of
India’s total consumption. In view of this'' we expect to have sales
volumes of about 80000 - 90000 MT of SSP for FY 2013-14.
With the expansion in other manufacturing capabilities'' need for
additional SSP capacities (for captive consumption of by- product) is
expected. Envisaging the same'' your Company is exploring the
feasibility for setup an additional SSP unit with capacity to
manufacture 200''000 Tons at Jhagadia'' Gujarat to cater to the demand in
the States of Gujarat'' Rajasthan and Madhya Pradesh.
Pharmaceuticals Industry accounts for almost quarter of the Indian
Chemical Industry. From being a startup and base level operations''
Indian Pharma Companies have evolved to be a leader in the production
of high quality generic drugs.
Patent expirations'' weak pipeline quality and increasing focus by
Governments to reduce healthcare costs continue to exert pressure on
innovator companies which supports outsourcing to low-cost nation like
India. Despite challenges'' leading Indian players continue to exhibit
strong proftability indicators.
Outlook on the Indian pharmaceutical companies remains favourable as
companies will continue to beneft from recovery in the domestic market''
strong growth potential in generics developed markets and potential
Globally'' generics players however continue to face competitive
environment from large innovator companies. Price erosion'' especially
through regulatory interventions'' remains a foremost challenge in the
European markets. Presence in limited competition products segments and
over-the-counter (OTCs) segment ofers some protection to margins. Most
developed markets continue to move away from branded generics to
commoditized un-branded generics and lower margin tender based
Your Company has four manufacturing units of which - two are USFDA
approved facilities & other two are WHO GMP approved facilities. These
plants are cGMP compliant - meeting ICH Q7 standards - thus enabling
buyers to use APIs in all regulated markets. Unlike other companies''
your Company has capacities for inhouse production of intermediates and
hence it is not dependent on China for the same. This helps your
Company to reduce the costs for its APIs and thus enhances the margins
of its range of products.
We present below the key fnancials for Pharmaceuticals Segment:
Key Financeal FY 2012-13 FY 2011-12 FY 2010-11
Sales 187 165 131
% of Total Sales 8.92% 9.86% 8.98%
Export 92 66 46
% of Segment Sales 49.20% 40.00% 35.15%
Segment EBIT 9 4 (6)
EBIT % 4.81% 2.55% NIL
The volumes of these products have been consistently increasing which
has helped improvement in margins and segmental proftability. The same
is evident from increase in revenues as tabulated above. Similarly'' the
EBIT for FY13 increased to 9.5 Crores as against 4 Crores for FY
2011-12. You would note that the EBIT margins have been improving and
it increased to over 5% of sales in FY13 as compared to 2.55% of sales
for FY12. Thus the incremental growth in revenues in this segment will
result into signifcant improvement in EBIT. We expect the segment to
grow as faster pace in coming years.
Home & Personal Care Chemicals
Rising per capita income have enabled the increase of consumption of
hygiene and personal care products. Increasing consumption is driving
demand for wide range of cosmetic chemicals'' health care products as
well as hygiene products using performance chemicals'' polymers and oleo
We present below the key fnancials for Home & Personal Care Chemicals
( in Crores)
Key Financeal FY 2012-13 FY 2011-12 FY 2010-11
Sales 152 158 95
% of Total Sales 7.25% 9.47% 6.52%
Export 22 21 10
% of Segment Sales 14.47% 13.21% 10.94%
Segment EBIT 5 5 5
EBIT % 3.29% 3.11% 5.36%
Home & Personal Care Chemicals segment is relatively a low margin
business. Your Company has two manufacturing units'' one each at
Pithampur (Madhya Pradesh) & at Silvassa. Your Company’s plans to
optimize its production capabilities to suitably alter/revise the
product mix has helped marginal improvement in margins inspite of
reduction in sales volumes. The commissioning of the Spray Dryer
project in Q4FY2012-13 and the product reshufing exercise is expected
to improve the margins in coming quarters. Your Company is also
focusing on increase in exports of its products under this segments.
This will help in better realization and improvement of margins.
No. Particulars Standalone Consolidated
(A) Primary Segments :
1 Segment Revenue
a) Performance Chemicals 131''948 131''961
b) Agri-Intermediates & Fertiliser 43''818 43''818
c) Pharmaceuticals 18''684 18''684
d) Home & Personal Care Chemicals 15''162 15''162
TOTAL 209''612 209''625
2 Segment Results Proft / (Loss)
(Before Tax and Interest
from each Segment)
a) Performance Chemicals 23''587 23''587
b) Agri-Intermediates & Fertilizer 8''308 8''308
c) Pharmaceuticals 945 945
d) Home & Personal Care Chemicals 503 503
TOTAL (A) 33''343 33''343
Less: Interest 9''500 9''537
Other Unallocable Expenditure (Net) 5''459 5''130
TOTAL (B) 14''959 14''667
TOTAL PROFIT BEFORE TAX (A-B) 18''384 18''676
(B) Secondary Segments :
a) India 103''651 103''664
b) Out of India 105''961 105''961
TOTAL 209''612 209''625
SEGMENT CAPITAL EMPLOYED
Fixed Assets used in the Company’s business or Liabilities contracted
have not been identifed to any of the reportable segments'' as the Fixed
Assets and services are used interchangeably between segments. The
Company believes that it is currently not practicable to provide
segment disclosures relating to capital employed.
RISKS AND CONCERNS
Your Company perceives risks or concerns common to industry such as
concerns related to the Macro Indian Economic Outlook'' Global Economic
fallout'' Regulatory risks'' Foreign Exchange volatilities'' Higher
Interest rates'' Rising Raw-material costs and other commercial &
business related risks. Segments like Agrochemicals'' Pharmaceuticals
and Home & Personal Care are not much afected by the economic cycle and
have its own independent growth rates. Further your Company’s
diversifed revenue mix'' fexible product mix and increasing volumes from
value added products helps to insulate the business from any economic
Volatility in foreign exchange rates of Indian Rupee vis-a-vis US$ is
now an inherent risk. Your Company’s policy to hedge only those
exposures which are backed by confrmed orders protects it from taking
any unwanted positions and thus is not signifcantly afected by any such
Chemical Businesses have lot of inherent process risks. To ensure that
this risks do not arise'' your Company had stepped up its eforts for
adopting greener'' cleaner and safer manufacturing operations. Your
Company have also been increasing and upgrading the level of automation
in the existing processes thereby providing for a safer working
Chemical businesses are generally working capital intensive and hence
the working capital requirements are also higher. Your Company has
been making continuous eforts to reduce the overall working capital
cycle. With these eforts and higher cash accruals going forward''
debt-equity ratio is expected to be better in coming years.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has clearly laid down policies'' guidelines and procedures
that form part of internal control systems'' which provide for automatic
checks and balances. Your Company has maintained a proper and adequate
system of internal controls. This is to ensure that all assets are
safeguarded and protected against loss from unauthorized use or
disposition and that the transactions are authorised'' recorded and
reported diligently. Your Company’s internal control systems
commensurate with the nature and size of its business operations. The
internal Auditors’ Reports are regularly reviewed by the Audit
Committee of the Board.
DIRECTORS’ RESPONSIBILITY STATEMENT
As required u/s. 217(2AA) of the Companies Act'' 1956 (the Act):
(i) That in the preparation of the Annual Accounts for the Year ended
31st March'' 2013'' the applicable Accounting Standards had been followed
along with proper explanation for material departures'' if any;
(ii) That the Directors had 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 afairs of the Company at the end of the fnancial year of the proft
of the Company for that year;
(iii) That the Directors had taken proper and sufcient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the Assets of the Company and
for preventing and detecting fraud and other irregularities;
(iv) That Directors’ have prepared the annual accounts on a going
The Company has 3 subsidiaries'' namely'' Aarti Corporate Services
Limited'' Shanti Intermediates Private Limited'' Nascent Chemical
Industries Limited. The Statement pursuant to Section 212 and summary
of fnancial information of Subsidiary Companies is provided in the
In accordance with the general circular issued by the Ministry of
Corporate Afairs'' Government of India'' the Balance Sheet'' Statement of
Proft and Loss and other documents of the subsidiary companies are not
being attached with the Balance Sheet of the Company. The Company will
make available the Annual Accounts of the subsidiary Company and the
related detailed information to any member of the Company who may be
interested in obtaining the same. The annual accounts of the subsidiary
will also be kept open for inspection at the Registered Ofce of the
Company as well as at the head ofce of the Subsidiary Company. The
Consolidated Financial Statements presented by the Company include the
fnancial results of its Subsidiary Company.
CONSOLIDATED FINANCIAL STATEMENTS
Your Directors have pleasure in presenting Consolidated Financial
Statements which form part of the Annual Report and Accounts.
In accordance of the provisions of the Companies Act'' 1956'' and the
Articles of Association of the Company'' Smt. Hetal Gogri Gala'' Shri
Shantilal T. Shah'' Shri Ramdas M. Gandhi'' Shri Haresh K. Chheda and
Shri Parimal H. Desai retire by rotation and being eligible'' ofer
themselves for re-appointment. A brief profle of the Directors proposed
to be appointed/re- appointed is given in the notice of the ensuring
Annual General Meeting.
Your Company has complied with the mandatory Corporate Governance
requirements stipulated under Clause 49 of the Listing Agreement.
Report on Corporate Governance is annexed hereto forming part of this
DISCLOSURE OF PARTICULARS
Information as per the requirements of Section 217(1)(e) of the
Companies Act'' 1956'' read with Rule 2 of Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules'' 1988'' relating
to Conservation of Energy'' Research & Development'' Technology
Absorption'' Foreign Exchange Earnings and Outgo are annexed hereto
forming part of this Report.
ENVIRONMENTAL'' SAFETY AND HEALTH
Your Company is committed to ensure sound Safety'' Health and
Environmental (SHE) performance related to its activities'' products and
services. The Company is taking continuous steps to develop Safer
Process Technologies and Unit Operations. Your Company has been
investing heavily in areas such as Process Automation for increased
safety and reduction of human error element'' enhanced level of training
on Process and Behaviour based safety requirements'' adoption of
expensive but safe & environment friendly production processes''
Installation of Bioreactors'' Chemical ROs'' Multiple efect evaporator
and Incinerator'' etc. to reduce the discharge of efuents'' commissioning
of Waste Heat recovery systems'' and so on to ensure the Reduction''
Recovery and Reuse of efuents & other utilities. Monitoring and
periodic review of the designed SHE Management System is done on a
continuous basis. Your Company already has two Zero Discharge” units
and is reviewing to convert couple of more units as Zero Discharge
units in future. The Company is committed to continuously take further
steps to provide a safe and healthy environment.
CORPORATE SOCIAL RESPONSIBILITY
As contribution towards community development to fulfll the company’s
obligations towards the society'' Aarti Industries Limited alongwith its
Promoters and Associate Companies (collectively referred as Aarti
Group) have taken several initiatives to this cause in its journey so
far. In addition to the Financial Support'' your Management is
personally and continuously involved to ensure the reach of these
initiatives to the society at large. Few of these initiatives founded
and continuously supported by Aarti Group are briefed hereunder:
Aarti Group had set-up a school named Tulsi Vidya Mandir at Kutch''
Gujarat in the year 2005'' and have been aiding regularly to meet its
objectives. Presently'' Tulsi Vidya Mandir imparts Secondary & Higher
Secondary education to over 350 children coming from about 12 villages.
Aarti Group also founded Mahavir School/College of Nursing at Sabar
Kantha'' Gujarat in the year 2008'' with an objective to spread
professional nursing education to the interior villages. Every year
around 200 candidates from interior villages are enrolled and trained
in Nursing Profession. With the objective to uplift the lower segment
of our society'' Maninagar Sanskar Dham'' at Kutch in Gujarat'' was
founded by Aarti Group in the year 2011. On an average over 40 slum
kids are nurtured by this institution.
Aarti Group had also set-up Mahavir Health Centre at Alam Nagar'' Bihar
in the year 2010'' to provide better healthcare facilities in this part
of Bihar. This Centre is equipped with latest equipments including its
own OPD'' X-Ray'' and Pathology facilities. On an average around 50
patients are treated at this Centre. With the objective to provide
relief from the recent drought situation prevailing in Maharashtra''
Aarti Group undertook various drought relief activities in the village
of Beed'' Maharashtra. Under this programme'' Aarti Group deployed
several water tankers to provide this basic amenity. It also arranged
for distribution of fodder and temporary shelter to cattles afected by
this severe drought.
In addition to above'' your Company organizes many activities on regular
basis including Blood Donation Camps'' Health checkup camps'' etc. The
Company has been donating to several Hospitals'' Educational
Institutions'' Trusts'' and contribution for area beautifcations. The
company also contributes for relief measures in times of natural
calamities. In parlance to the objective of providing basic primary and
secondary education in the surrounding areas'' your company actively
contributes for the upgradation & infrastructure development of the
schools. The Company envisages the upliftment of society by way of
enlightening and educating the masses. In this regard the company plans
to promote cheap as well as subsidized housing facilities for its
employees and also deserving members of the society. The company thus
promotes the Shelter'' Health and Education led modal for the general
upliftment of the society. With the view to contribute for upliftment
of society'' our Chairman Emeritus'' Shri Chandrakant V. Gogri has
committed a major portion of his time for these Philanthropic
activities. Your Company has extended its full support to this cause
and shall always remain committed for the same.
As required by the Provision of Section 217(2A) of the Companies Act''
1956'' read with Companies (Particulars of Employees) Rules'' 1975 as
amended up-to-date'' the names and the other particulars of the
Employees are set out in the Annexure to the Directors’ Report.
However'' as per the Provisions of Section 219(1)(b)(iv) of the
Companies Act'' 1956'' the Reports and Accounts are being sent to all the
Shareholders of the Company excluding the aforesaid information. Any
Shareholder interested in obtaining such particulars may write to the
Company Secretary at the Registered Ofce of the Company.
M/s. Parikh Joshi & Kothare'' Auditors of the Company retire at the
ensuing Annual General Meeting and are eligible for reappointment.
Members are requested to appoint Auditors and to fx their remuneration.
The Cost Auditor Ms. Ketki Visariya (Fellowship No. 16028)'' Cost
Accountant'' re-appointed by the Company under Section 233B of the
Companies Act'' 1956 attend the Audit Committee Meeting'' were cost audit
reports are discussed.
The due date for fling the Cost Audit Reports for the fnancial year
ended 31st March'' 2012 under the new XBRL format was 28th February''
2013 and the Cost Audit Reports for Organic-inorganic Chemicals'' Bulk
Drugs and Fertilizers were fled by the Cost Auditors on 28th February''
2013. The due date for fling the Cost Audit Reports for the fnancial
year ended 31st March'' 2013 is 30th September'' 2013.
INDUSTRIAL RELATIONS & HUMAN RESOURCES
The Company enjoys cordial relation with its employees at all levels.
Your Company continues to ensure safety and health of its employees.
Your Directors record their sincere appreciation of the support and
co-operation of all employees and counts on them to maintain Company’s
The Board of Directors places on record its sincere appreciation for
the dedicated services rendered by the employees of the Company at all
levels and the constructive co-operation extended by them. Your
Directors would also like to express their grateful appreciation for
the assistance and support by all Government Authorities'' Auditors''
fnancial institutions'' banks'' suppliers'' other business associates and
last but not the least the Shareholders.
For and on behalf of the Board
Place : Mumbai RAJENDRA V. GOGRI
Dated : 16th May'' 2013 CHAIRMAN & MANAGING DIRECTOR