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Aarti Industries

BSE: 524208|NSE: AARTIIND|ISIN: INE769A01020|SECTOR: Chemicals
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Directors Report Year End : Mar '17    Mar 16

Directors'' Report

To the Members of AARTI INDUSTRIES LIMITED

The Directors are pleased to present this Thirty Fourth Annual Report and the Audited Financial Statement for the year ended 31st March, 2017.

FINANCIAL RESULTS

(Figures in RS, Crores)

PARTICULARS

STANDALONE

CONSOLIDATED

2016-17

2015-16

2016-17

2015-16

Total Income from Operations (Gross)

3050

2934

3163

3007

EBIDTA

608

530

653

572

Depreciation & Amortization

115

93

123

98

Profit/(Loss) from Operations before Other Income, Finance Costs and Exceptional Items

493

437

531

474

Other Income/Exceptional Items

3

10

2

6

Profit/(Loss) before Finance Costs

496

447

533

480

Finance Costs

117

116

117

117

Profit/(Loss) before Tax

379

331

416

363

Tax Expenses

a) Provision for Taxation-Current (net of MAT entitlement)

49

43

59

55

b) Provision for Deferred Tax

22

17

28

19

c) Short/(excess) Tax Provisions of earlier years

1

19

1

21

Total Tax Expenses

72

79

88

95

Share of Profit/(Loss) of Associates

-

-

-

-

Non controlling Interest

-

-

(12)

(11)

Net Profit/(Loss) after consolidation

307

252

316

257

Earnings Per Share ( H)

37.35

30.30

38.45

30.83

Book Value Per Share (H)

159.53

131.26

173.69

142.75

Note :- Result for year ended 31st March, 2017 are in compliance with the Indian Accounting Standards (Ind-AS) notified by Ministry of Corporate Affairs. Consequently result for year ended 31st March, 2016 have been restated to comply with Ind-AS to make them comparable.

DIVIDEND

Your directors are pleased to recommend a Dividend of H1 (@20%) per Share (Face value of H5/-each) for the financial year 2016-17

Your Company has transferred RS,31 Crores to General Reserve (Previous Year: RS,25.25 Crores) and RS,30 Crores to Debenture Redemption Reserve (Previous Year: RS,30 Crores) also RS,0.60 Crores has been transferred to Capital Redemption Reserve pursuant to the scheme of Buy Back.

FINANCIALS

Your Company reported Gross Total Income at RS,3,050 Crores for FY 2016-17 as against RS,2,934 Crores for FY 2015

16. Similarly the exports for the year were at RS,1,415 Crores for FY 2016-17 v/s RS,1,352 Crores for FY 2015-16.

Your Company''s Earnings Before Interest Depreciation and Taxes stood at RS,611 Crores in FY 2016-17 as compared to RS,540 Crores in FY 2015-16, registering a growth of 13%. Likewise Net Profit Before Tax rose by 14% to RS,379 Crores in FY 2016-17 as compared to RS,331 Crores in FY 2015-16.

Likewise, Net Profit after Tax & Deferred Tax also grew by 21% to RS,307 Crores in FY 2016-17 as compared to RS,252 Crores in Financial Year 2015-16.

Likewise the Consolidated Total income for FY 2016-17 was at RS,3,163 Crores as compared to RS,3,007 Crores for FY 201516 and exports for FY 2016-17 was RS,1,523 Crores vs RS,1,431 Crores for FY 2015-16.

On a Consolidated basis, your Company''s Earnings Before Interest Depreciation and Taxes stood at RS,655 Crores in FY 2016-17 as compared to RS,578 Crores in FY 2015-16, registering a growth of 13%. Similarly, Net Profit after consolidation grew by 23% to RS,316 Crores in FY 2016-17 as compared to RS,257 Crores in FY 2015-16. Likewise, Consolidated EPS surged by about 25% at RS,38.45 for FY 2016-17, as compared to RS,30.83 for FY 2015-16.

SHARE CAPITAL

The Company had on 16th December, 2016 completed Buyback of 12,00,000 (Twelve Lakhs) fully paid up Equity Shares (representing up to about 1.44% of the total number of Equity shares of the Company) from all the Equity Shareholders/ Beneficial owners of the Company who held Equity Shares as on the record date i.e. 2nd November, 2016 (Record Date) on a proportionate basis through the tender offer using stock exchange mechanism (Tender offer) at a price of H800/- (Rupees Eight Hundred Only) per Equity Share (including premium of H795/- per share) for an aggregate amount of RS,96 crores. The number of Equity Shares reduced from 8,33,20,383 to 8,21,20,383 post Buyback and accordingly Issued, Subscribed and Paid-up Capital reduced to H41,06,01,915/-.

Apart from the above, there was no changes in the Share Capital during the Financial Year under review.

CORPORATE SOCIAL RESPONSIBILITY

Our Company through, Aarti Foundation & Dhanvallabh Charitable Trust and various other NGOs has been doing work in following Segments:

- Cluster & Rural Development

- Education & Skill Development

- Childcare & Healthcare Facilities

- Women Empowerment & Livelihood Opportunities

- Disaster Relief & Rehabilitation

- Eradication of Hunger & Poverty

- Water Conservation & Environment

- Research & Development work for upliftment of Society

Rural Education, Water Conservation, Tribal Welfare, Agriculture, Animal Husbandry, Health and Hygiene, Disaster Relief and Rehabilitation, are the main areas of focus in the social welfare plans of our CSR Activities. Many of our Pilot projects had been appreciated by various NGO''s and Other Corporate Houses who have also started adopting those models thereby multiplying the magnitude of the reach of these social activities for the benefit of the Society at large.

A brief note on various CSR initiatives undertaken during the year is presented earlier in this Annual report.

CSR annual report is annexed as Annexure-A and forms an integral part of the Report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

As on March 31, 2017 the Company had 3862 permanent employees at its manufacturing plants and administrative office. The Company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them.

The Company enjoyed excellent relationship with workers and staff during the year under review.

REMUNERATION AND NOMINATION POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy also lays down criteria for selection and appointment of Board Members.

The details of this policy are given in the Corporate Governance Report.

PERSONNEL

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report.

In terms of Section 136(1) of the Companies Act, 2013, the Report and the Accounts are being sent to the Members excluding the aforesaid Annexure. Any Member interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company.

MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

Company has incorporate a Wholly Owned Subsidiary Company in the name of Aarti Polychem Private Limited with an initial authorized share capital of H 1,00,000 (One Lakh) on 25th May, 2017. In spite of that no other material changes and commitment affecting the financial position of the company occurred between the end of the Financial Year to which this financial statements relate and the date of the report.

However, during the year under review there was a material change in the Share Capital pursuant to the Buyback of Equity shares of the Company. The details of which are mentioned under the head Share Capital of this report.

MEETINGS

The details of the number of meetings of the Board held during the Financial Year 2016-17 forms part of the Corporate Governance Report.

RISK MANAGEMENT

Risk Management Committee through its dynamic risk management framework continuously identifies, evaluates and takes appropriate measures to mitigate various elements of risks.

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 ensures that all Assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported diligently. Your Company''s internal control systems commensurate with the nature and size of its business operations. Internal Financial Controls are evaluated and Internal Auditors'' Reports are regularly reviewed by the Audit Committee of the Board.

Statutory Auditors Report on Internal Financial Controls as required under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the Act) is annexed with the Independent Auditors'' Report.

MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT

Management''s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 read with Schedule V to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), is presented in a separate section forming part of the Annual Report.

BUSINESS RESPONSIBILITY REPORTING

Business Responsibility Reporting for the year under review, as stipulated under Regulation 34 read with SEBI Circular No CIR/CFD/CMD/10/2015 dated 4th November, 2015 is forming part of this Annual Report. As a green initiative the BR Report has been hosted on the Company''s website www.aarti-industries.com

DIRECTORS'' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013 :

a. That in the preparation of the annual financial statements for the year ended 31st March, 2017, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. 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 affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period;

c. That the Directors had taken proper and sufficient 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;

d. That Directors'' have prepared the annual accounts on a going concern basis;

e. The directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the Financial Year were on arm''s length basis and were in the ordinary course of the business. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large.

All related party Transactions are presented to the Audit Committee. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the nature, value and terms and conditions of transactions.

The related party transactions policy is uploaded on the Company''s website at the web-link given below : http://aarti-industries.com/media/investors/corporate_ governance/1496727334_Related_Party_Transaction_ Policy.pdf

The details of Related party transactions are provided in the accompanying financial statements.

Since all related party transactions entered into by the Company were in ordinary course of business and were on an arms length''s basis, Form AOC-2 is not applicable to Company.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (6) OF SECTION 149

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015.

CORPORATE GOVERNANCE

Your Company has complied with the mandatory Corporate Governance requirements stipulated under Regulation 34(3) of the Listing Agreement. Report on Corporate Governance is annexed hereto forming part of this report.

CONSOLIDATED FINANCIAL STATEMENT

Your Directors have pleasure in presenting Consolidated Financial Statements which form part of the Annual Report and Accounts.

ANNUAL RETURN

The details forming part of the extract of Annual Return in the Form MGT-9, as required under Section 92 of the Companies Act, 2013 is included in the Report as Annexure-B and forms an integral part of the Report.

DEPOSITS

The Company did not have any deposits at the beginning of the year under review. The Company has neither accepted nor renewed any deposits during the year under review.

The Company does not have any deposits which are not in compliance with the requirements of Chapter V of the Companies Act, 2013.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed CS Sunil M. Dedhia (COP No. 2031), Proprietor of Sunil M. Dedhia & Co., Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure-C and forms an integral part of this Report.

The said report does not contain any observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to the financial statements.

BOARD EVALUATION

Pursuant to the provisions of Companies Act, 2013 and the SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015, a structured questionnaire was prepared after taking into consideration, various aspects of the Board''s functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

SUBSIDIARY COMPANIES

The Company has 6 (six) direct subsidiaries, namely, Aarti Corporate Services Limited, Alchemie (Europe) Limited, Innovative Envirocare Jhagadia Limited, Ganesh Polychem Limited, Aarti USA Inc., Aarti Polychem Private Limited (incorporated on 25th May, 2017) and 2 (two) indirect subsidiaries namely Shanti Intermediates Private Limited, Nascent Chemical Industries Limited both hold through Aarti Corporate Services Limited.

During the year, the Board of Directors reviewed the affairs of the subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report.

Further a statement containing salient features of the financial statement of our Subsidiaries in the prescribed format AOC-1 is included in the Report as Annexure-D and forms an integral part of this Report. The statement also provides the details of performance, financial position of each of the Subsidiaries.

DIRECTORS / KEY MANAGERIAL PERSONNEL

Shri Manoj M. Chheda (DIN: 00022699)and Shri Kirit R. Mehta (DIN: 00051703), Whole time Directors of the Company shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment.

Your Directors also recommend approval for renewal of term of Shri Rashesh Chandrakant Gogri (DIN 00066291), Vice - Chairman and Managing Director of the Company whose present term expired on 8th June, 2017 and Shri Renil Rajendra Gorgi (DIN: 01582147), whole-time Director of the Company whose present term expires on 15th August, 2017.

Your Directors also recommend renewal of term of Shri Rajendra Vallabhaji Gogri (DIN 00061003), Chairman and Managing Director whose present term expires on 30th June, 2018.

Present Term of Shri Ramdas M. Gandhi (DIN : 00029437) and Shri Laxmichand K. Jain (DIN: 00042099) Independent

Directors of the Company expires on 24th September, 2017. Notice(s) have been received from member(s) along with requisite deposits proposing their candidature for appointment as Independent Directors.

During the Year 2016-17, Smt. Hetal Gogri Gala (DIN: 00005499), Whole-time Director was re-appointed for a period of 5 (five) years w.e.f. 1st November, 2016.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.

ENVIRONMENTAL, SAFETY AND HEALTH

Your Company is committed to ensure a sound Safety, Health and Environment (SHE) performance related to its activities, products and services. Your Company had been continuously taking various steps to develop and adopt 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 Behavior based safety, adoption of safe & environmental friendly production process, Installation of Bioreactors, Chemical ROs, Multiple effect evaporator and Incinerator, etc to reduce the discharge of effluents, commissioning of Waste Heat recovery systems, and so on to ensure the Reduction, Recovery and Reuse of effluents & other utilities. Monitoring and periodic review of the designed SHE Management System are done on a continuous basis.

Some of the ongoing initiatives in this regard as briefed below:

Introducing Aarti Management System: An in-house developed framework of 32 elements detailing procedures and processes catering to all Plant Related Activities - 3 elements namely MOC (to manage change), BBS (major root causes of incidents are due to behavior) and Permit Systems catering to reduce SHE related risks had been launched and being implemented at various levels of operations. Other elements are being developed and reviewed and would be adopted in due course

Review Existing Process Safety Parameters: Structured & regular HAZOP meetings are being carried out as per scheduled HAZOP calendar to further strengthen process safety of existing processes. Also HIRA (Hazard Identification and Risk Assessment) for procedures and practices are being initiated for some of the units and would be gradually implemented across various units.

With these and various other initiatives, your Company firmly places the SHE at the top of its goals and aims to provide a workplace which is safer and healthier for the society at large.

WHISTLE BLOWER POLICY

The Company has a whistle blower policy to report genuine concerns or grievances. The Whistle Blower policy has been posted on the website of the Company and the web link thereto is http://aarti-industries.com/media/investors/ corporate governance/1494923104_Whistle_Blower_ Policy_Ammended.pdf

MATERIAL SUBSIDIARY

The Company does not have any material subsidiary whose net worth exceeds 20% of the consolidated net worth of the Company in the immediately preceding accounting year or has generated 20% of the consolidated income of the Company during the previous Financial Year. A policy on material subsidiaries had been formulated and is available on the website of the Company and the web link thereto is http://aarti-industries.com/media/investors/corporate_ governance/1494923294_Policy_for_determining_ Material_Subsidiary17.6.16.pdf

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS.

The Independent Directors of the Company were familiarized and the details of familiarization programmes imparted to them are placed on the website of the Company and the web link thereto is http://aarti-industries.com/media/ investors/corporate governance/1494923569_Details_of_ Familirisation_Programme.pdf

DIVIDEND DISTRIBUTION POLICY

As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the top 500 listed companies shall formulate a dividend distribution policy. Accordingly, the policy was adopted to set out the parameter and circumstances that will be taken in to account by the Board in determining the distribution of dividend to its shareholders and/ or retaining profits earned by the company. A policy is available on the website of the Company and the web link thereto is http://www.aarti-industries.com/media/ investors/corporate governance/1494923066_Dividend_ Distribution_Policy.pdf

STATUTORY AUDITORS

Statutory Auditor of the Company M/s. Gokhale & Sathe, Chartered Accountants (Firm Registration. No. 103264W) holds office till the conclusion of the ensuing Annual General Meeting of the Company. They have been holding office as Statutory Auditors of the Company for a period of more than 10 years and hence are not eligible for re -appointment as per section 139(2) of Companies Act, 2013.

In view of the above, Board on the recommendation of Audit Committee appointed M/s. Kirtane & Pandit, Chartered Accountants (Firm Registration. No. 105215W/W100057) as Statutory Auditors of the Company to hold office up to conclusion of 35th Annual General Meeting. At the request of the Company, M/s. Kirtane & Pandit have communicated their eligibility and willingness to accept the office, if appointed. Members are requested to appoint Auditors and to fix their remuneration as mentioned at Item No. 5 of the notice.

AUDITORS'' REPORT

There is no qualification, reservation or adverse remark or disclaimer made by the Auditor in their report.

COST AUDITORS

The Cost Auditor Ms. Ketki D. Visariya (Fellowship No.16028), Cost Accountant, was re-appointed by the Company under provisions of Section 148(5) read with Section 141 of the Companies Act, 2013 and she attended the Audit Committee Meeting, where cost audit reports are discussed.

The due date for filing the Cost Audit Reports in XBRL mode for the Financial Year ended 31st March, 2016 was 30th September, 2016 and the Cost Audit Report were filed by the Cost Auditor on 29th September, 2016. The due date for filing the Cost Audit Reports for the Financial Year ended 31st March, 2017 is 30th September, 2017.

The Company is seeking the ratification from the Shareholders for the Remuneration of Ms. Ketki D. Visariya,

Cost Auditor of the Company for the Financial Year ending 31st March, 2018 vide resolution no. 13 of the Notice of AGM.

NUMBER OF CASES FILED, IF ANY, AND THEIR DISPOSAL UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has Zero tolerance towards any action on the part of any one which may fall under the ambit of ''Sexual Harassment'' at workplace, and is fully committed to uphold and maintain the dignity of every women working with the Company. The Policy framed by the Company in this regard provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints.

Particulars

No. of Complaints

Number of Complaints pending as on beginning of the Financial Year

NIL

Number of Complaints filed during the Financial Year

NIL

Number of Complaints pending as on the end of the Financial Year

NIL

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, as amended from time to time, forms a part of this in Annexure-E.

ACKNOWLEDGEMENT

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 like to express their grateful appreciation for the assistance and support by all Shareholders, Government Authorities, Auditors, financial institutions, Customers, employees, suppliers, other business associates and various other stakeholders.

For and on behalf of the Board

RAJENDRA V. GOGRI

CHAIRMAN AND MANAGING DIRECTOR

Place : Mumbai

Date: 11th August, 2017

Source :
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