Aarti Industries Directors Report, Aarti Ind Reports by Directors
Aarti Industries
BSE: 524208|NSE: AARTIIND|ISIN: INE769A01020|SECTOR: Chemicals
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Directors Report Year End : Mar '13    « Mar 12
 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.
                                                  (in Lakhs)
 Particulars                                Consolidated
                                       2012-13     2011-12
 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
 Other Income''
 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 
 Tax Expenses
 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.
 27.21 crs).
 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 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: 
                                                       (in Crores)
              Performance  Agri-
                           Intermediates Pharmac
                                         euticals  Home & 
                                                   Personal    Total
              Chemicals    & Fertilizers           Care
 Sales             1319           438        187       152      2096
 % of 
 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.
 Performance Chemicals
 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
 Company’s operations.
 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
 Agrochemicals worldwide.
 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
 export markets.
 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
 outsourcing opportunities.
 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: 
                                          (in Crores)
 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.
                                                      (in Lakhs)
 No.  Particulars                       Standalone      Consolidated
 (A) Primary Segments : 
     Business 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 : 
 Geographical Segments
 a) India                                 103''651        103''664
 b) Out of India                          105''961        105''961
 TOTAL                                    209''612        209''625
 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.
 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.
 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.
 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
 concern basis.
 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
 Annual Report.
 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.
 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
 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.
 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.
 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.
 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
 growth momentum.
 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
Source : Dion Global Solutions Limited
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