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Aarti Industries
BSE: 524208|NSE: AARTIIND|ISIN: INE769A01020|SECTOR: Chemicals
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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '14    « Mar 13
TO THE MEMBERS OF AARTI INDUSTRIES LIMITED
 
 The Directors are pleased to present this Thirty First Annual Report
 and the Audited Statement of Accounts for the year ended 31st March,
 2014.
 
 CONSOLIDATED FINANCIAL RESULTS                       (Rsin Crores)
 
 Particulars                                    2013-14    2012-13
 
 Net Sales                                        2,598      2,058
 
 Other Operating Income                              34         38
 
 Total Income from Operations (Net)               2,632      2,096
 
 Expenses
 
 a) Cost of Material Consumed                     1,630      1,261
 
 b) Purchases of Stock-in-trade                     117         93
 
 c) Changes in inventories of Finished Goods,
    Work-in-progress and Stock-in-trade             (62)       (71)
 
 d) Employee Benefits Expenses                       79         65
 
 e) Depreciation and Amortisation Expenses           88         83
 
 f) Other Expenses                                  467        387
 
 Total Expenses                                   2,319      1,818
 
 Profit/(Loss) from Operations before Other 
 Income,Finance Costs and Exceptional Items         313        278
 
 Other Income                                        11          4
 
 Profit/(Loss) before Finance Costs                 324        282
 
 Finance Costs                                      118         95
 
 Profit/(Loss) before Tax                           206        187
 
 Tax Expenses
 
 a) Provision for Taxation-Current                   40         46
 
 b) Provision for Deferred Tax                       14          8
 
 Total Tax Expenses                                  54         54
 
 Net Profit/(Loss) after Tax                        152        133
 
 Share of Profit/(Loss) of Associates                11          2
 
 Minority Interest                                   (1)        (1) 
 
 Net Profit/(Loss) after consolidation              162        134
 
 Earnings Per Share (Rs)                          18.34      15.17
 
 BookValue Per Share (Rs)                         98.29      85.36
 
 DIVIDEND
 
 Your Company had declared and paid Interim Dividends ofRs 3.00 ps. (@
 60%) per share (ofRs 5/- each). Your Directors are pleased to recommend
 a Final Dividend ofRs 1.50 ps. (@ 30%) per share (ofRs 5/- each) for the
 FY 2013-14, aggregating to the Total Dividend of Rs 4.50 ps. (@ 90%) per
 share (of Rs 5/- each) for the FY 2013-14 compared to the Total Dividend
 of Rs 4.00 ps.  (@ 80%) per share (ofRs 5/- each) for the FY 2012-13. The
 total amount of Dividend pay-out for the year would be Rs 39.87 Crores
 (previous year Rs 35.44 Crores).
 
 Your Company has transferred Rs 14.90 Crores to General Reserve (P.Y 
 Rs 13.15 Crores).
 
 FINANCIALS
 
 Your Company has presented yet another year of consistent and stable
 growth. During the year, the Standalone Net Revenues of the Company
 grew by over 25% at Rs 2,633 Crores (previous year Rs 2,096 Crores).
 Exports revenues also grew to Rs 1,281 Crores, a growth of over 20%
 (previous year Rs 1,060 Crores).
 
 Operating profit before Interest, Depreciation and Tax for FY 2013-14
 increased by 11% to Rs 395 Crores (previous year Rs 356 Crores). EBIDTA
 margins for the Company were at 15.3% for FY 2013-14 from 16.6% in FY
 2012-13, on account of higher input costs.
 
 Profit before Tax for FY 2013-14 also increased toRs 201 Crores
 (previous yearRs 184 Crores). Profit after Tax and Deferred Tax grew toRs
 149 Crores for FY 2013-14 fromRs 131 Crores for FY 2012-13.
 
 Your Company''s Consolidated Income increased by about 26% to Rs 2,632
 Crores as compared to Rs 2,096 Crores for last year.  Consolidated
 EBIDTA also grew by 13% to Rs 412 Crores from Rs 365 Crores last year.
 Net Profit after Consolidation surged by 21 % at Rs 162 Crores vis-a-vis
 Rs 134 Crores for last year. Consolidated EPS for the FY 2013-14 was at
 Rs 18.34 as against Rs 15.17 for the FY 2012-13.
 
 During last few years, with scale up of capacities and introduction of
 various high growth and high margin export oriented products, the share
 of Exports Revenue to Total Revenue has been increasing. Exports
 represent about 50% of the total revenues. Also a bulk of products sold
 in domestic markets are converted and ultimately exported.  Hence
 considering this, about 70% of our output would be exported either
 directly or indirectly. The recovery of Global Markets from the
 recessionary environment coupled with our strong Global position and
 Strategic arrangements with key global customers, has helped us to
 increase our volumes both present and incremental on account of higher
 production capacities. Our delivery and service commitment helps us to
 gain loyalty from our customers, which results into increase in our
 exports operations.
 
 ueoqrapmcai spread ot export Revenue CHEMICAL INDUSTRY - STRUCTURE &
 DEVELOPMENT
 
 The Global Speciality Chemical Industry size is pegged at around 0bn
 (FICCI Speciality Chemical report and 12th Five- Year Plan document)
 accounting for roughly 22% of the global chemical industry. This
 industry has grown at a CAGRof 3.7% during 2006-11, despite contracting
 by around 7% in 2009, due to the global financial crisis. Going
 forward, the industry is expected to grow at a CAGR of about 5.4%
 annually to reach 0bn by FY 16, based on Industry estimates.
 Asia-Pacific and the Middle Eastern countries are expected to
 contribute to the bulk of the future growth for the sector.
 
 Indian Speciality Chemical sector has demonstrated strong growth of
 around 13%, and is expected to accelerate further, higher than the
 average global growth rate. (Source - FICCI). The high rate of growth
 for the segment is driven by faster growth in end-user industries such
 as paints & coatings, speciality polymers, and home care surfactants,
 among others.  This is supported by both domestic and export
 opportunities. Derisking of business concentration from China by
 various global customers coupled with appreciation of Chinese Yuan v/s
 Indian Rupee and the rising operating costs in China, shall further
 increase the opportunities for Indian Companies to expand the business
 in global markets. Your Company expects the encouraging growth
 opportunity in sectors like Pigments, Speciality Polymers,
 Pharmaceuticals, Agrochemicals, Construction chemicals and Water
 Chemicals to support the higher industry growth.
 
 The emergence of a stable Government at Centre has improved the
 business sentiment and consumer confidence across Pan India and
 improving the future macro outlook. This new and renewed hope of
 growth, if supported by positive and proactive steps from the
 Government, would restart the revival of Indian Economy and would
 result into increase in demand at various sectors. Government
 Initiatives in the form of Port based Chemical Parks in SEZ,
 Improvement in Infrastructure, Tax concessions, rationalization of Duty
 Structure, FDI relaxation, etc. would facilitate further growth of the
 Indian Chemical Industry into a major Chemical hub.
 
 Your Company is a leading manufacturer of Speciality Chemicals with
 diversified end-uses into Agrochemicals, Pharmaceuticals, High
 Performance Polymers, Paints, Pigments, Printing Inks, Rubber
 Chemicals, Additives, Surfactants, Dyes, Oil & Gas additives, Flavours
 & Fragrances, etc. Your Company''s derisking by diversification has
 helped it withstand the volatilities & downturns of a specific end-user
 segment and also helps to capitalize on the growth opportunities in
 other end-user segments.
 
 With the rationales of Long term sustainability for both growth and
 profitability, your Company continued in last year the efforts to adopt
 a sustainable framework considering the elements of Safety, Health,
 Environment Impact and Energy Efficiency initiatives. Your Company has
 made significant investments by installing various Bioreactors,
 Chemical Reverse Osmosis, Multiple Effect Evaporator, Incineration,
 Electrostatic Filters, Solvent Recovery Systems, Waste Heat Recovery
 Systems, etc. Your Company had also been continuously working towards
 improvement of process safety as well as increasing the levels of
 automation. These would provide long term benefits of Consistency in
 Quality, Yield Improvements, Saving in utilities cost, minimization of
 human error, etc. Your Company has been constantly improving the
 manufacturing process and adoption of greener processes. These efforts
 have been appreciated by various MNC customers. Your Company plans to
 invest further in these areas to ensure providing greener and safer
 manufacturing environment.
 
 Reclassification of Business Segments
 
 The Company is a multi-product and multi-faceted one. The operations
 were earlier classified into four segments viz, Performance Chemicals,
 Agri Intermediates & Fertilizers, Pharmaceuticals and Home & Personal
 Care based on the end-use/ applications.
 
 However, in case of PerformanceChemicals Segment and Agri Intermediates
 & Fertilizers Segment, a majority of manufacturing facilities are
 common and interlinked. As a result the segmental performance for these
 two segments may fluctuate based on the product mix adopted in a
 particular reporting period. Thus, for better understanding of the
 operations resulting on account of these interchangeable facilities, it
 has been decided to merge these two segments into a single reportable
 segment under the name of Speciality Chemicals. Hence the operations
 of the Company has been reclassified into three segments viz,
 Speciality Chemicals, Pharmaceuticals and Home & Personal Care
 Chemicals. This reclassification has also facilitated the
 identification of Capital Employed for each of these segments, which
 was not possible earlier on account of common manufacturing facilities.
 The changed reclassification does not have any financial impact. The
 profile of these new business segments are presented below:
 
 The brief Segmental financials are also presented below: (Rsin Crores)
 
                 Speciality  Pharmaceuticals  Home & Personal Total
                  Chemicals                   Care Chemicals
 
 Sales              2,216         249             167         2,632
 
 % of Total Sales   84.20%       9.46%           6.34%       100.00%
 
 Export             1,130         117              34         1,281
 
 % of Sales         50.99%      46.99%          20.36%        48.67%
 
 EBIT                 332          30               4           366
 
 % of Sales         14.98%      12.05%           2.40%        13.91%
 
 Capital Employed 
 as at 31st March 
 2014                1414         377               87         2006*
 
 ROCE%              23.48%       7.96%            4.60%       18.25% 
 
 (* Includes unallocated CapitalEmployed of Rs 128 Crores)
 
 As you would note from above, Speciality Chemicals accounts for about
 85% of the Revenues and over 90% of EBIT. Further the operations for
 Pharmaceutical Segment are growing and have registered a growth in
 revenues by about 33%, while the EBIT for the segment had tripled over
 last year. Also the EBIT margin for Pharmaceutical Segment has
 increased from 5% for FY 2012-13 to 12% for FY 2013-14. This segment is
 expected to be poised for faster growth. We shall further review these
 segments in details as below:
 
 Speciality Chemicals Segment:
 
 This segment continues to account for majority of the revenues and
 profits for the Company. Over last year, the segment had reported a
 growth of about 26% in its revenues of which about 12% is attributable
 to volume growth and the balance towards the increase in input costs
 which has been passed on to the customers. The increase in benzene
 prices does not impact EBIT in general, however when looked in
 percentage terms, it reduces the EBIT %.
 
 We present below the key financials for Speciality Chemicals Segment:
                                                   (Rs in Crores)
 
 Key Financials  FY 2013-14  FY 2012-13  FY 2011-12  FY2010-11
 
 Sales              2,216       1,757      1,350      1,228
 
 % of Total Sales   84.20%      83.83%     80.70%     84.49%
 
 Export             1,130         946        639        504
 
 % of Segment Sales 50.99%      53.84%     47.33%     41.04%
 
 Segment EBIT         332         319        217        186
 
 EBIT%              14.98%      18.16%     76.07%     15.15%
 
 Your Company is one of leading global player manufacturing various
 Benzene Based Derivatives through a number of chemicals processes at
 its Global Scale manufacturing units located at Vapi, Jhagadia, Kutch
 in the State of Gujarat and Tarapur in the State of Maharashtra.
 
 A brief structure of Benzene Based Product Profile and Global market
 share is presented below:
 
 In addition to the above chemistries, your Company also manufactures a
 number of products through Halex Chemistry, Phthalates, Diazotisation,
 Denitro Chlorination, Methoxylation, Alkylated Anilines &Toulidines.
 The products manufactured under these complex chemistry range from Rs
 300/- per kg to over Rs 1500/- per kg. Your Company''s Global scale
 capacities and higher market share have helped the Company to
 capitalize on the growth opportunities and convert that into higher
 volumes.  Your Company''s strengths of highly integrated manufacturing
 operations through its global size units manufacturing diverse products
 having diversified end usage catering to needs of over 800 domestic and
 global customers have helped itself to be one of the key player in the
 global arena.
 
 This diversity in the end-user profile along with the common
 manufacturing units, which can be used for diverse, dynamic and
 interchangeable product mix of a variety of Speciality chemicals, not
 only ensures better utilization of capacities, but also helps building
 customer confidence by providing adequate quantities to meet their
 needs. Further, the uniqueness of integrated operations with optimum
 isomer/co product balancing and gainful utilization of by-products have
 helped your Company to emerge as a Strategic supplier to various
 MNCsand they consider your Company as the partner in their future
 growth. Considering these opportunities, over past two years the
 Company has been expanding its various capacities across various
 manufacturing sites. The Company has further plans for expansion, of
 which the major ones are briefed below. These expansions shall be able
 to fuel the growth of the Company for next 4 to 5 years.
 
 Key Expansion Activities:
 
 The proposed debottlenecking/expansion of the NCB capacities
 (Nitration) from 57000 MT to 75000 MT is underway and is expected to be
 progressively completed in FY 2014-15. Against the present capacity of
 about 57000 MT, the production achieved in FY 2013-14 was about 54230
 MT (Previous year about 48072 MT).
 
 Your Company further plans to expand its another critical and base
 production process viz Chlorination Process by about 15000 tpa i.efrom
 present 65000 tpa to 80000 tpa. This expansion shall ensure adequate
 supply of first stage products over next 3-4 years for captive
 consumption for forward chain of products as well as to meet the
 additional demand for these chemicals from global markets. Along with
 this, the Company also proposes to set up a Calcium Chloride
 Granulation plant.  This shall consume the by-product HCL generated in
 the process and convert that into commercially marketable product with
 high export potential. Your Company already has one such unit in
 Bhachau, Kutch and an another one is now being planned at Vapi,
 Gujarat. Your Company was the 1st company in India to import such
 technology.The Calcium Choride Granules are 100% exported by your
 Company to various global customers for Oil-Exploration and De-icing
 purposes.
 
 Your Company also plans to expand its capacities for one of its key
 Speciality Chemical with diversed end use into Polymers, Dyestuffs &
 Additives through Continuous Hydrogenation Process. With this
 expansion, your Company would have a dedicated unit to cater to the
 growing demand of this Speciality Chemical, from FY 2015-16, having
 large export potential.  Further, in case of the existing continuous
 Hydrogenation unit which caters to the growing, high margin and niche
 demand in the segments of Polymers, Agrochemicals, Pigments, etc in
 global markets have also been registering a consistent volume growth
 due to higher exports. Annual average production of Hydrogenated
 compounds in FY 2013-14 was 1650 TPM as compared to 1390 TPM for FY
 2012-13, thereby posting a y-o-y volume growth of about 19% and is
 expected to grow further in coming periods.
 
 It may be noted that the above volume data are given for reference
 purposes & may not be directly comparable, as each hydrogenated product
 would have different process time. Thus with different product mix
 adopted the process utilisation time would vary & so the output may
 also vary.
 
 Your Company has also been upgrading its 6 Batch Nitration capacities
 and consolidate the same into Continuous Nitration units over a period
 of time. In this regard, Your Company had commissioned one Continuous
 Nitration unit, thereby reducing the Batch Nitration units from 6 to 4.
 While this shall increase the level of automation of the process, it
 shall also facilitate for overall increase in production capabilities.
 It shall also result in increasing the consistencies & yields of
 various products and simultaneously help to reduce the consumption of
 fuel and other utilities, and thus bring about higher volumes with
 significant cost savings and more safer and highly automated
 operations.
 
 Your Company plans to setup a dedicated block of Continuous
 
 Nitration Unit for manufacture of Nitro Toulenes and derivatives at
 Jhagadia. The products manufactured shall be used as intermediates into
 end-user industries such as Optical Brighteners, Agro Chemicals,
 Pigments, Pharmaceuticals, etc. This unit shall also provide feeder
 material required for the proposed Ethylation unit being setup at Dahej
 SEZ. The Company has already closed the technological tie-ups and has
 taken up this project on fast track basis. The Company plans to
 commission this unit in FY 2015-16.
 
 On account of the wide diversity in product applications, the
 Speciality Chemicals segment on an overall basis is expected to grow
 with Key driving industries for growth of Speciality Chemicals which
 are summarized 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 efficiency. In
 addition to this,
 
 these polymers are also used in high growth segments such as Water
 Treatment, Power Plant Filter, Electronic media & Telecommunication
 devices and various other Electrical Instruments. Aforesaid various
 expansions will help to increase the volumes of these Polymer
 intermediates to cater the growing international demand.
 
 - Dyes, Paints, Pigments and Printing Inks:
 
 This sector has witnessed a shift in the consumption pattern of
 Printing Inks based applications. While the demands for Printing inks
 in developed economies are reducing, the same are increasing in
 developing economies on account of increasing per-capita income &
 consumption (along-with changes in consumption profile), growth in
 education and healthcare facilities, etc. The global replacement of
 usage of Organic Pigment vis-a-vis metal pigments has been the driving
 force behind the significant growth of Pigment applications globally
 and shall continue further going forward. The expanded capacity for a
 Pigment intermediate commissioned in Q1 FY 2013-14 has already reached
 about 85% capacity utilization and your Company further proposes to
 scale up the capacities by debottlenecking.
 
 - Agri-Intermediates and Fertilizers:
 
 Your Company is a leading global manufacturer of various Agrochemicals
 Intermediates and has presence across all the sub-segments viz
 herbicides, insecticides, fungicides, etc. Emphasis on achieving food
 grain self-sufficiency, limited farmland availability and growth in
 horticulture and floriculture 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
 for years to come. Your Company is in talks with few customers for
 long-term supply arrangement to meet their increasing requirements.
 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 Indian as well as various
 other local climatic changes across the world.
 
 Your Company is also into manufacturing of Single Super Phosphate (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 saves the Company from the hassles of management and disposal of
 the by-product dilute sulphuric acid. However, off-late the challenges
 of Cyclicity of Indian Monsoon, High Inventory and Recovery Periods,
 Delays in grant of Subsidy, etc have resulted into high working capital
 requirement for this business.  Considering the same, your Company has
 discontinued the expansion of this unit planned earlier. Further, since
 overall composition of Fertilizers and Nutrients is less than 4% to the
 total revenues, the cyclicity of this business does not materially
 affect the overall operations of the Company. The Company is also
 undertaking R&D Initiatives to reduce the generation of the by-product
 and recycle the same by reconcentration, thereby limiting the exposure
 to this volatile business for the time being or till conditions
 improve.
 
 Pharmaceuticals:
 
 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 nations. Despite challenges, leading Indian
 players continue to exhibit strong profitability indicators.Outlook on
 the Indian pharmaceutical companies remains favourable as companies
 will continue to benefit from recovery in the domestic market, strong
 growth potential in generics in developed marketsand potential
 outsourcing opportunities.Globally, generics players however
 continuetofacecompetitiveenvironment from large innovator companies.
 Price erosion, especially through regulatory interventions, remains a
 foremost challenge in the European markets. Presence in limited
 competition product segments and over-the-counter (OTCs) segment offers
 some protection to margins. Most developed markets continue to move
 away from branded generics to commoditized un-branded generics and
 lower margin tender based business.
 
 Your Company has four manufacturing units of which - two are USFDA
 approved facilities & other two are WHO GMP approved facilities. The
 plants are cGMP compliant - meeting ICH Q7 standards - thus enabling
 buyers to use APIs in all regulated markets. Your Company has 42
 commercial APIs with 33 European DMFs, 27 US DMFs and 15 CEP (of which
 4 are under approval). There are 12 more APIs under development. Your
 Company enjoys distinct advantage of having dedicated USA, Japan and EU
 regulatory approvals for Steroids and Anti-Cancer products. Your
 Company also enjoys cost efficiencies by being backward integrated for
 most of the APIs and thus enhances the margins of its range of
 products. In FY 2013-14, your Company scaled up its capacities from 4
 lines to 9 lines for manufacturing of APIs at its Tarapur USFDA unit.
 
 We present below the key financials for Pharmaceuticals Segment: 
                                                    (Rs inCrores)
 
 Key Financials     FY2013-14  FY2012-13  FY2011-12  FY2010-11 
 
 Sales                 249        187        165       131
 
 % of Total Sales     9.46%      8.92%      9.86%     8.98%
 
 Export                117         92         66        46
 
 % of Segment Sales  46.99%     49.20%     40.00%    35.15%
 
 Segment EBIT           30          9          4        (6)
 
 EBIT%               12.05%      4.81%      2.55%       NA
 
 The volumes of products under this segment have been consistently
 increasing which have helped improvement in margins and segmental
 profitability. EBIT for FY 2012-13 increased to Rs 30 Crores v/s Rs 9
 Crores for FY 2013-14. EBIT margins have been improving and increased
 to about 12% of sales in FY 2013-14 as compared to about 5% of sales
 for FY 2012-13. You would note that the incremental sales of aboutRs 62
 Crores have resulted into incremental EBITofRs21 Crores. Thus with
 incremental EBIT from additional volumes at about 25 to 30%,
 incremental volume shall increase the EBIT significantly. Further of
 the total exports, exports to regulated markets are over 60%, which
 help into improvement of margins. Thus the incremental growth in
 revenues would result in a significant improvement in EBIT.
 
 Further, your Company also plans to commission a dedicated unit to
 manufacture caffeine, targeting the needs of Cola and Energy Drinks
 makers. Thus, with increase in volumes through global markets and with
 newer capacities, we expect the segment to grow at faster pace in
 coming years.
 
 Home & Personal Care Chemicals
 
 Rising per capita income has 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
 chemicals.
 
 We present below the key financials for Home & Personal Care Chemicals
 Segment:                                           (Rs in Crores)
 
 Key Financials        FY2013-14  FY2012-13  FY2011-12  FY2010-11
 
 Sales                    167         152       158         95
 
 % of Total Sales        6.34%       7.25%     9.47%      6.52%
 
 Export                    34          22        21         10
 
 % of Segment Sales     20.36%      14.47%    13.21%     10.94%
 
 Segment EBIT               4           5         5          5
 
 EBIT% 2.40% 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 plans to carry
 out debottlenecking for some of its operations so as to expand the
 capacities for export oriented products which have better margins.
 These efforts will help to increase exports for this segment and also
 result into improvement of margins.
 
 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 prices and other commercial &
 business related risks. While Segments like Pharmaceuticals and Home &
 Personal Care are not much affected by the economic cycle and have its
 own independent growth drivers, the diversity of end uses of Speciality
 Chemicals and the ability of the Company to interchangeably use the
 production facilities insulate the Company from any adversity for any
 specific end user applications. Further, your Company''s diversified
 revenue mix, flexible product mix and increasing export volumes also
 help to derisk the business from any domestic economic setbacks as well
 as certain specific
 
 global uncertainties. Diversified & wide customer base further reduces
 risks of dependence of business with few customer or few products. Your
 Company is also in the process of entering into long term supply
 arrangement with its key suppliers to ensure continuous and adequate
 supply of raw-materials to meet the growing demand for the products.
 
 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 confirmed orders helps it from taking any
 unwanted positions and thus is not significantly affected by any such
 movements.
 
 Chemical Businesses has lots of inherent process risks. To ensure that
 this risks do not arise, your Company had set up its efforts for
 adopting greener, cleaner and safer manufacturing operations, your
 Company has been increasing and upgrading the level of automation in
 the existing processes thereby providing for a safer working
 environment.
 
 Chemical businesses are generally working capital intensive and hence
 the working capital requirements are also higher.  Your Company has
 been making continuous efforts to reduce the working capital cycle.
 With these efforts and higher cash accruals going forward, debt-equity
 ratio is expected to improve 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 ensures 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
 31 st March, 2014, 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 affairs of the Company at the end of the financial year of the
 profit of the Company for that year;
 
 (iii) 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;
 
 (iv) That Directors''have prepared the annual accounts on a going
 concern basis.
 
 SUBSIDIARY COMPANIES
 
 The Company has 5 subsidiaries, namely, Aarti Corporate Services
 Limited, Alchemie Europe Limited, Innovative Envirocare Jhagadia
 Limited, Shanti Intermediates Private Limited and Nascent Chemical
 Industries Limited. Statement pursuant to Section 212 and summary of
 financial information of Subsidiaries are provided in the Annual
 Report.
 
 In accordance with the general circular issued by the Ministry of
 Corporate Affairs, Government of India, the Balance Sheet, Statement of
 Profit and Loss and other documents of the subsidiaries are not being
 attached with the Balance Sheet of the Company. The Company will make
 available the Annual Accounts of the subsidiaries and the related
 detailed information to any member of the Company who may be interested
 in obtaining the same. The annual accounts of the subsidiaries will
 also be kept open for inspection at the Registered Office of the
 Company as well as at the head offices of the Subsidiaries. The
 Consolidated Financial Statements presented by the Company include the
 financial results of its Subsidiaries.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 Your Directors have pleasure in presenting Consolidated Financial
 Statements which form part of the Annual Report and Accounts.
 
 DIRECTORS
 
 Shri Kirit R. Mehta and Shri Manoj M. Chheda, Whole-time Directors,
 retire by rotation in terms of Section 152 of the Companies Act, 2013
 and being eligible, offer themselves for re-appointment.
 
 Pursuant to Section 152 of the Companies Act, 2013, Shri Bhavesh R.
 Vora, Shri P. A. Sethi and Shri K. V. S. Shyam Sunder, Independent
 Directors will retire at the ensuing Annual General Meeting and being
 eligible, seek re-appointment.
 
 The Companies Act, 2013 inter alia provides for appointment of
 independent directors. Section 149(10) of the said Act, effective from
 1st April, 2014, provide that independent directors shall hold office
 for a term of up to five consecutive years on the Board of a company
 and shall be eligible for re-appointment on passing a special
 resolution by the shareholders of the Company.  Section 149(11) of the
 said Act provides that no independent director shall be eligible for
 more than two consecutive terms of five years. It is also clarified
 that existing tenure of an independent director shall not be counted
 for the above purpose.  Section 149(13) states that the provisions of
 retirement by rotation as provided in Section 152(6) and (7) of the
 said Act shall not apply to such independent directors.
 
 Our independent directors were appointed as directors liable to retire
 by rotation under the provisions of the erstwhile Companies Act, 1956.
 The Board has been advised that independent directors so appointed
 would continue to serve their existing term as per the resolution
 pursuant to which they were appointed. In view of this, independent
 directors, namely, Shri Bhavesh R. Vora, Shri P. A. Sethi and Shri K.
 V. S. Shyam Sunder, complete their present terms at the ensuing AGM,
 and being eligible and seeking re-appointment, be considered for
 re-appointment for a period of 5 (five) years with effect from date of
 this Annual General Meeting i.e. 24th September, 2014.
 
 Shri Ramdas M. Gandhi, Shri Vijay H. Patil and Shri Laxmichand K. Jain,
 are also Independent Directors of the Company, whose period of office
 is liable to determination by retirement of Directors by rotation under
 theerstwhileapplicable provisions of the Companies Act, 1956. Under
 Section 149(10) of the Companies Act, 2013 and Rules made thereunder,
 an Independent Director shall now hold office fora term of 5 (five)
 consecutive yearson the Board of theCompany and is not subject to
 retirement by rotation. In terms of Section 149 and other applicable
 provisions of the Companies Act, 2013, and Rules made thereunder, Shri
 Ramdas M. Gandhi, Shri Vijay H. Patil and Shri Laxmichand K. Jain,
 being eligible and offering themselves for such appointment, be
 considered for re-appointment as Independent Directors of the Company
 for a period of 3 (three) years with effect from date of this Annual
 General Meeting i.e. 24th September, 2014.
 
 Shri Sunil M. Dedhia and Shri Haresh K. Chheda resigned as Independent
 Directors of the Company effective from 1st April, 2014. The Board wish
 to place on record its appreciation for their guidance to the Company
 during their tenure with the Company as such.
 
 CORPORATE GOVERNANCE
 
 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
 report.
 
 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, 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 is done on a continuous basis. The Company already
 has two Zero Discharge unit and is reviewing the viability for
 converting other unit into Zero discharge. The Company is committed to
 continuously take further steps to provide a safe and healthy
 environment.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Your Company has taken several CSR initiatives for over a decade. The
 involvement is not only through financial support but also in the form
 of Personal and continuous involvement of your Management thereby
 ensuring the activities are benefited by their experience and to ensure
 the reach of these initiatives to the society at large. Shri
 Chandrakant V. Gogri, Chairman Emeritus is driving the CSR
 intiatives.The CSR activities of your Company had primarily been
 focused on promoting education to the poorest of the poor, Empowering
 women, healthcare, affordable housing, support to those affected by
 natural calamities.
 
 Aarti Group had set up a school named Tulsi Vidya Mandir at Kutch,
 Gujarat in year 2005. Tulsi Vidya Mandir imparts Secondary & Higher
 Education to over 400 children coming from about 12 villages. Aarti
 Group also founded Mahavir School/College of Nursing at Sabar Kantha,
 Gujarat in Year 2008. Mahavir School/College of Nursing is spreading
 professional nursing education to around 150 candidates annually in the
 interior villages. Thus providing people from interiors with an
 alternative option to earn their livelihood. Further Aarti Group also
 founded Maninagar Sanskar Dham, at Kutch in Gujarat in year 2011. It is
 a kindergarten for children of rag-pickers. These children are nurtured
 at the centre for a year and then assisted till obtaining admission to
 primary school. Aarti Group has been contributing to Ratanpar Boarding
 School located in remote part of kutch. Ratanpar Boarding School is
 imparting essential educational and Boarding facility to around 150
 students. Your Company along with its employees have contributed to the
 cause of rehabilitation of 15 villages affected during flash flood in
 Uttarakhand in last monsoon. The Rehabilitation work is in final phase
 and would be completed in FY 2014-15.
 
 Apart from the above, the Company continues to support programs such as
 organizing on a Blood Donation Camps, Health checkup camps, etc on
 regular basis. The Company has been donating to several Hospitals,
 Educational Institutions, Trusts, and contributes for green/open
 spaces. 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 upgradation & infrastructure development of
 the schools.
 
 During the year, the sectoral reach had been broadened to include
 Military and vocational training, waste water recycling
 providing/contributing for education facilities in remote locations and
 for Nomads, employment opportunities, etc. with the focus on
 eradication of hunger, poverty and malnutrition.
 
 PERSONNEL
 
 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 Annexureto 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 Office of the Company.
 
 AUDITORS
 
 M/s. Parikh Joshi & Kothare, Auditors of the Company retire at the
 ensuing Annual General Meeting. Though eligible, Auditors have informed
 that they are not seeking re-appointment as they are in the process of
 consolidation of their firm with M/s. Gokhale & Sathe, Chartered
 Accountants. At the request of the Company, M/s. Gokhale & Sathe have
 Communicated their eligibility and willingness to accept the office, if
 appointed. Members are requested to appoint Auditors and to fix their
 remuneration.
 
 COST AUDITORS
 
 The Cost Auditor Ms. Ketki D. Visariya (Fellowship No. 16028), Cost
 Accountant, re-appointed by the Company under Section 233B of the
 Companies Act, 1956 attend 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, 2013 was 30th September, 2013 and the
 Cost Audit Reports were filed by the Cost Auditor on 27th September,
 2013. The due date for filing the Cost Audit Reports for the financial
 year ended 31st March, 2014 is 30th September, 2014.
 
 The Company is seeking the ratification from the Shareholders for the
 appointment of Ms. Ketki D. Visariya, Cost Auditor of the Company for
 the financial year ending 31st March, 2015 vide resolution no. 13 of
 the Notice of AGM.
 
 INDUSTRIAL RELATIONS & HUMAN RESOURCES
 
 The Company enjoys coordial relation with its employees at all levels.
 Your Company continues to ensure safety and health of its employees.
 Your directors record their appreciation of the support and
 co-operation of all employees and counts on them to be able to maintain
 company''s growth momentum.
 
 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 Government Authorities, Auditors,
 financial institutions, banks, suppliers, other business associates and
 last but not the least the Shareholders.
 
                                        For and on behalf of the Board
 
                                                       Sd/- 
 Place : Mumbai                                  RAJENDRA V. GOGRI
 Dated : 30th May, 2014                    CHAIRMAN & MANAGING DIRECTOR
Source : Dion Global Solutions Limited
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