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Aarti Industries

BSE: 524208|NSE: AARTIIND|ISIN: INE769A01020|SECTOR: Chemicals
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Directors Report Year End : Mar '16    Mar 15

To the Members of AARTI INDUSTRIES LIMITED

The Directors are pleased to present this Thirty Third Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2016.

FINANCIAL RESULTS

(Figures in Rs, Crores)

PARTICULARS

STANDALONE CONSOLIDATED

2015-16

2014-15

2015-16

2014-15

Total Income from Operations (Net)

2717

2871

2780

2908

EBIDTA

540

458

578

471

Depreciation & Amortization

93

79

98

82

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

437

378

474

384

Other Income/Exceptional Items

10

5

6

9

Profit/(Loss) before Finance Costs

447

383

480

393

Finance Costs Profit/(Loss) before Tax

116

137

117

138

331

246

363

255

Tax Expenses

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

43

40

55

43

b) Provision for Deferred Tax

17

18

19

18

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

Share of Profit/(Loss) of Associates

19

-

21

-

79

58

95

61

-

-

-

14

Minority Interest

Net Profit/(Loss) after consolidation Earnings Per Share (''

-

-

(11)

(2)

252

188

257

206

30.30

21.00

30.83

23.24

Book Value Per Share (?)

128.43

102.47

133.75

114.73

DIVIDEND

Your Company had declared and paid three Interim Dividends aggregating Rs, 8.50 ps. (@ 170%) per share (of Rs. 5/- each) as compared to the Total Dividend of Rs, 5.50 ps. (@ 110%) per share (of Rs, 5/- each) for the FY 2014-15. The total amount of Dividend pay-out for the year was Rs, 70.82 Crores (Previous Year: Rs, 48.73 Crores). In view of this, the Board had not proposed any further dividend for FY 2015-16.

Your Company has transferred Rs, 25.25 Crores to General Reserve (Previous Year: Rs, 19.00 Crores) and Rs, 30 Crores to Debenture Redemption Reserve (Previous Year: Rs, 30 Crores).

FINANCIALS

Your Company reported total Income at Rs, 2717 Crores for FY 2015-16 as against Rs, 2871 Crores for FY 2014-15. Similarly the exports for the year were at Rs, 1352 Crores for FY 2015-16 v/s Rs, 1449 Crores for FY 2014-15. While the volumes had grown by over 10% y-o-y, the total income and exports were lower on account of softer crude prices.

Your Company’s Earnings Before Interest Depreciation and Taxes stood at Rs, 540 Crores in FY 2015-16 as compared to Rs, 458 Crores in FY 2014-15, registering a growth of 18%. Likewise Net Profit Before Tax rose by 35 % to Rs, 331 Crores in FY 2015-16 as compared to Rs, 246 Crores in FY 2014-15. Likewise, Net Profit after Tax & Deferred Tax also grew by 34% to Rs, 252 Crores in FY 2015-16 as compared to Rs, 188 Crores in Financial Year 2014-15.

Likewise the Consolidated Total income for FY 2015-16 was at Rs, 2780 Crores as compared to Rs, 2908 Crores for FY 2014-15 and exports for the year 2015-16 was Rs, 1431 Crores vs Rs, 1449 Crores for FY 2014-15.

On a Consolidated basis, your Company’s Earnings Before Interest Depreciation and Taxes stood at Rs, 578 Crores in FY 2015-16 as compared to Rs, 471 Crores in FY 2014-15, registering a growth of 23%. Similarly, Net Profit after consolidation grew by 25% to Rs, 257 Crores in FY 2015-16 as compared to Rs, 206 Crores in FY 2014-15. Likewise, Consolidated EPS surged by about 33% at Rs, 30.83 for FY 2015-16, as compared to Rs, 23.24 for FY 2014-15.

SHARE CAPITAL

In terms of the Scheme of Amalgamation approved by the Hon''ble High Courts at Ahmadabad and Mumbai, Anushakti Chemicals and Drugs Limited; Anushakti Holdings Limited; Alchemie Leasing and Financing Private Limited and Gogri and Sons Investments Private Limited (Transferor Companies) had been merged in the Company (Transferee Company) with effect from 1st April, 2015; pursuant to which the Authorized Share Capital of the Transferor Companies merged into the Company. Consequently the Authorized Share Capital of the Company has increased to Rs,1,15,07,51,600.

Further, Pursuant to the Scheme of Amalgamation,

1,67,26,401 Equity Shares were issued to the Shareholders of the Transferor Companies and 2,19,97,705 Equity Shares being held by Transferor Companies in the Company were cancelled. As a result the paid-up share capital of the Company has been reduced by 52,71,304 Equity Share and stands cancelled at Rs, 2,63,56,520.

Apart from the above, no other shares were issued by the Company during the Financial Year under review.

CORPORATE SOCIAL RESPONSIBILITY

Your Company through own trusts Aarti Foundation & Dhanvallabh Charitable trust and various other NGO''s 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 up liftmen 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 at page no. 26 of 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, 2016 the Company had 3254 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

No 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 scheme of amalgamation. 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 2015-16 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.

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 March 31, 2016, 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://www.aartigroup.com/pdfs/Related%20Party%20

Transaction%20Policy%20Pdf.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).

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 5 (five) direct subsidiaries, namely, Aarti Corporate Services Limited, Alchemie Europe Limited, Innovative Envirocare Jhagadia Limited, Ganesh Polychem Limited, Aarti USA Inc and 2 (two) indirect subsidiaries namely Shanti Intermediates Private Limited, Nascent Chemical Industries Limited both hold through Aarti Corporate Services Limited.

During the year under review Aarti USA Inc. and former associate Ganesh Polychem Limited has become Subsidiary of the Company and other Companies namely Anushakti Chemicals and Drugs Limited, Anushakti Holdings Limited, Aarti Intermediates Private Limited, Aarti Bio-Tech Limited and Perfect Enviro Control System Limited have ceased to be Associate Companies.

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. Parimal H. Desai and Smt. Hetal Gogri Gala, 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 renewal of term of Smt. Hetal Gogri Gala, Whole-time Director of the Company whose present term expires on 31st October, 2016.

During the Year 2015-16 , Whole-time Directors, namely, Shri. Kirit R. Mehta and Shri. Parimal H Desai were re-appointed for a period of 5 (five) years w.e.f. 18th September, 2015 and 10th February, 2016 respectively.

Further, Padmashri Prof. Ganapati D. Yadav and Smt. Priti P. Savla, Independent Directors were appointed for a period of 3 Years w.e.f. 24th September, 2015.

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 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.

- Maintenance element with purpose to achieve rated performance of assets throughout rated life is being launched. Standardization of maintenance practices are under progress. Also the Plant Maintenance module (an IT enabled solution) are also being implemented with an objective to map and monitor all maintenance activities through the IT enabled system. This would help to have online reporting and tracking of various scheduled and unscheduled maintenance breakdown activities.

- Systematic and well documented scale up procedure including risk assessment and process safety study at each stage of development from R&D to Pilot to Commercial Scale, to ensure inherently safe processes, has been developed.

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 www.aartigroup.com

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://www. aartigroup.com/pdfs/Policy%20for%20determining%20 Material%20Subsidiary17.6.16.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 www.aartigroup.com

STATUTORY AUDITORS

In the 31st Annual General Meeting (AGM) of the Company held on September 24, 2014, M/s. Gokhale & Sathe, Chartered Accountants (Firm Regn. No. 103264W) had been appointed as the Statutory Auditors of the Company for a period up to 3(three) years to hold office from the conclusion of the 31st AGM (AGM) until the conclusion of the 34th AGM of the Company. In terms of the provisions of the Companies Act, 2013, it is necessary to get the appointment ratified by the shareholders in every Annual General Meeting until the expiry of the period of original appointment.

In view of the above, the Board of Directors recommends your ratification of the appointment of M/s. Gokhale & Sathe, Chartered Accountants (Firm Regn. No. 103264W) as the Statutory Auditors as mentioned at Item No. 4 of the Notice.

AUDITORS'' REPORT

There are 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, re-appointed by the Company under provisions of Section 148(5) read with Section 141 of the Companies Act, 2013 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, 2015 was 30th September, 2015 and the Cost Audit Reports were filed by the Cost Auditor on 26th September, 2015. The due date for filing the Cost Audit Reports for the Financial Year ended 31st March, 2016 is 30th September, 2016.

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, 2017 vide resolution no. 6 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

Sd/-

RAJENDRA V. GOGRI

CHAIRMAN AND MANAGING DIRECTOR

Place : Mumbai

Date: 6th May, 2016

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