The Directors have pleasure in presenting their fifty - fifth Annual Report on business and operations of
Phillips Carbon Black Limited and the Audited Accounts for the financial year ended 31st March, 2016.
(Rs. in crore)
Less: Finance and hedging cost
Balance brought forward
Less: Adjustment consequent to revision of useful life of certain assets pursuant to Schedule II of the
Companies Act, 2013
Balance brought forward (net of adjustment)
Profit available for Appropriation
Tax on aforesaid Dividend
Balance carried forward to Balance Sheet
Based on Company’s performance, your Directors are happy to recommend a dividend of 25% i.e., @ Rs.
2.50/- per share which will absorb Rs. 8.62 crore, for approval of Members at the ensuing Annual General
Meeting. The tax on aforesaid dividend, to be borne by the Company, will be Rs. 1.75 crore.
INDUSTRY STRUCTURE AND DEVELOPMENTS
Global economic recovery continues, but at an ever slowing and increasingly fragile pace. Major
macroeconomic realignments are affecting prospects differentially across countries and regions. These include
slowdown in China, a decline in oil price with sizable redistributive consequences across sectors and
countries, slowdown in investment and trade activities, declining capital flows to emerging economies. These
realignments together with noneconomic factors such as geopolitical tensions and political discord are
Amid this uncertain and differential growth, global automobile industry witnessed an estimated demand
increase of almost 2% in FY16 which is less than FY15 estimated growth of 2.7%. Recovering automobile sales
in major markets of Europe such as Spain, Italy, UK, France and Germany contributed to a growth of 8 - 9% in
FY16. Increasing consumer spending, low gasoline prices and pent-up demand boosted automobile sales in US.
Emerging markets of Eastern Europe, South America and Africa whose income are dependent on commodity prices,
saw a sharp decline in auto sales with demand decreasing by as much as 30 to 40% for a few countries.
Increased auto demand in Asia continued to be driven by China and South Asia at a slower pace of approx.
3.2%. As China is moving towards consumption driven economy model, the same is reflected in the increasing
passenger car sales. Japan continues its de growth in auto sales in a weak economy. Global demand for
passenger car tyre grew by estimated 2% with improved demand in Western Europe, North America, China and
India. Global demand for truck tyre declined by estimated 2% with OEM segment demand decreasing by estimated
7%. Tyre demand in emerging markets continued to decline.
Indian Automobile Industry’s domestic market recorded an increase in passenger vehicle sales by 7%,
commercial vehicle by 11% and muted growth of 1 - 3% in two and three wheeler segments in FY16. Low cost of
ownership, improving demand from infrastructural activity and better than a normal monsoon should drive the
FY17 growth across the segments. Auto exports grew by 1.9% on account of lower sales in two wheeler segment.
Tyre Industry recorded lower production amid exports falling by 13-15% and increased imports by 12-14% in
FY16. FY17 growth across segments is expected to improve with improving rural demand and increased
Global Carbon black industry continued to operate at capacity utilization of 75 - 80% in FY16 against
demand supply imbalance. The need for local servicing to the customer and price competitiveness are prompting
major players to rationalize and restructure their capacity across geographies. International Market is
witnessing aggressive competitions from low cost carbon black manufacturers.
PERFORMANCE Carbon Black
Your Company’s EBITDA during FY16 was Rs. 230.19 crore as against Rs. 210.21 crore achieved in the
previous year. This was mainly on account of higher capacity utilization. While global Carbon Black demand
continued to grow by 4-5%, your Company achieved better growth. However, the impact of this volume growth was
marginally offset by steady decline in crude price.
PBT for the year was Rs. 57.04 crore which is almost four times as that of previous year’s PBT of
Rs. 14.33 crore.
Your Company’s power segment revenue (excluding inter segment revenue) was higher at Rs. 76.32
crore vis-a-vis Rs. 69.13 crore in the last year on account of higher volume.
Production during FY16 was 3,32,038 MT as compared to 311,823 MT in the previous year.
Capacity utilization is expected to improve further this year with higher volume expected from the market
and the rise in consumption trend of automobile sector. With the strategic location of its four plants, your
Company is well poised to service the demand from various customers in India and overseas. The close vicinity
of seaports to a couple of plants should facilitate logistics costs within India and abroad.
Research and Development
The Research and Development (R&D) units located at Durgapur, Kochi, Mundra and Palej continued to
receive recognition as in-house Research and Development units from the Department of Scientific and
Industrial Research, Ministry of Science and Technology.
During the year your Company successfully - i) developed new grades of carbon black for domestic and
ii) improved product characteristics to meet more stringent customer specifications, iii)continued
recasting of Standard Operating Procedures, iv) established state of the art rubber application laboratory
and v) modified reactor design operating conditions to improve yield.
Environment, Health, Safety and Social Responsibility
Your Company’s commitment to Nature and Society leads to preservation and enrichment of environment
by conducting all its operations in an environment-friendly and safe manner. We are tirelessly continuing to
act upon the initiatives (environmental, health care projects and educational programs) that would enable the
Company to touch the lives of the people based around its manufacturing units.
Each plant focuses on driving safe workplace initiatives, which has resulted in zero fatal accident at
the plants. The Company ensures that it always adheres to all the environmental conformances.
Human Resource Development
Your Company has embarked upon a major transformational journey by focusing on building capabilities with
a strong emphasis on people. While defining the vision, the Leadership team deliberated on how to create
holistic experiences that the Company wants its key stakeholders to have with its product, service and
culture. The Human Resources function has partnered with the business to drive this initiative, and has
aligned the HR processes to realize its vision: “To become a trusted Global player providing cutting
edge solutions to our Partners and an exciting workplace to our People”.
Your Company focused on translating the vision statement into reality by identifying the actions that
could be taken - both individually and collectively - to achieve its vision. People capability building also
forms an integral part of these interventions. Recently, a host of Learning and Development initiatives were
introduced across PCBL. One such initiative, ‘‘Nirantar Gyan Vardhan’’ is aimed at
creating organization-specific competencies that will provide competitive advantage. Also interventions like
the Competency Based Interviews, aimed at creating an unified method for Talent acquisition across the
organization. These are conducted as certification programs.
Keeping in mind the importance of communication within workplace, the Company has introduced two
significant platforms of internal communication - ‘Mypulse’, the internal blogging space for
employees and the ‘Brown Bag Series’ that is all about connecting and knowledge sharing.
The internal blogging system, ‘Mypulse’ is a platform for creative thinking, knowledge
sharing and effective communication. It inculcates in people the habit of writing journals or blogs, which
builds the skill of documentation.
‘Brown Bag Series’ is a platform where employees connect, think and talk business, broaden
horizon and increase awareness. The sessions are attended simultaneously by the employees across the Head
Office, Plants and Regional Offices. It is a monthly affair with diverse topics concerning business, global
economy and carbon black industry. The Company is now on the social media platforms like Facebook and
Linkedin as well.
Other initiatives include:
An Industry-Academia partnership with a Core Sector University, whereby managers teach students Carbon
Black process and technology in their campus.
The effective implementation of Talent Review process aims at identification of Hi-potential talents and
ensures their development for critical positions.
Automation of ‘Travel Management’ and ‘New Joinee On boarding’ touch points on HR
Connect, the employees’ portal has been introduced. With an on boarding touch point, HR seeks feedback
from new joinees over the period of 180 days. These automated processes have supported the HR team to provide
consistent HR services across the Organization.
Industrial Relations (IR) situation continues to be harmonious and even non managerial employees in
various locations have shown great understanding of the business situation by accepting no wage settlement
for four years. Not a single man-day was lost in this financial year.
There were 806 permanent employees on the rolls of the Company as on 31st March, 2016.
Internal Financial Control System and its Adequacy
Your Company has adequate Internal Financial Control systems in all areas of operation. Your Board has
adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including
adherence to the Company’s policies, safeguarding of its assets, the prevention and detection of frauds
and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable
financial disclosures. Services of internal and external auditors are utilized from time to time, as also
in-house expertise and resources. Your Company continuously upgrades these systems in line with the best
These reports and deviations are regularly discussed with Management Committee Members and actions are
taken whenever necessary.
An Independent Audit Committee of the Board reviews the adequacy of Internal Financial Control.
Opportunities and Threats
Your Company is always on the lookout for opportunities that may arise while keeping tab on the likely
threats to its business.
- Slow but steady recovery of advanced economies should raise the demand for automobile and tyre and
therefore increase the demand for carbon black.
- In line with any capacity addition in Indian Auto Industry, the domestic tyre industry is also
aligning accordingly to meet the growing demand from OEM and replacement market.
- Better than the normal monsoon, low cost of vehicle ownership and thrust on infrastructure development
to drive the Indian Automobile industry growth shall raise the demand for tyre from the OEM segment.
- Increasing competition from low cost carbon black manufacturers such as Russia, China and South
- Sharp fall in Crude prices leading to inventory price risk. Segment wise Performance
The performance of Carbon Black and Power segment has been covered in this Report earlier.
Risks and Concern
Raw material for your Company viz., Carbon Black Feedstock (CBFS) is a residue from the distillation
process and is subject to daily volatility, whereas the selling price of finished carbon black is revised on
monthly/quarterly basis. In the event the Company is unable to pass on the increase in CBFS cost then, it may
have an adverse impact on profit.
In view of long transit time in import of CBFS, a sudden crash in the CBFS price may lead to loss of
profit. Increase in import or drop in demand for carbon black may also have significant impact on the
The Company is also exposed to risks from fluctuation of Indian Rupee vis-a-vis other currencies,
interest rate, realization for power and regulations relating to environment.
Major Expansion Plans
Projects are proceeding at a pace considered appropriate in view of the prevailing economic situation,
global scenario and the Company’s business strategy.
The Company has four subsidiaries as on 31st March, 2016. There are no associate companies or joint
venture companies as per the Companies Act, 2013.
In accordance with the provisions of Section 129(3) of the Companies Act, 2013, the Company has prepared
a Consolidated Financial Statement of the Company and all the subsidiaries namely, Phillips Carbon Black
Cyprus Holdings Limited, PCBL Netherlands Holdings B.V, Phillips Carbon Black Vietnam Joint Stock Company and
Goodluck Dealcom Private Limited, in the form and manner as that of its own duly audited by M/s. Price
Waterhouse, the auditors in compliance with the applicable accounting standards and the SEBI (Listing
Obligations and Disclosure Requirements), Regulations, 2015. The Consolidated financial statements for the
year 2015-16 forms a part of the Annual Report and Accounts and shall be laid before the Annual General
Meeting of the Company while laying its financial statements under sub-section (2) of the said section. A
Statement containing salient features of the financial statements of the Company’s subsidiaries in Form
AOC-1 is attached to the financial statements of the Company.
Further pursuant to the provisions of Section 136 of the Act, the financial statements of the Company,
consolidated financial statements along with relevant documents and separate audited accounts in respect of
subsidiaries, are available on the website of the Company.
The Company does not have any material subsidiary in the immediately preceding accounting year. However
as per revised SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, SEBI has made it
mandatory for all listed companies to formulate a policy for determining “material subsidiaries”.
Accordingly, a policy on “material subsidiaries” was formulated by the Audit Committee of the
Board of Directors and the same is also posted on the website of the Company and may be accessed at the link
Demand for carbon black in India is expected to grow @ 6-7% during the next couple of years. With its
wide product portfolio basket and manufacturing units located strategically near to the customer location,
your Company is well positioned to cater to increase in the demand.
Overseas demand for carbon black is expected to grow @4 - 4.5%. Your Company has well established supply
chain distribution network to ensure timely delivery, service to customers and widen its presence in the
international market. This will continue to be a major thrust area for your Company in the coming years.
Also, moving up the product value chain is one of the important pillars of your company’s business
strategy and therefore the Manufacturing and Technology team is working to add more high value products to
Steps in Manufacturing and Procurement
Your Company continues to focus on various initiatives to improve operational efficiencies like improving
yield, exploring new geographies for feedstock sourcing as well as investing in technical capabilities for
developing new grades particularly for non-rubber applications.
The paid up Equity Share Capital as on 31st March, 2016 was Rs. 34.47 crore. During the year under
review, your Company has not issued shares with differential voting rights nor granted stock options nor
sweat equity. As on 31st March, 2016, none of the Directors of the Company hold shares or convertible
instruments of the Company.
Extract of Annual Return
In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of annual return in the
prescribed format is given in ‘Annexure - A’, which is annexed hereto and forms a part of the
Conservation Of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The particulars as prescribed under sub-section (3)(m) of Section 134 of the Companies Act, 2013 read
with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in the ‘Annexure - B’, which is
annexed hereto and forms a part of the Boards’ Report.
The Company does not have any Public Deposit Scheme and has repaid all Public Deposits that matured and
were claimed by the depositors under the earlier Public Deposit Schemes. There is no outstanding balance as
on 31st March, 2016.
Details of Significant and Material orders passed by the Regulators, Courts and Tribunals
No significant and material order has been passed by the regulators, courts and tribunals impacting the
going concern status and company’s operations in future.
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.
Committees of the Board
Currently, the Board has four committees : the Audit Committee, the Nomination and Remuneration
Committee, the Stakeholders Relationship Committee and the Corporate Social Responsibility Committee. A
detailed note on the composition of the Board and its Committees is provided in the Corporate Governance
Report Section of this Annual Report.
Corporate Social Responsibility
In accordance with Section 135 of the Companies Act, 2013 and the rules made there under, the Company has
formulated a Corporate Social Responsibility Policy, a brief outline of which along with the required
disclosures is given in ‘Annexure - C’, which is annexed hereto and forms a part of the
The Company along with other companies of the Group has set up RP-Sanjiv Goenka Group CSR Trust, to carry
out CSR activities.
The detail of the CSR Policy is also posted on the website of the Company and may be accessed at the
Vigil Mechanism /Whistle Blower Policy In compliance with provisions of Section 177(9) of the Companies
Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, the Company has
framed a Whistle Blower Policy / Vigil Mechanism for directors, employees and stakeholders for reporting
genuine concerns about any instance of any irregularity, unethical practice and/or misconduct. The details of
the Vigil Mechanism/ Whistle Blower Policy is also posted on the website of the Company and may be accessed at
Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure
Requirements), Regulations, 2015, the Board has carried out an annual performance evaluation of its own
performance, the directors individually as well as the evaluation of the working of its Audit, Nomination and
Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained
in the Corporate Governance Report.
In a separate meeting of Independent directors, performance of non-independent directors, performance of
the board as a whole and performance of the Chairman was evaluated, taking into account the views of
executive directors and non-executive directors. The same was also discussed in the Board Meeting.
Performance evaluation of independent directors was done by the entire board, excluding the independent
director being evaluated.
The Board has on the recommendation of the Nomination and Remuneration Committee framed a policy for
selection and appointment of Directors, Senior Management Personnel and their remuneration. The Remuneration
Policy is stated in the Corporate Governance Report.
Related Party Transactions
All Related Party Transactions that were entered into during the financial year were on an arm’s
length basis and were in the ordinary course of business. Hence, the provisions of Section 188 of the
Companies Act, 2013 are not attracted. Thus, disclosure in Form AOC-2 is not required. Further, there are no
materially significant Related Party Transactions during the year under review made by the Company with
Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential
conflict with the interest of the Company at large.
All Related Party Transactions are placed before the Audit Committee for approval.
The policy on Related Party Transactions as approved by the Board is also posted on the website of the
Company and may be accessed at the link http://pcblltd.com/investorrelations/
Risk Management is the process of identification, assessment, and prioritization of risks followed by
coordinated efforts to minimize, monitor and mitigate/control the probability and/or impact of unfortunate
events or to maximize the realization of opportunities. The Company has laid a comprehensive Risk Assessment
and Minimization / Mitigation Procedure, which is reviewed by the Audit Committee and approved by the Board
from time to time. These procedures are reviewed to ensure that executive management controls risk through
means of a properly defined framework.
Particulars of Employees
As required under provisions of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees concerned
forms a part of the Boards’ Report. Having regard to the provisions of Section 136 of the Companies
Act, 2013, the Annual Report excluding the aforesaid information is being sent to the members of the Company.
Any member interested in obtaining such particulars may write to the Company Secretary of the Company.
Details relating to Remuneration of Directors, Key Managerial Personnel and Employees
Disclosure pertaining to remuneration and other details as required under Section 197(12) of the
Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 is marked as ‘Annexure - D’, which is annexed hereto and forms a part of
the Boards’ Report.
A separate Report on Corporate Governance as prescribed under the SEBI (Listing Obligations and
Disclosure Requirements), Regulations, 2015, together with a certificate from the Company’s Auditors
confirming compliance is set out in the Annexure forming part of this Annual Report.
Number of meetings of Board of Directors
The details of the number of meetings of the Board of Directors held during the financial year 2015-16
forms a part of the Corporate Governance Report.
Directors’ Responsibility Statement
Pursuant to Section 134(3) (c) of the Companies Act, 2013, the Directors to the best of their knowledge
and belief confirm that:
i) In the preparation of the annual accounts for the financial year ended 31st March, 2016, the
applicable accounting standards have been followed and there are no material departures:
ii) Appropriate accounting policies have been selected and applied consistently and judgments and
estimates have been made 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 financial year and of the profit and loss of the Company for the
iii) Proper and sufficient care have been taken, for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
iv) The annual accounts have been prepared on a going concern basis.
v) Internal financial controls laid down by the Directors have been followed by the Company and such
internal financial controls are adequate and were operating effectively.
vi) Proper systems to ensure compliance with the provisions of all applicable laws were in place and
were adequate and operating effectively.
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director under Section 149(7) of the
Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the
Companies Act, 2013 and Regulations 16(b) and 25 of SEBI (Listing Obligations and Disclosure Requirements),
Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the rules framed there under,
M/s. Price Waterhouse (Firm Registration No. 301112E), Chartered Accountants, were appointed as Statutory
Auditors of the Company from the conclusion of the 53rd Annual General Meeting (AGM) of the Company held on
30th July, 2014 till the conclusion of 56th AGM to be held in the year 2017, subject to ratification of their
appointment at every AGM. Accordingly, a Resolution seeking Members ratification for their appointment is
included at Item No. 4 of the Notice convening the Annual General Meeting.
Pursuant to Section 148 of the Companies act, 2013 read with the Companies (Cost Records and Audit)
Amendment Rules, 2014, the Cost Audit records maintained by the Company relating to manufacture of Carbon
Black and generation and transmission of electricity at the plants located at Durgapur, Kochi, Mundra and
Palej of the Company is required to be audited. Your Directors had, on the recommendation of the Audit
Committee, appointed Messrs Shome & Banerjee, to audit the cost accounts of the Company for the financial
year 2016 -2017 on a remuneration of Rs. 4,50,000/- (Rupees Four lacs fifty thousand only). As required under
the Companies Act, 2013, the remuneration payable to the Cost Auditors is required to be placed before the
members in a General Meeting for their ratification. Accordingly, a Resolution seeking Members ratification
for the remuneration payable to Messrs Shome & Banerjee, Cost Auditors is included at Item No. 7 of the
Notice convening the Annual General Meeting.
The Company submits its Cost Audit Report with the Ministry of Corporate Affairs within the stipulated
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Anjan Kumar Roy & Co., Company
Secretaries (Membership No. FCS 5684) to undertake the Secretarial Audit of the Company. The Secretarial
Audit Report for the Financial Year ended 31st March, 2016 is marked as ‘Annexure - E’, which is
annexed hereto and forms a part of the Boards’ Report.
The Board deeply mourns the sad demise of Dr. Ram S Tarneja, who expired on 7th August, 2015 and places
on record its appreciation for the services rendered by him as a Director.
Mr. Sanjiv Goenka retires by rotation at the forthcoming Annual General Meeting and, being eligible,
offers himself for re-appointment.
The Board of Directors of the Company at its Meeting held on 29th January, 2016 has re-appointed Mr.
Kaushik Roy, as Managing Director of the Company for a further period of three years from 5th February, 2016,
subject to the approval of the members and such other approvals as may be necessary.
As per Section 149 and other applicable provisions of the Companies Act, 2013, your Directors are seeking
appointment of Mr. Paras K Chowdhary, as an Independent Director for three consecutive years for a term up to
21st July, 2019. The Company has received a notice pursuant to Section 160 of the Companies Act, 2013 along
with prescribed deposit from a member of the Company signifying his intention to propose the candidature of
Mr. Paras K Chowdhary for the office of an Independent Director of the Company. Details of the proposal for
appointment of Mr. Paras K Chowdhary, as an Independent Director is mentioned in the Explanatory Statement
under Section 102 of the Companies Act, 2013 of the Notice of the 55th Annual General Meeting.
As in the previous years, this year too, we are publishing only the statutory disclosures in the print
version of the Annual Report. Physical copies of the Notice of the 55th Annual General Meeting (AGM) have
been sent to all the Members of the Company. Besides, the electronic copies of the Notice have also been sent
to all the Members whose email IDs are registered with the Company’s Registrar and Share Transfer Agent/
Depository Participants for communication purposes. The electronic copies of the Annual Report 2015-16 are
being sent to all Members whose email addresses are registered with the Company/Depository Participants(s).
For members who have not registered their email addresses, physical copies of Annual Report are being sent in
the permitted mode.
Forward - looking Statement
This Report contains forward - looking statements that involve risks and uncertainties. Actual results,
performance or achievements could differ materially from those expressed or implied in such forward - looking
statements. Significant factors that could make a difference to the Company’s operations include
domestic and international economic conditions affecting demand-supply and price conditions, foreign exchange
fluctuations, changes in government regulations, tax regimes and other statutes.
Your Directors record their grateful appreciation for the encouragement, assistance and co-operation
received from members, government authorities, banks and customers. They also thank them for the trust
reposed in the Management and wish to thank all employees for their commitment and contribution.
For and on behalf of the Board
13th May, 2016
(DIN : 00074796)