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EID Parry (India) Ltd.

BSE: 500125 | NSE: EIDPARRY |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE126A01031 | SECTOR: Sugar

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

Dear Shareholders,

The Directors have pleasure in presenting the Forty Third Annual Report together with the audited financial statements for the year ended March 31, 2018.

FINANCIAL PERFORMANCE

Rs. in Crore

Particulars

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

Revenue from operations

2079.83

2476.75

15437.58

14667.11

Gross Revenue

2281.69

2631.21

15610.99

14825.70

Profit Before Interest and Depreciation (EBITDA)

305.21

508.67

1454.96

1584.96

Depreciation

114.46

112.11

251.30

248.04

Profit Before Interest and Tax (EBIT)

190.75

396.56

1203.66

1336.92

Finance Charges

112.90

139.91

335.51

417.32

Net Profit Before Tax

77.85

256.65

868.15

919.60

Tax Expenses

(23.16)

(26.96)

350.72

211.35

Net Profit After tax before minority interest

101.01

283.61

517.43

708.25

Minority Interest

261.61

187.44

Net profit After Tax and minority interest

101.01

283.61

255.82

520.81

Balance of Profit brought forward

332.49

85.90

75.20

(381.26)

Transfer from Debenture Redemption Reserve (Net)

(8.33)

33.33

(8.33)

19.17

Balance Available for appropriation

425.17

402.84

322.69

158.72

Note: The above standalone financial performance is inclusive of continuing and discontinuing operations.

Dividend and Reserves

Based on the Company’s performance, the Directors recommend for approval of the members, a dividend of Rs.3/- per share for the year ended March 31, 2018. The final dividend on equity shares, if approved by the members, would involve a cash outflow of Rs.53.10 crore.

The Company has not transferred any amount to the reserves for the year ended March 31, 2018.

Share Capital

The Paid up Equity Share Capital of the Company as on March 31, 2018 was Rs.17.70 Crore. During the year under review, the Company allotted 49,222 equity shares on exercise of stock options under the ESOP Scheme, 2007. The Company also allotted 10,74,861 Equity Shares to the shareholders of Parrys Sugar Industries Limited (PSIL), consequent to merger of PSIL with the Company.

Consolidated Operations

Consolidated Revenue from operations of your Company for the year was Rs.15,438 Crore, as against Rs.14,667 Crore in the previous year. Overall expenses for the year was Rs.14,656 Crore as against Rs.13,906 Crore in the previous year. Operating Profit (EBITDA) was Rs.1,455 Crore as against Rs.1,585 Crore in the previous year. Profit after Tax and minority interest for the year was Rs.256 Crore, as against Rs.521 Crore in the previous year.

Standalone Operations

Standalone Revenue from operations of your Company for the year was Rs.2,080 Crore as against Rs.2,477 Crore in the previous year. Operating Profit (EBITDA) was Rs.305 Crore, as against Rs.509 Crore in the previous year. Profit after Tax for the year was at Rs.101 Crore as against Rs.284 Crore in the previous year. One of the prime focus areas of the Company has been to reduce debt, which is important to improve the Company’s risk profile and increase sustained earnings. The Company’s total long term borrowings, which was Rs.762 Crore as of March 31, 2017 reduced to Rs.586 Crore as of March 31, 2018. This coupled with overall debt management enabled the Company to reduce finance charges to Rs.113 Crore as compared to Rs.140 Crore in the previous year.

The subdued performance of the Company was largely on account of lower sugar selling prices, which have been on a downward spiral since April 2017 after a significant high in 2016-17. Further, during the year, the Company settled the cane price disputes pertaining to the sugar season 2013-14 to 2016-17 in Tamil Nadu by paying Rs.87 Crore over and above the statutory dues to the farmers. Though statutorily not liable, the Company made these payments as a gesture of goodwill to secure cane supply and maintain enduring relationship with them. This additional payout came at a time when the sugar price had already taken a toll caused by huge domestic and international surplus. Despite the various setbacks mentioned above, the Company could achieve an EBIDTA of Rs.305 Crore due to a slew of initiatives in its areas of operations including optimum efficiency in consuming steam, power and reducing the downtime. The Company ensured that it utilised its distilleries to the maximum capacity by procuring molasses from both domestic and overseas sources as Tamilnadu ran short of molasses due to very low cane availability. The Company also participated in the raw sugar import program as allowed by the Government of India which helped the Company to sweat its assets during the off season, which otherwise would have remained idle.

The Company’s on-going programme of systematic disposal of surplus non-performing assets, continuous thrust on cost control, rigorous cost restructuring exercises and focus on efficiency improvements have favorably impacted the profits. Despite the extremely challenging operating environment, your Company delivered a reasonable performance against the backdrop of high cane cost, sluggish sugar price and lower cane availability. This demonstrates the resilience of your Company’s strong portfolio of sales mix, superior execution of competitive strategies, relentless focus on value creation and deep consumer insights. The Company is well positioned to establish itself as the most trusted sugar producer in the Indian market with continued focus on strong farmer relationship, product quality, R&D and operational excellence across the value chain.

BUSINESS OVERVIEW

Sugar

Improved sugarcane availability is one of the important parameters for sustained growth and profitability of the sugar business. For the year 2017-18, the sugarcane availability in the State of Tamil Nadu (TN) was low, due to widespread drought affecting a majority section of the command area. The Cane area in TN has seen a massive decline during the last few years caused by deficit rain and farmers shifting to other competing crops. This has adversely affected the Company’s TN operations, where most of its plant capacity remained idle for a larger part of the year. The lower sugarcane crush in TN was further compounded by lower recovery in Nellikuppam due to varied climatic conditions. During the year under review, the cane crushed by the plants in TN was 12.30 LMT as against 24.61 LMT in the previous year. The average daily crush rate at 8819 TCD was lower than the average actual crushing rate of 14291 TCD achieved in the previous year. The average recovery was at 8.27% in the current year as against 8.89% in the previous year.

With respect to Karnataka units, the cane crushed was higher at 19.80 LMT as compared to 15.07 LMT in the previous year, which was as per expectations. The average crushing days increased from 102 to 128 and the average recovery was at 11.25 % as against 10.75% in the previous year. The threat of illegal cane poaching which affected the company’s performance in the previous year was mitigated to a larger extent this year due to various proactive measures initiated at the ground level. The availability of harvesting and transportation labour was also a major issue this year in Karnataka as well as in TN and Andhra Pradesh (AP) due to the excess cane production in Maharashtra. The Company’s efforts in employing mechanical harvesters paid dividends as farmers adapted themselves to the mechanised harvesting in an effective manner. The deployment of mechanical harvesters is proposed to be increased progressively to cover a large part of the area as shortage of harvesting labour is going to be the order of the day.

With respect to the AP unit, the cane crushed was at 4.62 LMT as compared to 4.76 LMT in the previous year. The average recovery was at 9.55% as against 9.67% in the previous year.

The overall cane crushed by the Company as a whole, came down to 36.72 LMT as against 44.44 LMT in the previous year. The average sugar recovery went up from 9.61% in the previous year to 10.04% in the current year.

The sustained availability of cane being a major concern, a number of initiatives are being taken up by the Company including cooperative farming, providing resources for drip and micro irrigation and facilitating the clean seed programme directly and through agencies/ agri service providers etc. As a part of farmer centric and inclusive strategy, the Company operates soil testing labs which provide ‘soil health cards’ to farmer for improving soil health and fertility. These initiatives will help in increasing the yield per acre which in turn will increase the income per acre to the farmer. To have connection with the farmers throughout the life cycle of Cane crop, a Farmer Connect App has been launched in TN and the same will be rolled out in AP and Karnataka in the coming years. By this, the cane and extension team will be in regular touch with the farmers during the life cycle of the crop and assist the farmers immediately as and when the need arises.

The Company is also working closely with the Government on a number of subsidy schemes to promote drip irrigation, like Sustainable Sugarcane Initiative (SSI). The company has embarked on a program of ensuring clean seed for planting. In TN and AP, the 3-Tier Nursery programme has been strengthened and varietal purities are being improved through quality seed sourcing from Breeding Institutes and Company’s own tissue culture seedling production centres. In TN, 168 shade nets have been installed through Govt SSI schemes through which the Company is promoting Pro Tray seedlings for quality cane, better yield and reduction in cost of cultivation. All these activities will pave the way for recovery improvement and ensure sustained sugarcane availability.

Sugarcane Price

For the Sugar Season 2017-18, the Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution, fixed the Fair & Remunerative Price (FRP) for sugarcane at Rs.255/quintal for a basic recovery of 9.5% and a premium of Rs.2.68 for every 0.1% increase in the recovery rate, as recommended by the Commission of Agricultural Costs and Prices (CACP). The annual increase of FRP by the government is more than the increase in the Minimum Support Price (MSP) of most other crops like wheat and paddy. The progressive increase of FRP during the last several years has severely affected the industry. Internationally, India is the most “expensive” producer of cane. While the MSP of wheat/paddy went up by around 47% over eight years, the sugarcane price went up by almost 97% in the past nine years. Sugarcane farmers are thus beneficiaries of better return than the grain growers. The FRP is not effectively linked to the market prices of sugar and in most of the years, the sugar mills have suffered losses due to poor realisation from the market.

All India Sugar Production and Government Policies

The four prime stakeholders of the Indian sugar business are farmers, sugar mills, consumers and the Government. Despite the sugar industry being deregulated since 2013, the Government continues to be the most dominant force of intervention amongst the stakeholders. The only policy of sugar is to have “policy of change” triggered by market volatility and pressures exerted by other constituents. The Government of India has been very dynamic in pursuing policies consistent with the requirements of the sugar market to avoid shocks to the millers and farmers. The Industry is also expected to respond in equal measure by ensuring prompt payments to farmers.

The previous Sugar season 2016-17 started with an opening balance of 77 LMT and a lower season production of 203 LMT due to drought in the Southern and Western States. There was pressure on the Government to import large quantity of sugar, on the premise that the stocks would be critically low at the start of the 2017-18 sugar season and sugar prices would rise to unprecedented levels. Interactions by ISMA with the Government, helped to convince the Government that only a small quantity of imports was required to ensure sufficient sugar stocks till the start of the 2017-18 season.

The Government, on concerns of regional deficits, allowed 5 LMT of imports in April 2017 after confirmation of the actual sugar production in the season. Further, instead of allowing the 5 LMT of imports to come through any port, after assessing regional shortage, 3 LMT was allowed to be imported through the ports in South India, 1.5 LMT in the Western region and 0.50 LMT through the Eastern Region.

Government imposed a stock limit on mills such that no mill can keep more than 21% of its total sugar availability of 2016-17 at the end of September 2017 and not more than 8% at the end of October 2017. The Government also continued the stock holding limit on traders allowing a dealer or trader in East and North-East India to store up to 1,000 MT of sugar and 500 MT elsewhere in the country.

This conscious and well calculated decision of the Government was aimed at ensuring that the supply of sugar to the market was steady and domestic prices were stable for the consumers and the sugar mills were able to cover their costs and pay cane price to the farmers on time.

However, with the commencement of the sugar season 2017-18, prices started dropping due to anticipated huge supply of sugar. Hence, the Govt mandated stock holding limit for Sugar mills at 83% of January ‘18 closing stock and 86% of February ‘18 closing stocks. This imposition of the stock limit was to regulate the supply of sugar in order to hold the sugar price at a sustainable level.

The apex body, Indian Sugar Mills Association (ISMA), revised its forecast for the country’s production at 315-320 LMT for the 2017-18 season as against its original estimate of 255 LMT. With 40 LMT of carryover stock from the previous year, the overall surplus at the end of the sugar season 2017-18 was expected to jump to 95-100 LMT. The all India sugar production upto March, 31 2018 reached 281.82 LMT, as against 188.8 LMT in the previous year for the same period. Due to this unexpected surplus sugar availability, domestic ex-mill prices crashed (Refer Chart 1).

In order to move the surplus stocks out of the country and thereby improve prices, the Government in March 2018 announced an Minimum Indicative Export Quota of 20 LMT for exports. However, due to depressed world sugar market, the scheme did not achieve its intended objective. The lower realization from domestic sales as well as depressed global sugar market, made it extremely difficult for the mills to generate sufficient funds for payment of cane price to the farmers in time.

It will be next to impossible for the mills to handle the surplus without the necessary support of the government to industry in the form of some subsidies or incentives. It is high time the Government came out with a long term viable policy to manage this situation impacting the industry. The Government needs to holistically address the issue of unrealistic sugar cane pricing which is currently not linked to the market price of sugar.

Manufacturing Operations

The Company has always been on the forefront of achieving manufacturing excellence and driving cost optimisation across the value chain. The Company believes that this is the only way it can insulate itself from the volatility in the prices of sugar and sugarcane, which are beyond its control and are significantly affecting its operations. The TPM initiative at the Company’s units, which was launched few years back has helped the Company to achieve manufacturing excellence, operational safety and higher level of ownership by employees. The better efficiencies on steam, energy and chemicals consumption besides reduction of total losses, have helped in ensuring that the costs remain under control. Safety has been on top of the agenda across all the factories. Some of the areas covered under the Safety program include launch of TPM Safety Pillar, safety patrol walk by the Plant management team, safety review, display of signage, PPE usage, etc for ensuring safety and accident prevention.

Nellikuppam sugar factory is the first sugar factory in Tamil Nadu to move in the direction of achieving Zero Liquid Discharge (ZLD) for the sugar units. The Company also enhanced the refining capacity of the Unit from 170 MT to 190 MT. The Company has been trying to gradually increase the capacity of Karnataka plants over the past few years. In line with this, the units at Haliyal and Bagalkot have increased their capacity from 7000 TCD to 7500 TCD and from 5400 to 5800 TCD respectively with minimal capital expenditure. The capacity of the Ramdurg, a leased unit has been increased from 4000 tCd to 5000 TCD by the Lessor, Shri Dhanalaxmi Sahakari Sakkare Karkhane Niyamit.

In AP the performance of the Sankili Unit was moderate due to lower availability of Cane. The Sankili Unit’s capacity was expanded from 4200 TCD to 4600 TCD.

Sales and Marketing

The Company’s overall strategy is to de-risk the sugar business from the vagaries of the cyclicality of the industry by way of value addition and de-commoditization. The Company is working towards creating a differentiation in all aspects of its product and processes to sustain the competitive advantage and to counter the continuous risk of cyclicality in sugar prices and rising cane costs. The Company has been continuously working towards optimising its sales mix with increased sales to institutional segments and retail segments. The Company has to its credit a number of certifications and approvals from competent authorities regarding food safety, quality and sustainability, which are being leveraged strategically with the institutional segments. The Company has been successful in establishing a long term and fruitful relationship with its customers and has been selected as preferred supplier by several MNC’s including GSK, Pepsi, Abbott, etc, due to the consistency in quality and adoption of best practices.

The Company believes that its commitment to quality and the power of its strong and trusted brand “Parry”, which has been recognised and valued across segments of the market and customers over the years, will bear fruit. ‘Amrit’, the Company’s retail brand of brown sugar, has been well accepted by the customers.

Research & Extension Services

The company’s state of the art R&D for the Sugar business was established 25 years back with the core purpose of enriching and energising lives by creating value added products from agriculture. The Company is a leader and is one of the few select Sugar Companies in India to have an integrated R&D program for its farmers which is recognized by the Department of Scientific and Industrial Research (DSIR), Ministry of Science & Technology, Government of India. Since sugarcane as a raw material is grown across three states of the country, spanning diverse agro-climatic conditions, research emphasis and approaches vary and are largely location oriented. The Company has established a strong research infrastructure, with a pioneering vision to improve the yield and reduce costs to farmer and also to improve quality of sugarcane and thereby improving factory efficiencies. The R&D technologies are disseminated to the farmers through an exclusive extension function and novel technology transfer tools like mobile village theatres and method demonstrations.

Quality

The Company’s processes and products are Customer Centric. Two of the Company’s units are FSSC 22000 Certified and many other plants are qualified in ISO’s Quality Management System. The refinery unit of the Company at Nellikuppam has several Pharmacopoeia accreditations such as Indian, US, British and Japanese thereby enabling it to cater to the stringent needs of several leading Pharma company requirements for Drug Manufacturing. Also the Company supplies its Quality Sugar to many institutional Customers. The Company has won CII’s Commendation Certification Award for Food Safety 2017 as ‘Strong Commitment to Food Safety’, a milestone in the Sugar Industry. Three of the Company’s units are Bonsucro Certified so as to address the global requirements of Sustainable agriculture.

Bio Pesticides

During the year, the Bio Pesticides Division of the Company registered a revenue of Rs.138 Crore as against Rs.122 Crore in the previous year. PBIT for the year was at Rs.30.02 Crore as against Rs.14.70 Crore during the previous year. Parry America Inc, a wholly owned subsidiary of the Company, registered sales of USD 10 Mn, achieving a growth of 18% over previous year. On a consolidated basis the Bio-Pesticides Business registered a revenue of Rs.152 Crore in 2017-18 as compared to Rs.123 Crore in the previous year.

During the year, the Company successfully procured the highest ever volume of raw neem seeds, from Tamil Nadu, Karnataka & Andhra Pradesh. Due to improved seed arrivals, the procurement prices were fairly maintained. The export as well as the domestic markets responded well for the marginal improvement in selling price. which coupled with effective cost control helped the business to achieve the planned operating profits. The business however continued with its de-risking measures over short term and long term horizon, in raw material procurement.

Parry’s Azadirachtin®, with the highest purity and best stability, continued to command a premium and maintain its leadership position both in the agriculture and indoor garden segments. As a critical part of the future ready strategy for growth, work is in progress to foray into the ‘Microbial segment’. The Company has undertaken a detailed study across the globe, on major crop pest problems and identified the critical ones for which it would work to identify patentable microbial solutions. The bio pesticides business with its eco-friendly products that are safe to farmers and consumers envisages to offer assured and sustainable crop protection solution for the global clients.

The bio pesticides market is driven by factors such as pest resistance to chemicals, Integrated Pest Management (IPM), growth in demand for organic food, heavy crop loss due to pest attacks, lower cost of raw materials, and faster regulatory approval. North America is expected to dominate the bio pesticides market owing to its highly streamlined product registration process, which makes it easier for most private companies to launch their products. Bio pesticides are expected to be a potential substitute for synthetic pesticides in Europe due to the stringent regulations on chemical usage and maximum residue limit. The impending ban on neonicotinoids is expected to drive the growth of the European bio pesticides market.

Nutraceuticals

During the year the Nutraceuticals Division of the Company achieved a revenue from operations of Rs.68 crore as against Rs.71 crore during the previous year. PBIT for the year was at Rs.8 Crore as against Rs.11 Crore during the previous year. The overseas wholly owned subsidiary, US Nutraceuticals LLC achieved sales of US$ 22.7 MN against US$ 23.8 MN of previous year. On a consolidated basis, the division registered a revenue of Rs.216 Crore in 2017-18 as compared to Rs.228 Crore in the previous year.

During the year, overall sales volume of premium Organic Spirulina increased by 10% over previous year mainly due to improved sales volume in European market where premium quality continues to be valued. Further, the business launched Spirulina Granules under different flavours and other value added formulation products. Implementation of TPM and CGMP resulted in improved product quality and productivity. The business has made investments to improve the productivity of Organic Chlorella cultivation and downstream processes, which would enable the scaling up of Chlorella volumes in the coming years.

During the year, the Company established a state of art laboratory facility to ensure good laboratory practices as per regulatory requirements. As part of its clean label program, the Company has enrolled for Non GMO (Genetically Modified Organisms) verification program from Food Chain ID. The Company has obtained Non GMO certificate for its Organic Spirulina and Chlorella products (both powder and tablets) and the Company could use the Non GMO logo in its product labels. As the global health markets are maturing up to micro-algal sources for nutrition, the company stands to gain a major place in the industry that exemplifies clean and sustainable methods of cultivation and eco-friendly discharges from its facilities.

CORPORATE DEVELOPMENTS

Joint Venture with Synthite Industries Ltd

During the year, in line with its vision to grow the Nutraceuticals business through value-added Algae products, the Company entered into a 50:50 Joint Venture (JV) with Synthite Industries Ltd, Cochin, India, to produce Phycocyanin, a natural blue pigment extracted from Spirulina. Phycocyanin is a complex of light-harvesting proteins, extracted from Spirulina which has a characteristic deep blue colour. Phycocyanin offers excellent stability and flexibility for application in a variety of food and beverages and is approved by all major regulatory bodies in USA, EU, Japan and South Korea as food colour. The JV will leverage on Parry Nutra’s Spirulina cultivation strengths and Synthite’s extraction capabilities making it a good strategic fit for both the partners.

Sale of Bio Pesticides Division

During the year, the shareholders, based on the recommendation of the Board of Directors, approved the sale and transfer of the Bio Pesticides Business together with all its employees as well as assets and liabilities including all concerned licences, permits, consents and approvals whatsoever comprising of manufacturing, marketing and trading in Bio Pesticides Products (“Bio Pesticides Business), as a “going concern” and by way of a slump sale to its subsidiary Company Coromandel International Ltd (CIL), with effect from April 1, 2018. The sale of the entire share holding in the wholly owned subsidiary, Parry Amercia Inc to CIL was also approved. This would complement CILs crop protection business. CILs extensive marketing network and experience would enable this business to grow faster. The sale proceeds realized by the Company would help the Company to reduce its debt, which would improve its debt equity ratio

AWARDS & RECOGNITIONS

During the year, the Company received the following awards:

- ”Commitment to Engagement” award from Aon Hewitt in May 2017.

- Nellikuppam Unit - second prize in Best Industrial Relations Category for the period 2008-2014 from Hon’ble. Labour Minister. TN govt. for sustaining cordial industrial relations climate in July 2017.

- ”Chennai Best Employer Award 2017” from Employer Branding Institute India in Dec 2017.

- ET Now’s Best Corporate Social Responsibilities Practices Award during Feb 2018.

- India’s Best Sugar Manufacturing Company of the year 2017 Award by International Brand Consulting Corporation, USA.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Following were the changes in the composition of the Board:

- Mr. M.B.N. Rao Independent Director resigned from the Board on February 27, 2018.

The Board wishes to place on record its appreciation for the valuable contribution made by Mr.Anand Narain Bhatia, Mr.V.Ramesh, Mr.A.Vellayan and Mr.M.B.N. Rao during their tenure as Members of the Board and Board Committees.

Mr. S. Suresh was appointed as the Managing Director of the Company for a period of five years w.e.f August 1, 2017 which was approved by the shareholders at the Annual General Meeting held on August 4, 2017.

Mr. Ramesh K B Menon and Mr.M.M.Venkatachalam joined the Board as non-executive non independent Directors on November 8, 2017 and February 7, 2018 respectively. Mr. C. K. Ranganathan and Mr. Ajay B Baliga joined the Board as Independent Directors on November 8, 2017 and May 9, 2018 respectively.

Consequent to the retirement of Mr.A.Vellayan, the Board elected Mr.V.Ravichandran as Chairman with effect from February 8, 2018.

In accordance with the provisions of Section 161 of the Companies Act, 2013, Mr. Ramesh K. B. Menon, Mr.M.M.Venkatachalam, Mr. C. K. Ranganathan and Mr. Ajay B Baliga hold office up to the date of the ensuing Annual General Meeting. The Company has received letters proposing their appointment as directors at the ensuing Annual General Meeting of the Company.

As per the provisions of Section 152 of the Companies Act, 2013 read with the Articles of Association of the Company, Mr. V. Ravichandran, Director retires by rotation at the forthcoming Annual General Meeting and being eligible offers himself for reappointment and the requisite details in this connection is contained in the notice convening the meeting and the Corporate Governance Report.

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under section 149(6) of the Companies Act, 2013 and also comply with Regulations 16 & 25 of the SEBI (lODR) Regulations, 2015.

Mr. S.Suresh, Managing Director, Mr.V.Suri, Chief Financial Officer and Ms. G.Jalaja, Company Secretary are the Key Managerial Personnel of the Company as per Section 203 of the Companies Act, 2013.

Number of Meetings of the Board

Seven Meetings of the Board of Directors were held during the year, the details of which are given in the Corporate Governance Report.

Board Evaluation

In accordance with the Companies Act, 2013 and SEBI (LODR) Regulations, the Board has carried out an evaluation of its own performance, the performance of Committees of the Board and also the directors individually. The manner in which the evaluation was carried out and the process adopted has been given in the Corporate Governance Report.

Policy on Directors’ Appointment and Remuneration and Other Details

The Board has on the recommendation of the NRC framed a policy for selection and appointment of Directors, Senior Management and their remuneration and also framed the criteria for determining qualifications, positive attributes and independence of directors. The Remuneration Policy and criteria for Board nominations are available on the Company’s website at http://www.eidparry.com/investors/ Policies-Codes.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3) of the Companies Act, 2013, your Directors to the best of their knowledge, belief and according to information and explanations obtained from the management, confirm that:

- In the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards have been followed and there are no material departures from the same;

- they have 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 as at March 31, 2018 and of the profit of the Company for the year ended on that date;

- they have taken proper and sufficient care 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;

- they have prepared the annual accounts on a going concern basis;

- they have laid down proper internal financial controls to be followed by the Company and such controls are adequate and operating effectively and Company by the shareholders at the 42nd Annual General Meeting held on August 4, 2017 to hold office up to the conclusion of the 47th Annual General Meeting.

Cost Auditors

As per the requirement of the Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company’s cost records are subject to Cost Audit.

The Board of Directors, on the recommendation of the Audit Committee, have appointed M/s. Narasimha Murthy & Co, Cost Accountants, as the Cost Auditors to audit the cost accounting records maintained by the Company for the financial year 2018-19 on a remuneration of Rs.8,50,000/- plus applicable tax and reimbursement of out of pocket expenses. A resolution seeking members’ ratification for the remuneration payable to the Cost Auditor forms part of the notice convening the Annual General Meeting.

The cost audit report of the earlier Cost Auditor M/s. Geeyes & Co for the financial year 2016-17 was filed with the Ministry of Corporate Affairs on 8th September 2017. The cost audit report for the financial year 2017-18 would be filed with the Ministry of Corporate Affairs on or before September 30, 2018 as per the provisions of the Companies Act, 2013.

Secretarial Auditors

The Board appointed M/s. R Sridharan & Associates, Practicing Company Secretaries, Chennai as the Secretarial Auditors to undertake the Secretarial Audit of the Company for the year 2017-18. The Report of the Secretarial Auditors is provided in Annexure-B to this Report.

There are no qualifications, reservations or adverse remarks or disclaimers made by the Statutory / Secretarial Auditors in their respective reports.

The Statutory Auditors have not reported any incident of fraud during the year under review to the Audit Committee of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

EID Parry’s CSR initiatives primarily focus on improving the quality of life of the communities where it operates, through socio welfare initiatives.The various CSR initiatives undertaken by the Company during the last financial year include the following:

- Healthcare

The Company pursues a well managed Health Care programme across its units, providing medical amenities for people living in neighbouring villages. ‘Hospital on Wheels’, a well equipped mobile unit with diagnostic and medical intervention amenities makes emergency care possible for people living in remote areas. In addition, mobile medical units cater to the needs of the elderly in the cane growing villages around the Plants.

In addition to the comprehensive health and medical care programmes for employees, across the different Plants free pulse polio camps for the children of labourers and medical camps offering health checkups and free medicines are conducted regularly for cane growers, harvesting and transport labourers.

- Education

As an important part of its CSR programmes, E.I.D Parry promotes education in the neighbouring villages near its units. Besides contributing to infrastructure building and facility upgradation at schools, the Company provides educational assistance to cane growers children and participates in their developmental needs. Baby care centres, mid-day meals for Balawadi school children of labourers, training programmes for employees’ children are few of the ongoing initiatives.

- Community Welfare

E.I.D Parry has always played a key role in extending relief support to villagers during natural calamities and helping the Government in its disaster management initiatives. Drought relief measures were extended to farmers in Tamil Nadu, Karnataka and Andhra Pradesh, to mitigate crop loss. Community development works were also undertaken in the villages in and around the units. As part of its community welfare programmes the Company undertook the desilting of Ponds and Canals, to augment the water supply to villages and schools. Tree Planting across schools and neighbourhoods were conducted as part of the Green Environment initiatives.

The Company has constituted a CSR Committee in accordance with Section 135 of the Companies Act, 2013. The CSR Committee has formulated and recommended to the Board a CSR Policy indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy can be accessed on the Company’s website at www.eidparry. com.

As per the provisions of the Companies Act, 2013, the Company was required to spend Rs.13.20 Lakh towards CSR activities for the year 2017-18. However, the Company has been actively involved in various CSR activities and an amount of Rs.123.46 Lakh was spent during the year. The Annual Report on CSR activities is given in Annexure-C to this Report.

During the year, the Company has bagged the National CSR award under the category of “Best Overall Excellence in CSR” in National CSR Leadership Congress & Awards 2016.

RELATED PARTY TRANSACTIONS

All contracts / arrangements / transactions entered into by the Company during the financial year with the related parties were on arm’s length basis and were in the ordinary course of business. As the sale of Bio Pesticides business to Coromandel International Ltd (CIL), a related party transaction was not in the ordinary course of business, the Company has obtained the approval of shareholders. There were no materially significant related party transactions 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. Prior omnibus approval of the Audit Committee is obtained on a quarterly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are placed before the Audit Committee for their review on a quarterly basis. The policy on Related Party Transactions as approved by the Board is available at the web link: http://www.eidparry.com/ investors/Policies-Codes.

EMPLOYEE STOCK OPTION SCHEME

The Company has introduced Employee Stock Options Scheme, 2016 during the year 2016-17 as approved by the shareholders. The details of the Options granted upto March 31, 2018 and other disclosures as required under SEBI (Share Based Employee Benefits) Regulations, 2014 is available on the Company’s website at www.eidparry.com.

The Company has received a certificate from the Statutory Auditors of the Company that the above referred Scheme had been implemented in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the resolutions passed by the Members in this regard.

CORPORATE GOVERNANCE

The report on corporate governance along with certificate from a practicing Company Secretary as required under the SEBI (LODR) Regulations is annexed to this Report. The report also contains the details required to be provided on the board evaluation, remuneration policy, implementation of risk management policy, whistle-blower policy / vigil mechanism etc.

The Managing Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters as required under Regulation 17(8) read with Schedule II of Part B of the SEBI (LODR) Regulations.

TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the applicable provisions of the Companies Act, 2013, read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“the Rules”) all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Central Government, after the completion of seven years. Further according to the Rules, the shares in respect of which dividend has not been encashed by the shareholders for seven consecutive years or more is also required to be transferred to the demat account created by the IEPF Authority. Accordingly, the Company has transferred the unclaimed and unpaid dividends as well as the corresponding shares as per the requirements of the IEPF rules, details of which are provided on our website, at http://www.eidparry.com/Unpaid-Unclaimed-Dividend.

During the year, the Company has transferred an amount of Rs.22,51,264/- being the unclaimed dividend for the year 2009-10 to the Investor Education and Protection Fund established by the Central Government. The Company has also transferred 689002 shares in respect of which dividend has not been paid or claimed for seven consecutive years or more as enunciated under Section 124 (6) of the Companies Act, 2013.

DISCLOSURES Audit Committee

The Audit Committee comprises of Mr. V. Manickam, Independent Director as the Chairman, Mr. C. K. Ranganathan, Independent Director, Dr. (Ms) Rca Godbole, Independent Director and Mr.M.M.Venkatachalam, Non- Executive Non- Independent Director as Members.

CSR Committee

The CSR Committee comprises of Mr. V. Manickam, Independent Director, as the Chairman and Mr. V .Ravichandran, Non-Executive Non Independent Director and Mr. S. Suresh, Managing Director as members.

Vigil Mechanism & Whistle Blower Policy

The Company has a Vigil Mechanism for directors and employees to report genuine concerns and grievances and provides necessary safeguards against victimisation of employees and directors.

The Audit Committee reviews on a quarterly basis the functioning of the Whistle Blower and vigil mechanism. The Vigil Mechanism and Whistle Blower Policy have been posted on the Company’s website at www.eidparry. com and the details of the same are given in the Corporate Governance Report.

Business Responsibility Report (BRR)

The SEBI (LODR) Regulations mandate the inclusion of the BRR as part of the Annual Report for top 500 listed entities based on market capitalisation. In compliance with the SEBI (LODR) Regulations, the BRR forms part of this Annual Report.

Dividend Distribution Policy

Pursuant to Regulation 43A of Listing Regulations, the top 500 listed Companies shall formulate a Dividend Distribution Policy. The Company’s Dividend Distribution Policy as approved by the Board is available on the Company’s website at www.eidparry.com/investors/Policies-Codes.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars relating to conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo as required to be disclosed under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure - D to this Report.

Loans, Guarantees and Investments

There were no loans and advances in the nature of loans to associate companies as well as to firms/ companies in which Directors are interested during the financial year 2017-18.

During the financial year, the Company had given guarantees and made investments in subsidiaries/Joint venture within the limits as prescribed under Sections 185 and 186 of the Companies Act, 2013. Details of Guarantees and investments are given in Annexure - E to this Report.

Particulars of Employees and Related Disclosures

The information required under Section 197(12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Board’s Report for the year ended March 31, 2018 are given in Annexure - F to this Report.

Extract of Annual Return

The extract of the Annual Return of the Company in Form MGT-9 is given in Annexure - G to this Report.

Compliance of Secretarial Standard

The Company has complied with the Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government as required under Section 118(10) of the Companies Act, 2013.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Companies Act, 2013.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOP referred to in this Report.

The Managing Director of the Company does not receive any remuneration or commission from any of its subsidiaries.

No significant or material orders were passed by the Regulators or Courts or Tribunals, which impact the going concern status and Company’s operations in future.

ACKNOWLEDGEMENT

The Board places on record, its appreciation for the cooperation and support received from investors, customers, farmers, suppliers, employees, government authorities, banks and other business associates.

On behalf of the Board

Place : Chennai V.Ravichandran

Date : May 9, 2018 Chairman

Director’s Report