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Kothari Petrochem Ltd.

BSE: 532096 | NSE: KOTHARIPET |

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Series: EQ | ISIN: INE720A01015 | SECTOR: Trading

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Director’s Report

To the Members

The Directors have pleasure in presenting before you the 29th Annual Report of the Company together with the Audited Financial Statements for the year ended 31st March, 2018.

Financial Summary of the Company (Rs.in Lakhs)

Sl. No.

Particulars

2017 - 2018

2016 - 2017

(i)

Total Revenue (net of excise duty)

19,636.45

22,207.57

(ii)

Profit/(Loss) before Interest and Depreciation

1,949.88

1,457.30

(iii)

Interest

141.91

151.76

(iv)

Depreciation

360.98

310.37

(v)

Profit/(Loss) Before Tax

1,446.99

995.17

(vi)

Tax Adjustments including Deferred Tax

489.39

414.42

(vii)

Profit / (Loss) after Tax

957.60

580.75

(viii)

Other comprehensive Income

(1.27)

0.12

(ix)

Total comprehensive Income

956.33

580.87

(x)

Profit brought forward from previous year

1,164.61

747.04

(xi)

Profit available for appropriation

2,122.21

1,327.79

(xii)

Dividend

147.12

147.12

(xiii)

Dividend Distribution Tax

29.95

16.18

(xiv)

Profit / (Loss) after Appropriation

1,943.88

1,164.61

Financials Highlights

The Company’s Profit Before Tax for the year ended 31st March 2018 has increased to Rs.1,446.99 lakhs as compared to Rs.995.17 lakhs in the previous year. The total turnover for the year ended 31st March 2018 is Rs.19,636.45 lakhs as against Rs.22,207.57 lakhs in the previous year. The reduction in turnover is mainly due to drop in remnant LPG sales during the period ended 31st March 2018 as compared to previous year due to effective management of sourcing of raw material.

Compliance with IND AS

The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated February 16, 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of Companies. Ind AS has replaced the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For your company Ind AS is applicable from April 1, 2017, with a transition date of April 1, 2016. Your Company has prepared the financial statements as per the requirements of IND AS specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Indian Accounting Standards) Rules 2015, as amended, for the first time, being mandatory from 1st April 2017 and the previous year’s figures have been accordingly restated.

The following are the areas which had an impact on account of transition to Indian Accounting Standard:

(a) Fair valuation of derivatives (forward cover)

(b) Fair valuation of interest free deposits accepted / paid.

(c) Actuarial valuation of defined benefit obligation.

(d) Fair valuation of investment property

(e) Effective interest rate for term loans

(f) Expected credit loss for debtors

The reconciliation and description of the effect of the transition to Ind AS have been provided in the notes to accounts in the financial statement.

Status of the Plant

The plant production capacity remains at 22000 TPA in terms of 950 Molecular Weight Poly Iso Butylene (PIB). However based on the product mix, the plant production capacity will vary. Though the plant can now produce upto 24,000 TPA of 950 MW PIB, the production is confined to 22,000 TPA to conform to permission from Statutory Authorities. Overall the plant health is good and no major maintenance is required except the routine cleaning of the process equipments.

To augment the supply of raw material from the local source, Company has commissioned Lean Poly Iso Butylene Feed Stock (LBPFS) plant in September 2016 and to meet the additional requirement of steam and power for this plant as well as the existing PIB plant, a 2 MW captive power plant was commissioned in December 2017 with all necessary statutory clearances to meet 100% requirement of quality power and steam at a controlled cost.

The investment made in the captive power plant with a flexibility to operate with bio and fossil fuel instead of high cost furnace oil and diesel, will help the Company to become self dependent on quality and uninterrupted power and steam at a substantially low cost. The Boiler and Turbine were supplied by M/s. Isgec Heavy Engineering Ltd., & M/s. Siemens Ltd. respectively.

The facilities created for purifying the feed works well and plant is now being operated without much problem. The solar plant is continuing to generate power which is consumed by the main plant.

Your company continues to get ISO 9001:2008 & ISO 14001:2004 certification for quality and environment. This certification will now be changed to 9001:2015 & 14001:2015.

Performance

For the fifth year in succession, your company has achieved “Accident Free” operation. The company has been continuously imparting training to all its employees to ensure that all project execution apart from the plant operation is “accident free” and efficient.

Your company achieved a production of 16,242 MT which translates to a capacity utilisation of 94% (basis of Kvis 10 operation) in terms of 950 MW PIB. However, production got affected during November 2017 when the newly erected Captive power plant was commissioned and synchronised with PIB plant. Again in February 2018 production was disturbed for 16 days due to stoppage of plant for maintenance. Apart from these, the feed quality from the refinery got deteriorated in terms of more C3 ingression besides reduction of volumes of supply of raw material by the local supplier.

Newly designed product filters were installed in all the loading bays / drum filling points and thus your company continues to maintain the quality of the product in line with International Standards.

The company is also taking steps to develop new applications and open up new markets.

Safety

General Safety Audit has been conducted during January 2018. All the recommendations have been implemented and there is no unsafe conditions identified in the Audit.

Process Safety Management

A Process Safety Management (PSM) is being studied to implement in your Company during September 2018. Awards and recognitions

During the period under review, in recognition of the on time supply of PIB, your Company was awarded as “Most Valued Partner” by M/s. Indian Oil Corporation Ltd and “Excellence in Performance” by M/s Bharat Petroleum Corporation Ltd for the year 2017-18.

Research and Development

The Company has incurred an expenditure of Rs.88.67 Lakhs during the period ended 31st March 2018 toward Research and Development.

Conservation of Energy / Technology Absorption/Foreign Exchange Earning and Outgo (a) Conservation of Energy

During the year under review, six motors in Captive power plant with capacity of more than 55 KW were provided with Variable Frequency Drive (VFD) to optimize the energy consumption. LED clusters in Flame proof light fittings were replaced and condensate collection pit was provided with pump operating in auto on / off using level switch in plant area

(b) Technology absorption: Nil

Dividend

The Board of Directors at its meeting held on 25th May 2018 recommended a dividend at the rate of 7.5% i.e., Re.0.75/-paise per equity share of Rs.10/- each for the financial year ended March 31, 2018. If the dividend is approved by the Members at the ensuing Annual General Meeting to be held on 30th July, 2018, it will be paid on or before 28th August 2018 to those Members whose names appear in the Company’s Register of Members at the close of business hours on 23rd July 2018.

Meetings

During the year 04 Board Meetings and 04 Audit Committee Meetings were held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period as prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Share Capital

The paid up share capital as on March 31, 2018 was Rs.5918.68 Lakhs. The company has not issued any shares with differential voting rights nor granted stock options nor sweat equity.

Directors

Mr.Arjun B Kothari, (DIN 07117816) Director is liable to retire by rotation as a Director at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr.P.N.Devarajan, Independent Director of the Company, Chairman and Member of various Committees expired on 02.11.2017. The Board of Directors expresses its deep anguish and recall the valuable contribution made by him. The Board places on record its appreciation for the valuable services rendered by him.

Dr. R.K.Raghavan, Independent Director of the Company resigned from the office of Directorship with effect from November 01, 2017 consequent to his appointment as High Commissioner of India to Cyprus. The Board of Directors places on record its appreciation for the valuable services rendered by him.

Mr. C.V.Sankar (DIN 00703204) was appointed as an Additional Director in the capacity of Independent Director of the Company by the Board with effect from 10th July, 2017 and his appointment was regularised vide Shareholders Resolution dated 7th September 2017 for a term of five years upto 09th July 2022.

The Board of Directors appointed Mr.S.Sundarraman (DIN 01032768) as an Additional Director in the capacity of Independent Director of the Company for the term of five years from November 22, 2017 to November 21, 2022. The Resolution seeking shareholders approval for regularising the appointment as the Independent Director is proposed at item number 6 of the Notice convening the Annual General Meeting.

Mr. Pranab Kumar Rudra (DIN 00382665) was appointed for a term of five years commencing from 1.4.2014 to 31.03.2019. Pursuant to Section 149 (10) of the Companies Act 2013 read with Section 152 of Companies Act, 2013 and Companies (Appointment and Qualification of Directors) Rule, 2014, an Independent Director of the Company shall hold office for a term up to five consecutive years on the Board of the Company and shall be eligible for re-appointment on passing of a special resolution by the Company.

Based on the performance evaluation, the Board recommends the special resolution as set out in Item No.7 of the Notice convening the Annual General Meeting relating to the re-appointment of Mr.Pranab Kumar Rudra as an Independent Director, for the second term of five consecutive years from 01.04.2019 to 31.03.2024 for the approval by the shareholders of the Company.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet the criteria of their Independence laid down in Section 149(6).

Composition of Audit Committee

The Audit Committee comprised of the following Directors for the year ended 31st March 2018:

Sl. No.

Name of Directors

Designation

(a)

Mr. Pranab Kumar Rudra

Chairman (Independent Director)

(b)

Mr. C.V. Sankar

Member (Independent Director)

(c)

Mr. S.Sundarraman

Member (Independent Director)

The Board has not rejected any proposal / recommendations of Audit Committee during the year.

Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management and their remuneration. The Remuneration Policy details are stated in the Corporate Governance Report. The Remuneration Policy approved by the Board of Directors is posted on the website of the Company www.kotharipetrochemicals.com

Vigil Mechanism

The Company has a vigil mechanism named Whistle Blower Policy to deal with genuine concern raised by the Directors / Employees, if any. The details of the Whistle Blower policy is explained in the Corporate Governance Report and also posted on the Company’s website www.kotharipetrochemicals.com.

Prevention of Insider Trading

The Company has adopted a Code of Prevention of Insider Trading with a view to regulate trading in securities by the Directors and Designated Employees of the Company. The Code requires pre-clearance for dealing in the Company’s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. All the Directors and the designated employees have confirmed compliance with the Code.

Directors’ Responsibility Statement

In terms of Section 134(5) of the Companies Act, 2013, the Directors state that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(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.

Subsidiary Companies

Subsequent to the winding up / de-registration application filed by the erstwhile subsidiaries viz., M/s.Kothari Petrochemicals Pte. Ltd., Singapore (KPL SG) and M/s. Kothari Petrochemicals HK Ltd., Hong Kong (KPL HK) in their respective host countries, both the companies were dissolved on 7th August 2017 and 1st December 2017 respectively.

Extract of Annual Return

As required pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in MGT - 9 is annexed with this report as Annexure I.

AUDITORS a) Statutory Auditor

The Statutory Auditors of the Company M/s.P.Chandrasekar LLP, Chartered Accountants (Registration No.000580S / S200066) hold office till the conclusion of the 33rd Annual General Meeting of the Company.

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

b) Cost Auditor

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 in respect of its Poly Iso Butylene (PIB) unit required to be audited. Your Directors, on the recommendation of the Audit Committee, appointed M/s. P.RajuIyer, M.Pandurangan & Associates, Cost Accountants in practice for conducting the audit of cost records of the Company and the remuneration payable to the Cost Auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member’s ratification for the remuneration payable to M/s.P.RajuIyer, M.Pandurangan & Associates, Cost Accountant is included at Item No.4 of the Notice convening this Annual General Meeting.

c) Secretarial Auditor

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 Mrs.V.Vasumathy, Company Secretary in Practice, Chennai as Secretarial Auditor of the Company. The Secretarial Audit Report is annexed as “Annexure II”. The Report does not contain any qualification.

Deposits

The Company has not accepted deposits either from members or public falling within the ambit of Chapter V of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014 during the year. There were no outstanding deposits during and at the end of the financial year 2017-18.

Significant & Material orders passed by the Regulators

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.

Internal Control Systems and their Adequacy

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Audit function is carried out by an independent firm of Chartered Accountants. The scope and authority of the Internal Audit is defined by the Audit Committee. The Internal Audit Reports are placed before the Audit Committee for its review and the Internal Auditors attend the Audit Committee meeting.

The Internal Auditors monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures of the Company based on the Report of internal auditor, the Company undertake corrective action in their respective areas and thereby strengthen the controls.

Particulars of Loans, Guarantees or Investments

The company has not given any Loans or Guarantees or made any investments covered under the provisions of section 186 of the Companies Act, 2013.

Risk Management

Pursuant to the requirement of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company laid down the procedures to inform Board Members about the risk assessment and minimization procedures. Accordingly, the Company periodically submits the Risk Management Report to the Board for the review and suggestions.

Corporate Social Responsibility Policy

Pursuant to the provisions of Section 135 and schedule VII of the Companies Act, 2013, Corporate Social Responsibility Committee (CSR) was formed to recommend (a) the policy on Corporate Social Responsibility (CSR) and (b) implementation of the CSR Projects or Programs to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors. The policy on Corporate Social Responsibility as approved by the Board is posted on the Company’s website www.kotharipetrochemicals.com

As part of its initiatives under “Corporate Social Responsibility” (CSR), the company has contributed funds for the schemes of promotion of education. The contributions in this regard have been made to the Registered Trust which is undertaking these schemes. Detailed report on CSR activities in the prescribed format is forming part of this Annual Report.

Related Party Transactions

All related party transactions entered into during the financial year were on an arm’s length basis and were in the ordinary course of business and there were no ‘material’ contracts or arrangement or transactions not at arm’s length basis and thus disclosure in form AOC-2 is not required.

All Related Party Transactions are placed before the Audit Committee as well as to the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseen and repetitive nature. For all the transactions entered pursuant to the omnibus approval so granted, a statement giving details of all such transactions is placed before the Audit Committee for their approvals on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is posted on the Company’s website www.kotharipetrochemicals.com

Annual Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board has carried out the Annual Performance Evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees, as per the format prescribed by the Nomination and Remuneration Committee of the Company.

The structured questionnaire covers various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Directors (without participation of the relevant Director) was carried out by the entire Board. The Directors expressed their satisfaction with the evaluation process.

Separate Meeting of Independent Directors

The Independent Directors of the Company had met during the year to review the performance of Non-Independent Directors, Board as a whole and reviewed the performance of the Chairperson of the Company and also reviewed the access, the quality, quantity and timeliness of flow of information between the company management and the Board without the presence of the Non-Independent Directors and members of the Management.

Disclosure about Cost Audit

Filing of Cost Audit Report

2017 - 2018

2016-2017

Due Date

27.09.2018

27.09.2017

Actual Date

(Target date) 25.09.2018

25.09.2017

Cost Auditor Details

M/s. P. Raju Iyer, M.Pandurangan & Associates, M.No.27969, Chennai

M/s. P. Raju Iyer, M.Pandurangan & Associates, M.No.27969, Chennai

Audit Qualification in Report

-

-

Listing with Stock Exchanges

The Company is listed in The National Stock Exchange of India Limited (NSE) and the Stock Code is KOTHARIPET and ISIN-INE720A01015. The Company confirms that it has paid the Annual Listing Fees for the year 2018-2019 to NSE where the Company’s shares are listed.

Corporate Governance and Shareholders Information

Your Company has taken adequate steps to adhere to all the stipulations laid down in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A report on Corporate Governance forms part of this Annual Report.

Certificate from the Practising Company Secretary confirming the compliance with the conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this report.

Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rules 5 of the Company (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided elsewhere in the Annual Report.

PARTICULARS PURSUANT TO SECTION 197(12) AND THE RELEVANT RULES

a) The ratio of the remuneration of each director to the median employee’s remuneration for the financial year and such other details: Except Mr.Arjun B.Kothari Managing Director, no director is in receipt of remuneration except sitting fees

Sl. No.

Name

Designation

Ratio

(i)

Mr.Arjun B.Kothari

Managing Director

7.6 : 1

(For this purpose, Sitting fees paid to the Directors have not been considered as Remuneration)

b) The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

Sl. No.

Name

Designation

Percentage of Increase

(i)

Mr. Arjun. B.Kothari

Managing Director

No increase

(ii)

Mr.Cyrus Kallupurackal

Chief Financial Officer

9%

(iii)

Mr.A.Thanikainathan

Company Secretary

12%

c) 16.27% increase was reported in the median remuneration of employees in the financial year.

d) The number of permanent employees on the rolls of company as on 31st March 2018: 131

e) Average percentile increase already made in the salaries of employee’s other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and any exceptional circumstances for increase in the managerial remuneration:

Increase of remuneration for employees varies between 6% to 13% and for KMP the increase in remuneration was based on their performance during the year

f) We affirm that the remuneration paid during the period under review, is as per the Remuneration Policy of the company.

Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion and Analysis as describing the Company’s objectives, projections, estimates and expectations may constitute ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results might differ from those either expressed or implied in the statement depending on the circumstances.

Acknowledgement

Your Directors thank the Banks, Customers, Financial Institutions, Government Authorities, Suppliers and Shareholders for their continued support. Your directors also place on record their appreciation for the services by the employees of the Company.

On behalf of the Board

for Kothari Petrochemicals Limited

Place : Chennai Nina B. Kothari

Date : May 25, 2018 Chairperson

Director’s Report