The Directors take pleasure in presenting the Thirty-Eighth Annual
Report together with Audited Statements of Accounts for the year ended
31st March 2007.
(Rupees in Million)
Gross Turnover 12901 10442
Turnover, Net of Excise 11544 9075
Profit Before Tax 1540 1313
Current Year's Tax 309 409
Profit After Current Year's Tax 1231 904
Deferred Tax 34 17
Profit After Current and Deferred Tax 1197 887
Add: Prior Year Tax Provision written back 2 20
Profit After Tax 1199 907
Profit Brought Forward 369 302
Profit available for appropriation 1568 1209
Proposed Dividend on Equity Shares 379 316
Tax on Dividend 64 44
Transfer to General Reserve 600 480
Total 1043 840
Balance Carried to Balance Sheet 525 369
The Operating Profit for the year (before VRS payment of Rs 2.4
million) at Rs 1907.6 million, grew by 18.9%. Net Profit at Rs 1199.3
million, after Prior Year Tax provision written back of Rs 2.3 million,
grew by 32.3%.
Income Tax for the current year is lower at Rs 308.9 million (including
Rs 20.1 million for Fringe Benefit Tax) as against Rs 409 million in
the previous year
The Credit Rating Information Services of India Ltd. (CRISIL) has
affirmed the P1+ rating to Short Term Debt including Commercial Paper
Programme of the Company for Rs 1300 million.
The Directors recommend the payment of a dividend of Rs 1.50 per Equity
Share of Re 1 each (previous year Rs 1.25 per Equity Share of Re 1
each), amounting to Rs 378.6 million (previous year - Rs 315.5 million)
out of the Current Year's profit on 252.4 million Equity Shares of Re 1
each (previous year 252.4 million Equity Shares of Re 1 each). The
dividend for the current year will be free of tax in the hands of
Shareholders. The dividend payout amount has grown at a CAGR of 20%
during the last 5 years.
The Company incurred capital expenditure of Rs 742.8 million during the
year for setting up of a new manufacturing unit at Kalam, Himachal
Pradesh and for modernisation/expansion and for other assets.
New Units in Himachal Pradesh
Fourth Unit for water based synthetic adhesive was commissioned in
February 2007. The Company is setting up two more units viz. one for
Consumer Products and another for Construction Chemicals, which are
expected to commence production respectively during 2nd and 3rd quarter
of the Current Year.
Current Year Outlook
Barring unforeseen circumstances, the Company expects to perform well
during the current year.
Pagel Concrete Technologies Pvt Ltd. (Pagel):
The Company acquired 75% Equity stake in this Company at a cost of Rs
6.4 million and loan contribution of Rs 3.5 million. Pagel is an
existing Company incorporated in India in technical and financial
collaboration with PAGEL SPEZIAL-BETON GMBH & CO. KG, GERMANY and
engaged in the business of grouts and special mortars.
Pidilite USA, Inc (PIL Inc.) : The Company was incorporated on 12th May
2006 in Delaware, USA and acquired the business and assets relating to
art material and car care products from two existing companies in USA
in June 2006, having combined annual sales turnover of US$ 19 million.
The cost of acquisition is US$ 12 million.
Pidilite Innovation Centre Pte Ltd. (PICPL) :
Pidilite International Pte Ltd., Singapore as a Wholly Owned Subsidiary
of the Company has incorporated PICPL., a subsidiary in Singapore on
20th December 2006 to carry out Research, Development and related
With the above acquisitions now the Company has 4 direct Overseas
Subsidiaries one each in Singapore (Pidilite International Pte Ltd), in
UAE (Pidilite Middle East Ltd.), in Brazil (Pidilite Do Brasil
Desenvolvimento De Negocios Ltda.) and in USA (Pidilite USA, Inc).
These subsidiaries have total 6 step-down subsidiaries viz. Chemson
Asia Pte Ltd. (Singapore), Jupiter Chemicals LLC (Dubai), Pidilite
Speciality Chemicals Bangladesh Pvt. Ltd. (Bangladesh), Bamco Ltd.
(Thailand), PT Pidilite Indonesia (Indonesia), Pidilite Innovation
Centre Pte Ltd. Singapore).
The total investments during the year by our Company in all Overseas
Subsidiaries exceeded US$ 16.7 million.
A statement pursuant to Section 212 of the Companies Act, 1956,
relating to 12 subsidiary Companies is attached hereto.
In accordance with the requirements of Accounting Standards AS 21 (read
with AS 23) issued by the Institute of Chartered Accountants of India,
the Consolidated Accounts of the Company and its twelve subsidiaries
are annexed to this Annual Report. Additionally, a statement giving
prescribed particulars of information, in aggregate for each
subsidiary, is attached.
By letter N0.47/226/2007-CL-III dated 18th May 2007 the Company has
obtained from the Government of India, Ministry of Company Affairs, New
Delhi, under Section 212 of the Companies Act, 1956, an exemption from
annexing to this Report, the Annual Reports of above subsidiary
Companies viz. Fevicol Company Ltd, Pidilite International Pte Ltd,
Chemson Asia Pte Ltd, Pidilite Middle East Ltd, Jupiter Chemicals LLC,
Pidilite Do Brasil Desenvolvimento De Negocios Ltda, Pidilite
Speciality Chemicals Bangladesh Pvt Ltd, PT Pidilite Indonesia, Bamco
Limited, Pidilite USA, Inc., Pidilite Innovation Centre Pte Ltd. and
Pagel Concrete Technologies Pvt. Ltd. for the year ended on 31st March
2007. Accordingly, the said Annual Reports of the above subsidiary
Companies are not annexed to this Report.
Members desiring to have a copy of audited Annual Accounts of the above
subsidiaries may write to the Company Secretary at the Registered
Office of the Company and they will be provided with the same upon such
Annual Accounts of these subsidiary Companies will also be kept for
inspection of the Members at the Registered Office of the Company as
well the Registered Office of the subsidiary Companies.
Effective from 31st December 2006 Shri Amit Roy resigned from the Board
of Directors. Your Directors wish to place on record their sincere
appreciation of the valuable contribution made by him during his tenure
on the Board.
In accordance with the Articles of Association of the Company, Shri B K
Parekh, Shri S K Parekh, Shri A B Parekh and Shri Yash Mahajan,
Directors of the Company, retire by rotation and being eligible, offer
themselves for re-appointment.
Shri V S Vasan has been appointed as Additional Director of the Company
with effect from 2nd December 2006 and he holds office up to the
conclusion of the ensuing Annual General Meeting. A notice in writing,
with deposit of Rs 500 has been received from a member proposing Shri V
S Vasan as a candidate for the office of Director. Subject to approval
of the members, Shri V S Vasan has also been appointed as a Whole-Time
Director for a period of two years from 2nd December 2006 and also
designated as Director (Factories Operations) wef 14th December 2006 in
place of Shri Amit Roy in overall charge of all the factories of the
Company in India.
Directors' Responsibility Statement
The Directors confirm:
(i) that in the preparation of the Annual Accounts, the applicable
accounting standards have been followed;
(ii) that the Directors have selected such accounting policies and
applied them consistently and made judgements 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 ended 31st
March 2007 and of the profit of the Company for that year;
(iii) that the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
(iv) that the Directors have prepared the Annual Accounts on a going
Reports on Corporate Governance and Management Discussion and Analysis,
in accordance with Clause 49 of the Listing Agreements with Stock
Exchanges, along with a certificate from M/s M M Sheth & Co, Practising
Company Secretaries, are given separately in this Annual Report.
Members are requested to re-appoint M/s Haribhakti & Co, Chartered
Accountants, as Auditors of the Company and also for its
branches/depots/ C&F depots for the current year and to fix their
Subject to approval of Central Government, Board of Directors have
appointed M/s V J Talati & Co as Cost Auditor to conduct cost audit for
the financial year 2007-08.
Conservation of Energy, Technology Absorption, etc
The particulars under Section 217(1)(e) of the Companies Act, 1956,
read with the Companies (Disclosure of Particulars in the Report of the
Board of Directors) Rules, 1988, are attached to this Report as
Industry Structure and Development
There is no change in the industry structure as was reported in the
The Company operates under two major business segments i.e. Branded
Consumer & Bazaar Products and Speciality Industrial Chemicals.
Products such as Adhesives, Sealants, Art Materials, Construction and
Paint Chemicals are covered under branded Consumer & Bazaar Products
segment. These products are widely used by carpenters, painters,
plumbers, mechanics, households, students, offices, etc.
Speciality Industrial Chemicals segment covers products such as
Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment
Preparations, Surfactants, etc and caters to various industries like
packaging, textiles, paints, printing inks, paper, leather, etc.
In both the above business segments, there are a few medium to large
companies with national presence, and a large number of small size
companies that are active regionally. There is growing presence of
multinationals in many of the segments in which we operate. The share
of imports is less than 10% of domestic volumes in most of the product
Outlook on Opportunities, Threats, Risks and Concerns
Prices of raw materials, packing materials and freight charges continue
to rise thereby making further adverse impact on the margins of some of
our products. We expect to increase selling price of most of these
products over a period of time thereby restoring the margins.
Risk and Internal Adequacy
The Company has adequate internal control procedures commensurate with
its size and nature of business.
The Company has appointed Internal Auditors who audit the adequacy and
effectiveness of internal controls laid down by the management and
suggest improvements. For overseas subsidiaries, this is being done by
their Statutory Auditors.
The Audit Committee of the Board of Directors periodically reviews the
audit plans, internal audit reports, adequacy of internal controls and
The Company continues to place significant importance on its human
resources and enjoys cordial relations at all levels. During the year,
various initiatives for employee involvement and efficiency improvement
The total number of employees on 31st March 2007 was 2944.
A statement of particulars pursuant to Section 217(2A) of the Companies
Act, 1956 read with the Companies (Particulars of Employees) Rules,
1975, forms part of this report as Annexure II. As per the provisions
of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report,
together with Accounts, is being sent to the Shareholders of the
Company, excluding the statement of particulars of employees under
Section 217(2A) of the Act. Members desiring to have a copy of the same
may write to the Company Secretary at the Registered Office of the
Company and they will be provided with the same upon such a request.
Vinyl Chemicals (India) Ltd. (VCIL)
As you are aware, the Company is a principal promoter of VCIL and has
made strategic investment in VCIL. The Company was approached by a
Review Committee appointed by the Board of Directors of VCIL for
support in the task of restructuring VCIL's operations which had
resulted into losses for 5 consecutive quarters till 31st December
The Board of Directors of this Company had therefore appointed a
Special Committee to examine all relevant aspects as also explore
possible remedial measures. The Special Committee took a view that VAM
manufacturing plant of VCIL is of strategic importance to the Company
and that there is good probability of VAM manufacturing unit becoming
profitable sometime during the year 2008. The Committee therefore
recommended to the Board of Directors of this Company that VCIL's
manufacturing division at Mahad be demerged into this Company.
Subject to approval of Shareholders and the High Court at Mumbai, the
Board of Directors of both the Companies at their joint meeting held on
24th April 2007 considered and approved report of Valuation as also
draft Scheme of Demerger inter alia providing for ratio of allotment of
shares as under:
a. For every 12 (twelve) equity shares of face value of Rs 10 each
fully paid up in Vinyl Chemicals (India) Ltd., 1 (one) equity share of
face value of Re. 1 each in Pidilite Industries Ltd. (fractional
resultant number being appropriately rounded up or ignored depending on
the fraction being respectively more than half or less than half)
treated as fully paid;
b. Insofar as it relates to small shareholders of the Vinyl Chemicals
(India) Ltd. (a small shareholder means a member holding less than 501
equity shares) the Scheme provides for an option for such small
shareholder being allotted 1 (one) 6% Cumulative Redeemable of
Preference Share in Pidilite Industries Ltd. of Rs 10 each treated as
fully paid for every equity share held by a small shareholder in Vinyl
Chemicals (India) Ltd.
Both the Companies have submitted a draft Scheme of Arrangement under
section 391 read with Section 394 of the Companies Act, 1956 for the
above purpose to the Stock Exchanges as per the requirement of Listing
Agreement. Both the Companies will take necessary steps as may be
required under law for approval and implementation of the Scheme.
The Directors place on record their appreciation of the efficient
services rendered by the employees of the Company at all levels.
FOR AND ON BEHALF OF THE BOARD
Mumbai B K PAREKH
Date: 22nd May 2007 CHAIRMAN
Annexure I To The Report of the Directors 2006-2007
Statement containing particulars pursuant to the Companies (Disclosure
of particulars in the Report of the Board of Directors) Rules, 1988
forming part of the report of the Directors.
A] CONSERVATION OF ENERGY
a) Energy Conservation Measures taken
1. Energy Efficient mixing equipments.
2. Extended use of VFD for process/utilities equipments at new
3. Process/Utilities optimization and automization.
b) Additional Investments and Proposals, if any, being implemented for
reduction of Consumption of Energy.
1. Use of Agro waste solid fuel (briquette) instead of fuel oil.
2. Revamping utilities with Gas-fired combustion system.
c) Impact of measures of (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods.
0.75 lac kwh Electricity and 1400 MT of Fuel Oil are expected to be
saved annually by above measures.
d) Total energy consumption and energy consumption per unit of
as per Form A
B. Consumption per unit of production
It is not feasible to furnish information in respect of consumption per
unit of production.
B] TECHNOLOGY ABSORPTION
e) Efforts made in technology absorption:
(as per Form B)
Disclosure of Particulars with Respect to Technology Absorption
RESEARCH & DEVELOPMENT (R&D)
1. Specific areas in which R & D is carried out by the Company
R&D programmes are carried out towards development of new products,
improvement of the existing products and processes falling under the
category of Synthetic Resins, Adhesives, Sealants, Pigments and Pigment
Dispersions, Intermediates, Surfactants, Art Materials, Coatings,
Fabric Care Products, Construction Chemicals, Maintenance Chemicals,
Emulsion Polymers, etc.
2. Benefits derived as a result of the above R&D
Increase in sales due to product improvements and introduction of new
products; reduction in cost due to process improvements and cycle time
3. Future Plan of Action
Future R&D efforts will continue along similar lines, as at present.
4. Expenditure on R&D
(Rs in Million)
Year ended Year ended
31st March 2007 31st March 2006
i) Capital 2.75 1.61
ii) Recurring 47.07 39.77
Total 49.82 41.38
iii) Total R&D expenditure as a
percentage of total turnover 0.39 0.40
5. Technology Absorption, Adaptation and Innovation
i) Technologies, Process developed by our R&D Department are being
continuously absorbed and adopted on a commercial scale.
ii) Benefits derived as a result of the above efforts :
Improvement in products and processes.
iii) Information regarding Technology imported during the last 5 years:
No technology imported during last 5 years.
C] FOREIGN EXCHANGE EARNINGS & OUTGO
f) Activities relating to exports, initiatives taken to increase
exports, development of new export markets for products and services
and export plans
Export earnings during 2006-07 have shown an increase of Rs 310 Million
We have increased number cf foreign distributors for our products and
put in place more employees in exports and overseas business
g) Total foreign exchange used and earned
(Rs in Million)
Year ended Year ended
31st March 2007 31st March 2006
Foreign exchange earned 956 646
Foreign exchanged used* 2,175 1,472
* Out of the above, exchange used for import of materials which are
either not manufactured in India and/or not easily available in India,
amounted to Rs 1,843 million for the year ended 31st March 2007
(Previous year Rs 1,256 million).