Apcotex industries ltd

DIRECTORS’ REPORT

TO THE MEMBERS

Your Directors have pleasure in presenting to you the Twenty-Ninth Annual Report of the Company and the audited Statements of Accounts for the year ended 31st March 2015.

DIVIDEND

Your Directors have recommended a dividend @ Rs. 7.00 (Rupees Seven) (Previous year t 5/- (Rupees Five)) per Equity Share of Rs.  5.00/- each, for the financial year 201415. Dividend, if approved, will absorb a sum of Rs. 873.59 lacs (including Dividend Distribution Tax of Rs.  147.76 lacs) out of the net profits after tax, as above and will be paid to those shareholders whose names appear on the Register of Members on Friday 24th July 2015.

B. MANAGEMENT DISCUSSION AND ANALYSIS

The company manufactures and markets a range of Emulsion Polymers - Synthetic Latexes and Synthetic Rubber

I. CURRENT SCENARIO.

Your Company is one of the leading producers of polymer products namely, Synthetic Latexes (Vinyl Pyridine Latex, Carboxylated Styrene Butadiene Latex, Styrene Acrylic Latex, Nitrile Latex, etc.) and also Synthetic Rubber (High Styrene Rubber) in India. The Company has one of the broadest ranges of products in the industrial segments and caters to a wide range of industries. Company's Synthetic Latexes products are used, among other applications, for tyre cord dipping, paper and paperboard coating, carpet backing, concrete modification/water proofing, non-wovens, textile finishing, paints, etc,. Various grades of Synthetic Rubber find application in products such as footwear, automotive components, moulded items, v-belts, conveyor belts, hoses, etc.

The Company's major raw materials are petrochemical products and its business is vulnerable to high volatility in the prices of crude oil and its downstream products. This financial year the lower prices of crude oil and downstream petro-chemicals was advantageous to the company since most input material costs decreased significantly towards the second half of the year. The Company was able to manage inventories well and secure good prices on input materials.

A number of steps have been taken by the management to improve the operational efficiency of the Company in different functions like marketing, human resource development, production process, utilities etc.

Your company is recipient of Total Productive Maintenance (TPM) Excellence in Consistent TPM Commitment Award - Category A by the Japan Institute of Plant Maintenance (JIPM). TPM has helped the company significantly in improving efficiencies in plant and in operations and rationalizing costs. During the previous year, your Company has successfully completed re-certification of the integrated ISO 9001, ISO 14001 and OHSAS 18001. During the year under review your company has been allowed by Indian Chemical Council (ICC) to use "Responsible Care" logo for a period of one year till July 2015, which will be renewed thereafter after the audit.

II OPERATIONS DURING THE FINANCIAL YEAR 2014-15.

During the year, the Company achieved Gross Value Sales of Rs. 39114.46 lacs, registering a growth of 18.40%, compared to that of the preceding year. The company exported its products worth Rs.6899.46 lacs compared to exports of Rs. 3470.88 lacs during the previous year, a growth of 98.78%.

The Synthetic Rubber Latex business has registered volume sales growth of 27.32%, and Synthetic Rubber business has registered volume growth of about 23%, as compared to the volume sale during the previous financial year.

There was a continuous thrust from the management to develop a strong research and development and technical service team to develop new products for export markets, explore new applications and understand better the changing customer needs.

Profits before tax registered a growth of 109% to Rs. 3482.85 lacs as compared to Rs. 1665.13 lacs during the previous year due to better realizations, lower raw material costs, product/customer mix and exports with good margins. EBITDA increased by about 71% from Rs. 2756.43 lacs in the previous year to Rs. 4704.83 lacs in FY 2014-15.

The profit after tax stood at Rs. 2468.06 lacs as compared to Rs.1314.33 lacs in the previous year.

The Balance Sheet of the Company is also quite healthy with Debt/Equity ratio of 0.21, reasonable Working Capital cycle and Cash/Liquid Investments valued at Rs.49.11 crore based on NAV as on March 31, 2015.

Your Directors consider Company's performance as satisfactory.

OUTLOOK.

The Company expects FY 2015-16 to be more challenging since we already have a fairly high market share across all segments in India and overall growth of the economy has been slow. Introduction of new products and exports are short term future growth drivers for the Company. In the medium to long term the Company is exploring adding new capacities for current products, new adjacent businesses as well as opportunities for inorganic growth.

With company's continuous endeavour to enhance efficiencies at all levels and functions, your Directors view the prospects for the financial year 2015-16 with cautious optimism.

IV. RISKS AND CONCERNS.

The Company has laid down a well-defined Risk Management Framework covering the risk, risk exposure, potential impact and risk mitigation process. Major risks identified by the business and functions are systematically addressed through mitigating actions on continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company.

The Company has formed Internal Risk Management Committee, which periodically reviews all the risks in the organisation and identifies risk areas, monitors and reports the compliance and effectiveness of the policy and procedure to the Audit Committee and Board.

The Audit Committee and Board review the risks and suggest steps to be taken to control and mitigate the same through a properly defined framework.

The Company's Board of Directors perceives the following risks as high risks areas:-

1. Currency / Foreign Exchange Risks

2. Procurement Risks

3. Business Risks

Major risks arise from two main raw materials viz. Styrene and Butadiene. There is an availability risk associated with both, since Styrene is not manufactured in the country and is 100% imported. Butadiene is currently consistently available from only one manufacturer in the country even though there are two other manufacturers. No hedging instruments are available to hedge their availability and price volatility risk and therefore, the company manages the availability risks partly by monitoring overseas supplies and partly by varying inventory levels.

Hedging is available for Currency / Foreign Exchange risks and is resorted to selectively.

Some of the major raw materials are hazardous and inflammable. The Company has ensured that required Safety equipments and infrastructure are in place as per statutes and global safety standards. Your company is also certified for ISO 14001 and OHSAS 18001, which address all Environmental and Safety Systems and processes. In addition, all the safety measures like safety committee's constant supervision, periodical drills, risks awareness programmes, appropriate treatment of effluents generated, are regularly taken with constant attention from senior level of the management.

The Company has also insured its assets, loss of profits and standing charges for insurable risks.

V. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal checks and controls covering operations of the Company are in place and are constantly being improved upon. Adequate system exists to safeguard company's assets through insurance on reinstatement basis and maintenance of proper records. The company has well defined procedures to execute financial transactions.

Internal audit is being conducted by an Independent firm of Chartered Accountants. The internal auditor monitors and evaluates the efficiency and adequacy of internal control system in the organisation, its compliance with operating system, accounting procedures and policies of the Company. Based on the observations of the internal auditor, the process owners undertake the corrective action in their respective areas. Significant audit observations and corrective actions thereupon are presented to the Audit Committee.

The Partners of both, Statutory and Internal Auditor attend all the Audit Committee meetings.

VI. DEVELOPMENT OF HUMAN RESOURCE / INDUSTRIAL RELATIONS.

The company continuously monitors its Human Resource requirement to ensure that it has adequate human skills commensurate with its needs.

Cordial relations exist between the employees at various levels and the management.

To upgrade human skills and improve their efficiencies, the company continuously organizes workshops on different management areas and also deputes employees to external workshops and seminars.

CAUTIONARY STATEMENT.

Statement in this Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company's operations include raw material availability and prices, cyclical demand, movements in company's principal markets, changes in Government regulations, tax regimes, economic developments within and outside India and other incidental factors.

C. WIND POWER

The Wind Turbine Generator installed at Sadawaghapur, Taluka - Patan, District Satara, Maharashtra, has generated gross revenue of about Rs. 102.13 lacs during the financial year (previous year Rs 119.45 lacs), and same is netted-off against the power cost.

D. DISCLOSURES UNDER COMPANIES ACT, 2013

I. ENERGY, TECHNOLOGY & FOREIGN EXCHANGE

Information sought under the provisions of Section 134 (3) (m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in the Annexure I, forming part of this report.

II. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the annual return is enclosed in Annexure II.

III. CHANGES IN THE SHARE CAPITAL

The paid-up Equity Share Capital as on 31st March 2015 was Rs 518.45 lacs, comprising of 1,03,68,992 equity shares of Rs 5/- each. During the year under review, the Company has not issued any shares or convertible instruments.

IV. NUMBER OF BOARD MEETINGS

The Board meets at regular intervals to discuss and decide on the Company business policy and strategy apart from other Board business. During the financial year under review, the Board of Directors met 5 (five) times. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013.

The details of the Board meetings and the attendance of Directors are provided in the Corporate Governance Report.

V. COMPOSITION OF AUDIT COMMITTEE

The Audit Committee comprises of Mr. M. G. Patel, Mr. Kamlesh Vikamsey, Mr. Girish Choksey, Mr. Bipin Jhaveri (upto 10/10/2014) and Mrs. Priyamvada Bhumkar (w.e.f. 31/10/2014). Mr. M. G. Patel is the Chairman of the Committee. Mr. M. G. Patel, Mr. Kamlesh Vikamsey and Mrs. Priyamvada Bhumkar are the Non-Executive Independent Directors. More details on the committee are given in the Corporate Governance Report.

All the recommendations of the audit committee are accepted by the Board.

VI. BOARD INDEPENDENCE

The definition of Independence of Directors is derived from Clause 49 of the Listing Agreement entered into with the Stock Exchanges and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent in terms of Clause 49 of the Listing Agreement and Section 149(6) of the Companies Act, 2013;

1. Mr. M. G. Patel

2. Dr. S. Sivaram

3. Mr. Shailesh Vaidya

4. Mr. Kamlesh Vikamsey

5. Mrs. Priyamvada Bhumkar

In compliance with Schedule IV of the Companies Act, 2013 and Rules thereunder, the Independent Directors met on 20th March 2015 and discussed issues as prescribed under the schedule IV of the Companies Act, 2013 and also discussed various other issues.

VII. ANNUAL EVALUATION BY THE BOARD

In compliance with the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of Committees. A structured questionnaire was prepared after taking into consideration inputs received from the Nomination & Remuneration Committee members, covering various aspects of the Board's functioning such as adequacy of composition of Board and Committees, Board communication, timeliness and unbiased information of right length and quality of information, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as attendance, participation in the discussion, deliberation at the meeting, understanding role and responsibilities as board member, demonstration of knowledge, skill and experience that make him/her a valuable resource for the board.

The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non-Executive Directors was carried out by the Independent Directors, who also reviewed the performance of the Secretarial Department. The Directors expressed their satisfaction with the evaluation process.

VIII. NOMINATION AND REMUNERATION POLICY

The Nomination and Remuneration policy of the Company for Directors, KMP's and Senior Personnel of the Company is enclosed as Annexure III to this Report.

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure IV (A) to this Report.

IX. COMMENTS ON AUDITORS REPORT

There are no qualifications, reservations or adverse remarks on disclaimers made by M/s. Kalyaniwalla & Mistry, Statutory Auditors, in their report and by Mr. Mahesh Hurgat, Company Secretary in Practice, in his secretarial audit report. E.

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

X. RELATED PARTY TRANSACTIONS

All the related party transactions are entered on arm's length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. There are no materially significant related party transactions entered into by the Company with Promoters, Directors or Key Managerial Personnel etc., which may have potential conflict with the interest of the company at large.

All new related party transactions are first approved by the Audit Committee and thereafter placed before the Board for their consideration and approval. A statement of all related party transactions is presented before the Audit Committee meeting on quarterly basis, specifying the nature, value and terms and conditions of the transactions.

The particulars of Contracts or arrangements with related parties referred to in Section 188(1), read with Rule 15 of The Companies (Meetings of Board and Its Powers) Rules 2014 is appended to this report in prescribed Form AOC 2 as Annexure V .

The Related Party Transaction Policy as approved by the Board is uploaded on the company's website at the following web link.

<http://apcotex.com/policies/Related_Party_> Transaction_Policy.pdf

XI. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

XII. VIGIL MECHANISM

The Company has established a vigil mechanism for Directors and Employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

XIII. CORPORATE GOVERNANCE

The Company has always strived to adopt appropriate standards for good Corporate Governance.

Detailed report on the Corporate Governance and Management Discussion Analysis, form part of this report. A certificate from the Practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the said Report.

E.CORPORATE SOCIAL RESPONSIBILITY

The Company has constituted a Corporate Social Responsibility (CSR) Committee in compliance with Section 135 of the Companies Act, 2013. The CSR committee was constituted by the Board of Directors of the Company at its meeting held on 26th April 2014. On the recommendation of the CSR committee, the Board has approved the CSR policy of the Company which is published on the Company's website.

The Company has under taken projects in the areas of Healthcare, Education, and Vocational Training for village women and social projects around the area surrounding the factory.

CSR committee planned health check-up camp, distance education kits for remotely located schools in Adivasi H. settlements etc., around the plant area, which could not be completed as planned during the financial year 201415 resulting into shortfall in CSR spent to the extent of Rs 3.37 lacs.

The details of CSR activities as required under Section 135 of the Companies Act, 2013, are provided in CSR Report which is annexed herewith as Annexure VI.

F. FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS

The company has conducted the Familiarisation program for Independent Directors appointed during the year. The Program aims to provide insights into the Company to enable the Independent Directors to understand its business in depth, to familiarize them with the process, business and functionaries of the Company and to assist them in performing their role as Independent Directors of the Company. The Company's Policy of conducting the Familiarisation Program has been disclosed on the website of the Company at <http://apcotex.com/policies/> Familiarisation_Programme_Independent.pdf

G. DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm:

I. That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

II. That 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 at the end of the financial year and of the profit and loss of the company for that period;

III. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

IV. That they have prepared the annual accounts on a going concern basis;

V. That they, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

VI. That they have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

H. DISCLOSURE IN TERMS OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company takes all necessary measures to ensure a harassment free workplace and has instituted an Internal Complaints Committee for redressal of complaints and to prevent sexual harassment. No complaints relating to sexual harassment were received during the year.

I. FIXED DEPOSITS MATURED BUT NOT CLAIMED

Company has no Fixed Deposits at the end of the financial year. The Central Bureau of Investigation (CBI) has instructed the Company, not to repay the proceeds of four fixed deposits amounting to t 48,000/- and accrued interest of t 22,491/- thereon. These deposits matured during the first week of December 2002 and continue to remain with the Company.

J. INSURANCE

All insurable assets of the Company including inventories, buildings, plant and machinery etc., as also liability under legislative enactments, are insured on reinstatement basis after due valuation of assets by an external agency. The Company also holds a Loss of Profit Policy for the financial year 2014-15.

K. ECOLOGY AND SAFETY

Company ensures safe, healthy and eco-friendly environment at its plant and surrounding area. Company continually works towards identification and reduction of risks and prevention of pollution at its plant and its surroundings.

Members of the Safety Committee of the Company's Taloja Plant, have been regularly reviewing the safety measures and their implementation to ensure adequate safety in material handling and processing, control of pollution caused by liquid effluents, dust and emissions from chimney etc. Samples are periodically drawn and the reports submitted to the Pollution Control Board indicating compliance with the standards.

Necessary application for renewal of consent to operate the plant at Taloja has been made to Maharashtra Pollution Control Board, consent of which is awaited.

L. PERSONNEL

The information required under Section 197 of the Companies Act, 2013 and read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, are given in Annexure IV (B).

M. DIRECTORS & KEY MANAGERIAL PERSONNEL

I. Appointment:

Mrs. Priyamvada Bhumkar was appointed as additional director of the Company by Board of Directors at their meeting held on 31st October 2014. She would therefore hold office upto the conclusion of the ensuing Annual General Meeting.

Mrs. Priyamvada Bhumkar qualifies to be an Independent Director and her appointment has been recommended by the Nomination and Remuneration Committee. Accordingly, it is proposed to appoint Mrs. Priyamvada Bhumkar as an Independent Director for a term of 5 (Five) consecutive years upto 31st October 2019.

Pursuant to declaration made under Section 149 of the Companies Act, 2013, Mrs. Priyamvada Bhumkar meets all the criteria of Independence, as prescribed under the Companies Act, 2013 and Clause 49 of the Listing Agreement. She possess the appropriate skills, experience and knowledge inter alia in the field of finance, business strategy etc.

The background of the Director(s) proposed for appointment / reappointment is given under the Corporate Governance section of the Annual Report.

In compliance with provisions of Section 203 of the Companies Act, 2013, Mr. Rohit R. Mahakal, was redesignated as Chief Financial Officer of the Company with effect from 1st April 2015 in the Board meeting held on 20th March 2015 on the recommendation of the Audit Committee.

II. Retirement by Rotation:

In accordance with the provisions of Section 152(6) of the Companies Act, 2013 and Articles of Association of the Company Mr. Amit Choksey (DIN 00001470) will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer himself for reappointment. The Board recommends his reappointment.

III. Cessation:

Mr. Bipin Jhaveri, Director of the Company expired on 10th October 2014. Mr. Bipin Jhaveri served on the Board of the Company for more than two decades. Your Directors wish to place on record their appreciation for his service and valuable contribution made during the tenure of Mr. Bipin Jhaveri as Director of the Company.

The background of the Director(s) proposed for appointment / re-appointment is given under the Corporate Governance section of the Annual Report.

N. AUDITORS

I. Pursuant to provisions of Section 139(1) of the Companies Act, 2013, M/s. Kalyaniwalla & Mistry, Chartered Accountants (Firm Registration no. 104607W), were appointed as Statutory Auditors of the Company to hold the office till the conclusion of the Annual General Meeting during the year 2018, subject to ratification at every Annual General Meeting.

The Company has received letter from the Statutory Auditors to the effect that ratification of their appointment, if made, would be within the prescribed limit under Section 141 (3) (g) of the Companies Act, 2013 and that they are not disqualified from the appointment.

Your Board recommends the ratification of appointment of M/s. Kalyaniwalla & Mistry, Chartered Accountants (Firm Registration no. 104607W), Mumbai, as Statutory Auditors of the Company for the financial year 2015-16 and to hold the office till the conclusion of the next Annual General Meeting during the year 2016.

II. Pursuant to provisions of Section 204 of the Companies Act, 2013 the Board of Directors have appointed Mr. Mahesh Hurgat, Practicing Company Secretary to conduct the Secretarial Audit and his Report on the Company's Secretarial Audit is appended to this Report as Annexure VII.

O. CEO & CFO CERTIFICATION

Certificate from Managing Director and Chief Financial Officer of the Company, pursuant to the provisions of Clause 49(IX) of the Listing Agreement, for the financial year under review was placed before the Board of Directors of the Company at its meeting held on 8th May 2015.

P. ACKNOWLEDGEMENT

Your Directors take this opportunity to express their deep sense of gratitude to State Bank of India, Standard Chartered Bank, various departments of State / Central Government and local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Apcotex family. To all shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

The accompanying Annexure I to VII are an integral part of this Directors' Report.

FOR AND ON BEHALF OF THE BOARD

ATUL C CHOKSEY

CHAIRMAN

Mumbai: 8th May 2015