Director’s Report

Dear Shareholders,

Your Directors have pleasure in presenting the Fiftieth Annual Report and maiden Integrated Report of Deepak Nitrite Limited (‘your Company’ or ‘the Company’) along with the Audited Financial Statements for the Financial Year (‘FY’) ended March 31, 2021. The consolidated performance of your Company and its subsidiaries has been referred to wherever required.


Your Company’s financial performance for the year ended March 31, 2021 is summarized below:

The year started with COVID-19 pandemic as a global challenge, creating disruption across the world. The physical and emotional wellbeing of employees continues to be a top priority for the Company, with several initiatives to support employees and their families during the pandemic. In April, 2020, the Company decided that it would prioritize both lives and livelihoods and ensured that all its locations operated with the highest attention to man and material safety. The Company also has taken up the responsibility of vaccinating all its employees and spouses and will continue to look for opportunities to provide succour to the families that depend on it. Your Company, in partnership with Deepak Foundation has put up a 40 bed COVID hospital with ICU and oxygen beds, purchased oxygen PSA plants to be deployed at nearby facilities and has taken other appropriate measures. The Company also expanded medical and life insurance coverage for all its employees.


During FY 2020-21 the Company delivered a solid performance in the backdrop of a challenging macro-economic environment, despite losing one month of production during the year due to nationwide lockdown. The Company's diverse product line and operational excellence continues to be stronghold against widespread uncertainties. Amidst the severity of the second wave, the Company continues to function at a high level of efficiency and make progress on various growth initiatives, while adhering to Government directives, local guidelines and safety protocols across all its facilities. The Company has either maintained or increased market share across products. Your Company has demonstrated resilience in its business performance to close the year with y-o-y growth in its Strategic Business Units (‘SBUs’).

Total Revenue, including Other Income, in FY 2020-21 was ₹ 1,822.68 Crores compared to ₹ 2,237.24 Crores in FY 2019-20 and EBITDA in FY 2020-21 was at ₹ 549.61 Crores as against ₹ 804.28 Crores reported in the previous year. Profit Before Tax (‘PBT’) came in at ₹ 478.61 Crores as compared to ₹ 706.03 Crores in FY 2019-20. Profit After Tax (‘PAT’) stood at ₹ 354.72 Crores as compared to ₹ 544.04 Crores in FY 2019-20.

Due to the uncertainties in external environments, the best option for the Company was to become more nimble-footed. The Company paid very close attention to internal processes of people management, supply chain and operations and worked to maximize productivity wherever possible. The Company gained value from these focused efforts in terms of optimizing product mix particularly in the Fine & Speciality Chemicals SBU. As always, the wide range of your Company’s products helped it to overcome some businesses whose demand was affected by COVID / oil crisis such as fuel additives and paper chemicals. The robust performance during the year was an outcome of the diverse product range built up over five decades, guidance of the able and competent leadership, commitment and dedication of all associates and the calibrated expansion plans which support the Company relentless pursuit of growth by constantly strengthening its product portfolio to satisfy the growing demands of global clientele.

During FY 2020-21, Domestic Revenues were ₹ 954.25 Crores compared to ₹ 1292.94 Crores in FY 2019-20 and Export Revenues were ₹ 854.89 Crores as against ₹ 936.72 Crores in the previous year.

India has become an important and a high potential market for the chemical industry, and your Company is well placed to capitalize on this trend, due to its varied product offerings and decades of manufacturing excellence. There has also been a noticeable rise in demand from global consumers across key product categories. Interventions to de-risk supply chain from China have contributed to mitigate the supply chain challenges for Indian chemical majors. The China plus one strategy has meaningfully impacted demand, which is likely to steadily accelerate in the quarters and years ahead. This is expected to benefit the industry including the Company which is well equipped, globally, and domestically, with established infrastructure and proven track record, alongside a high level of forward and backward integration, in an improving demand scenario.


Your Company’s wholly owned material subsidiary, Deepak Phenolics Limited (‘DPL’), entered FY 2020-21 amidst a nation-wide lock down imposed by the authorities as a precautionary step to contain the spread of COVID-19. Domestic demand dropped to unprecedented low levels. Global markets also witnessed significant correction in terms of demand. Further, global markets suffered by Trade conflicts, political uncertainties, heightened volatility in commodity prices with some never before seen developments with respect to sharp fall in crude oil price at beginning of year and sharp rise in metal prices at the end of financial year.

DPL had its IPA plant ready for start but faced inevitable consequence of lack of licensor support for start-up and stabilisation due to the then COVID related restrictions on travelling of licensors. Despite the restrictions faced, DPL commissioned the IPA plant on its own during April-2020 in the midst of the lockdown and nothing could have been timelier in addressing the pressing need of sanitiser alcohol in India.

Further, as India and the global markets opened up towards middle of the first quarter, both Phenol and Acetone started to regain their rightful positions in the global markets. With the judicious mix of domestic sales and exports, DPL achieved 115% capacity utilization in FY 2020-21 despite remaining offline for the entire month of April-2020. Higher production reflected ability to work on operating leverage to report above 100% of capacity utilisation in the second complete year of operations from a plant of this magnitude indicates the level of preparedness of the organisation supported by reliable management of complex material logistics.

Despite the country wide lockdown and slowdown in the economic activity in India, the domestic market for Phenol exhibited a modest growth of 5-6% compared to the previous year indicating the intrinsic resilience of the market DPL operates in. Acetone market in India however declined around 6% compared to the previous year largely due to slowdown in derivatives and other surface coating segments comprising paints, inks and other coatings.

DPL has created new benchmark in revenues and profitability marking this as a milestone year for Deepak Group. DPL managed to achieve its targets in the backdrop of volatility in prices of raw materials and finished goods thereby demonstrating resilience. DPL reported elevated growth in revenues and profitability combined with opening up of new avenues of growth prospects. DPL reported Revenues of ₹ 2,563 Crores in FY 2020-21 as against ₹ 2,010 Crores in FY 2019-20 with Profit After Tax of ₹ 421 Crores in FY 2020-21 as against ₹ 67 Crores in FY 2019-20, registering growth of 28% and 528% respectively.

DPL continued to remain the largest producer of Phenol and Acetone in India with a market share of much above 50%. During the year under review, DPL was successfully placing its products in the highly competitive global market across multiple continents (Far East Asia, South America, Europe). Your Company is glad to report that DPL’s products were well received in the international market.

Phenol is a versatile industrial organic chemical and is used for manufacture of various chemical intermediates. This is consumed in a broad spectrum of end-user segments, including ply, laminates, foundry, paints, rubber, surfactants, pharmaceuticals, and agro- chemicals. Acetone and IPA are mainly used in pharmaceutical manufacturing aside from its significant applications in paints, adhesives, and thinners amongst many others. Acetone is a co- product of the production process for Phenol and IPA is on-purpose produced from Acetone


During FY 2020-21, the Company surpassed a remarkable milestone of ₹ 1,000 Crores in PBT as it clocked ₹ 1,041.72 Crores. Total Revenue including Other Income during FY 2020-21 was ₹ 4,381.27 Crores, growing 3% as compared to ₹ 4,264.91 Crores last year. The accretive performance of the Phenolics business and that of the Fine & Speciality Chemicals segment has driven the performance. The current year’s performance is even more resilient given the fact that, there was one month of production loss due to nationwide lockdown. This was achieved due to the exemplary dedication of the teams in the backdrop of the pandemic related curbs and localised lockdowns imposed by relevant authorities.

EBITDA came in at ₹ 1,268.55 Crores in FY 2020-21, higher by 20% as compared to ₹ 1,061.00 Crores in FY 2019-20. Raw material costs stood at ₹ 2,264.26 Crores as against ₹ 2,373.50 Crores in FY 2019-20, lower by 5%. The Company’s integrated manufacturing model which encompasses basic building blocks to complex, speciality chemical intermediates has enabled it to capitalize on the opportunities from the global disruption in a remunerative manner.

Profit Before Tax (PBT) stood at ₹ 1,041.72 Crores as compared to ₹ 806.40 Crores in FY 2019-20. The Profit After Tax (PAT) came in at ₹ 775.81 Crores as compared to ₹ 611.03 Crores in FY 2019- 20, representing a strong growth of 27%. Better profitability was achieved by operational improvements in the Phenolics market and incremental contribution from IPA products, that was supported by efficient logistics management. The Company’s performance has been highly influenced by the breadth and depth of its products and process competency. This resilience has been instrumental in delivering consistent returns regardless of the myriad challenges faced during the period.

Domestic Revenues stood at ₹ 3,088.06 Crores from ₹ 3,157.88 Crores in FY 2019-20, lower by 2%, while Revenue from Exports improved by 19% to ₹ 1,271.69 Crores as compared to ₹ 1,071.83 Crores last year. Consistent performance during the fiscal year reflects the Company's deeply rooted resilience, and attributed to exemplary teamwork, enhanced operations and better marketing and logistics capabilities. Overall, your Company remains optimistic about the numerous opportunities that have emerged because of increased focus on India's potential.


Based on your Company’s healthy performance, the Board of Directors are pleased to recommend a final dividend of ₹ 4.50 (Rupees Four and Paise Fifty only), being 225%, per equity share of face value of ₹ 2.00 (Rupees Two only) each for the year ended March 31, 2021. Also, to commemorate the Golden Jubilee year of the Company, the Directors have recommended a special dividend of ₹ 1.00 (Rupee One only), being 50%, per equity share of face value of ₹ 2.00 (Rupees Two only) each to be paid to the Members of the Company. Accordingly, the total dividend (final and special) as recommended for the year ended March 31, 2021 is ₹ 5.50 (Rupees Five and Paise Fifty only), being 275%, per equity share as against the interim dividend of ₹ 4.50 (Rupees Four and Paise Fifty only), being 225%, per equity share, paid during the financial year ended March 31, 2020. The total dividend as above on 13,63,93,041 Equity Shares of ₹ 2.00 each, if approved by the Members, would involve a total cash outflow of ₹ 75.02 Crores, resulting in a dividend Payout of 21.15% of the standalone profits of the Company.


The issued, subscribed and paid-up Equity Share Capital of the Company as on March 31, 2021 was ₹ 27.28 Crores comprising of 13,63,93,041 Equity Shares of ₹ 2.00 each. The Company has not issued any Equity Shares during FY 2020-21. There was no change in Share Capital during the year under review.


The Company proposed to transfer an amount of ₹ 5 Crores to the General Reserves out of the amount available for appropriation (Previous Year ₹ 10 Crores). The closing balance of the retained earnings of the Company for FY 2020-21 was ₹ 1,288.07 Crores.


The Company endeavours to maintain an optimal capital structure from time to time; however, during the year the Company has generated cash profit out of its operations thereby maintaining debt at a lower level. During the year under review, the total debt of the Company declined given the scheduled repayments & prepayments made and better working capital management.

Reduction in total debt resulted in lower interest costs for the Company. Depreciation increased due to change in estimated useful life of certain Property, Plant and Equipment. The Company has a dedicated team monitoring the exposure of foreign exchange and dynamically minimizing the risk arising therefrom. Due to judicious management, the Company has been able to manage its cash flow position in an efficient manner. On a Standalone basis, Total Debt: Equity as on March 31, 2021 reduced to Nil compared to 0.14 times as on March 31, 2020.

The Company is well placed in the industry, delivering quality guided by a robust product mix. Thus, on the back of steady performance over the years, both ICRA and CRISIL has upgraded long term credit rating, from AA- to AA while the short term rating of the Company remains at the highest level at A1+. This is primarily owing to the Company’s sustainable business performance, commercial viability across most segments of its products, diversified product portfolio, constant innovation, and efficient operations.
In case of the Company’s wholly owned subsidiary, Deepak Phenolics Limited (‘DPL’), ICRA has upgraded the long term credit rating by two notches i.e. from “ICRA A/Stable” to “ICRA AA-/Stable” and also upgraded short term credit rating from “ICRA A1” to “ICRA A1+” which is the highest rating in short term category.

During the year, DPL has pre-paid substantial part of its borrowing apart from honouring committed repayments. Pursuant to this, consolidated Net Debt / Equity ratio is 0.15x as of March 31, 2021 compared to 0.67x as of March 31, 2020.


hri Umesh Asikar completed his term of appointment as Executive Director & CEO of the Company on May 31, 2020. Accordingly Shri Umesh Asaikar retired as Executive Director & CEO of the Company from close of business hours on May 31, 2020.

Shri Maulik D. Mehta [DIN: 05227290] retires by rotation at the ensuing Annual General Meeting of the Company and being eligible, offers himself for re-appointment. A resolution seeking Members’ approval for his re-appointment along with other required details forms part of the Notice.

The Board of Directors at their meeting held on May 5, 2021, upon the recommendation of Nomination and Remuneration Committee, approved the re-appointment of Shri Maulik D. Mehta as an Executive Director & Chief Executive Officer of your Company for further period of five (5) years with effect from May 9, 2021, subject to approval by Members. A resolution seeking Members’ approval for his re-appointment along with other required details forms part of the Notice.

Dr. Richard H. Rupp [DIN: 02205790], who was appointed as an Independent Director at the 48th Annual General Meeting of the Company held on June 28, 2019 for a second term of three (3) consecutive years i.e. upto August 7, 2022, will attain the age of seventy five (75) years during the second term of his appointment. An approval of Members of the Company by way of Special Resolution is required in terms of Regulation 17(1A) of SEBI Listing Regulations, for Dr. Richard H. Rupp to continue as an Independent Director of the Company beyond the age of seventy five (75) years. A Special Resolution seeking Members’ approval for the same along with other required details forms part of the Notice.

During FY 2020-21, Shri Sandesh Kumar Anand [DIN: 00001792] ceased to be an Independent Director of the Company with effect from November 1, 2020. However, he continues to be a Non-Executive Non-Independent Director of the Company, liable to retire by rotation.

Pursuant to the provisions of Section 149 of the Companies Act, 2013 ('the Act') Independent Directors of the Company have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company.

During the year under review, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with your Company, other than sitting fees, commission and reimbursement of expenses, if any.

Pursuant to the provisions of Section 203 of the Act, Shri Deepak C. Mehta, Chairman & Managing Director, Shri Maulik D. Mehta, Executive Director & CEO, Shri Sanjay Upadhyay, Director - Finance & CFO and Shri Arvind Bajpai, Company Secretary & Compliance Officer are the Key Managerial Personnel of the Company as on March 31, 2021 except as mentioned above, there has been no change in the Key Managerial Personnel of the Company, during the year ended March 31, 2021.

Shri Deepak C. Mehta is also the Chairman & Managing Director of the Company’s wholly owned subsidiary, Deepak Phenolics Limited (‘DPL’). As per the terms of his appointment, he is entitled to receive remuneration from DPL by way of commission on net profits of DPL calculated in accordance with the provisions of Section 198 of the Act. The aggregate remuneration of Shri Deepak C. Mehta from the Company and its wholly owned subsidiary shall always be in accordance with Section V of Part II of Schedule V to the Act.


During FY 2020-21, four (4) meetings of Board of Directors of the Company were held. For details of meetings of the Board of Directors with regard to the dates and attendance of each of the Directors thereat, please refer to the Corporate Governance Report, which is a part of this Report.


The Board of Directors has carried out an annual evaluation of its own performance that of, Board Committees, and of individual Directors pursuant to the provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('SEBI Listing Regulations').

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the respective Committees were evaluated by the Board after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.
The above criteria are as per the Performance Evaluation Policy of the Company approved by the Board of Directors upon the recommendation of Nomination and Remuneration Committee.
As required under Regulation 25 of the Listing Regulations, a separate meeting of the Independent Directors of the Company was also held on March 16, 2021 to evaluate the performance of the Chairman, Non- Independent Directors and the Board as a whole and also to assess the quality, quantity and timeliness of flow of information between the management of the Company and the Board.

The Board and the Nomination and Remuneration Committee reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual Director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated, on the basis of following evaluation criteria:

Relevant Knowledge, Expertise and Experience.
Devotion of time and attention to the Company’s long term strategic issues.
Addressing the most relevant issues for the Company.
Discussing and endorsing the Company’s strategy
Professional Conduct, Ethics and Integrity.
Understanding of Duties, Roles and Function as Independent Director.

A duly constituted Audit Committee consists of majority of Independent Directors with Shri Dileep Choksi, Independent Director, as the Chairman of the Committee. The other members of the Audit Committee are Shri Sudhir Mankad and Shri Sanjay Asher, Independent Directors and Shri Sandesh Kumar Anand, Non-Executive Non-Independent Director. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members of the Audit Committee are set out in the Report on Corporate Governance, which forms part of this Report.

During the year under review, all the recommendations of the Audit Committee were accepted by the Board.


At the 46th Annual General Meeting of the Company held on June 26, 2017 the Members approved appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/ W-100018) as Statutory Auditors of the Company to hold office for a period of five (5) years from the conclusion of that Annual General Meeting till the conclusion of the 51st Annual General Meeting.


The observations made in the Auditors’ Report of Deloitte Haskins & Sells LLP, Chartered Accountants for the year ended March 31, 2021, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their Report.


Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2021 was carried out by the Secretarial Auditors, KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has appointed KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2021-22.


The Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune, for the year ended March 31, 2021 in Form No. MR-3 is annexed as Annexure - A, which forms part of this Report.

The observations made in the Secretarial Audit Report of KANJ & Co. LLP Company Secretaries, Pune for the year ended March 31, 2021 are self- explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark or disclaimer by the Secretarial Auditors in their Report.


The Company is required to maintain cost records under Companies (Cost Records and Audit) Rules, 2014. Accordingly, cost records have been maintained by your Company.

The Board of Directors, on the recommendation of the Audit Committee, appointed B. M. Sharma & Company, Cost Accountants, to conduct audit of the Company’s cost records for FY 2021-22 at a remuneration of ₹ 8,00,000/- (Rupees Eight Lakhs only) plus applicable taxes and out of pocket expenses. As required under the provisions of the Act, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the Members at the ensuing Annual General Meeting. A Resolution for the ratification of remuneration of Cost Auditors for FY 2021-22 is provided in the Notice. Your Directors recommend the same for approval by the Members.

The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year.


On the recommendation of the Audit Committee, the Board of Directors of the Company has appointed Sharp & Tannan Associates, Chartered Accountants as Internal Auditors of your Company to conduct the Internal Audit for FY 2021-22 and 2022-23.


During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143(12) of the Act details of which needs to be mentioned in this Report.

Best Regards,

Deepak C Mehta

Chairman and Managing Director

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