Director’s Report Index
FINANCIAL RESULTS 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.
PERFORMANCE REVIEW Standalone 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. DEEPAK PHENOLICS LIMITED 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 [...]
DIVIDEND 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.
SHARE CAPITAL 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.
FINANCE 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.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
DIRECTORS AND KEY MANAGERIAL PERSONNEL 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.
NUMBER OF MEETINGS OF THE BOARD
NUMBER OF MEETINGS OF THE BOARD 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.
BOARD EVALUATION 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.
AUDIT COMMITTEE 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.
STATUTORY AUDITORS 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. STATUTORY AUDITORS’ REPORT 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.
SECRETARIAL AUDITORS 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. SECRETARIAL AUDITOR’S REPORT 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.
COST AUDITORS 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.
REPORTING OF FRAUD BY AUDITORS
REPORTING OF FRAUD By AUDITORS 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.
RISK MANAGEMENT The Company has in place a Risk Management framework to identify, evaluate and monitor business risks and challenges across the Company. The Risk Management Policy, pursuant to Section 134 of the Act, has been adopted based on this framework. The Risk Management Policy provides for creation of a Risk Register, identification of risks and formulating mitigation plans. The Board of Directors of your Company has formed a Risk Management Committee to frame, implement and monitor the Risk Management plan for the Company. The Committee is responsible for monitoring and reviewing the Risk Management plan and ensuring its effectiveness. The details about the Risk Management Committee have been provided in the Corporate Governance section of the Annual Report. The enterprise risks for the Company are identified by the respective Risk Managers and presented to the Risk Management Committee for review. The Committee evaluates the performance of the Company against perceived risks, develops approaches to classify potential and evolving challenges that may adversely impact the overall risk exposure of the Company. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Risk Register gets updated periodically, to ensure that the risks remain relevant at any point in time and corresponding mitigation measures are effective. This provides a proactive and value adding review process which enables maintaining the risk profile at an acceptable level in a rapidly changing environment. The Audit Committee has additional oversight in the area of financial risks and controls.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY Your Company remains committed to ensuring an effective Internal Control environment that, inter alia, provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds / errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information. The Company has an independent Internal Audit function with well-established Risk Management processes both at the business and corporate levels and provide assurance on the adequacy and effectiveness of Internal Controls, compliance with operating systems, internal policies and regulatory requirements. The Audit Committee regularly reviews the major findings of the Internal Audits and corrective measures taken thereon to ensure the efficacy of the Internal Control process. These reviews are done with respect to different locations and functions to help take effective steps for ensuring compliance. The system of Internal Control is structured to verify that financial and other documents are accurate in compiling financial reports and other data, and in maintaining transparency for individuals. Statutory Auditors’ Report on Internal Financial Controls as required under Clause (i) of Sub-section 3 of Section 143 of the Act, is annexed with the Independent Auditors’ Report.
VIGIL MECHANISM Pursuant to provisions of Section 177 (9) of the Act, read with Regulation 22(1) of the SEBI Listing Regulations, your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behavior, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of the Company’s Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in certain cases. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Whistle Blower Policy is available on the Company’s website at https://www.godeepak.com/wpcontent/themes/twentysixteen/ companyfiles/corporate_governance_report/Whistle_Blower_ Policy.pdf.
DEPOSITS FROM PUBLIC
DEPOSITS FROM PUBLIC During FY 2020-21, the Company has not accepted or renewed any Fixed Deposits. As on March 31, 2021, 35 warrants aggregating to ₹ 7,23,507 issued by the Company to the respective deposit holders towards compulsory repayment of deposits and interest thereon in accordance with the provisions of Section 74 of the Act, remained uncleared. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2021.
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS here are no material related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large. Accordingly, the disclosure of related party transactions, as required under Section 134(3)(h) of the Act, in Form No. AOC-2 is not applicable to the Company. All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approval of the Audit Committee is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on an arm’s length basis. A statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors on a quarterly basis. The policy on Related Party Transactions as approved by the Board of Directors is uploaded on the website of the Company www. godeepak.com. None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Board’s Report has been prepared on a Standalone basis. Pursuant to requirement of Section 136 of the Act, which has exempted companies from attaching the financial statements of the subsidiary companies along with the Annual Report of the company, your Company will make available the Annual Financial Statements of the subsidiary companies and the related detailed information to any Member of the Company on receipt of a written request from them at the Registered Office of the Company. The Annual Financial Statements of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company on any working day during business hours. These are also available on the website of your Company www.godeepak.com. The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (‘Ind AS’), forms part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company. The Consolidated Financial Statements include the operations of following subsidiaries: Deepak Phenolics Limited Deepak Nitrite Corporation Inc. Deepak Clean Tech Limited During FY 2020-21, Deepak Clean Tech Limited was incorporated on October 9, 2020 as a wholly owned subsidiary of the Company. There is no other company which has become or ceased to be subsidiary or associate of the Company during the year ended March 31, 2021. Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the SEBI Listing Regulations. The Policy, as approved by the Board, is uploaded on the Company’s website www.godeepak.com.
PERFORMANCE OF SUBSIDIARIES
PERFORMANCE OF SUBSIDIARIES Deepak Phenolics Limited The Company’s wholly owned subsidiary, Deepak Phenolics Limited (‘DPL’), is in the business manufacturing of Phenol, Acetone and their downstream products. During FY 2020-21, the Revenue from Operations of DPL was ₹ 2,563 Crores and Profit After Tax for the period was ₹ 421 Crores. Deepak Nitrite Corporation Inc. (USA) Deepak Nitrite Corporation Inc. (“DNC”) is a wholly owned subsidiary incorporated in the United States of America to cater to the marketing requirements of the Company in North and South American region. During FY 2020-21 the total revenue of DNC was USD 21,667 and the Net Income for the period was USD 625. Deepak Clean Tech Limited Deepak Clean Tech Limited is a newly incorporated wholly owned subsidiary of the Company and it is yet to commence commercial operations. In accordance with the provisions of the Act, Regulation 33 of the SEBI Listing Regulations and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for FY 2020-21, together with the Auditor’s Report, forms part of this Annual Report. A statement containing the salient features of the Company’s subsidiaries, associate and joint venture company in the prescribed Form No. AOC-1, is attached to the Financial Statements.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are given in the notes to the Financial Statements.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF YOUR COMPANY
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 There have been no material changes and commitments affecting the financial position of the Company since the close of Financial Year i.e. since March 31, 2021 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of the Company.
DIRECTORS’ RESPONSIBILITY STATEMENT
DIRECTORS' RESPONSIBILITY STATEMENT Based on the framework of Internal Financial Controls established and maintained by the Company, work performed by the Internal, Statutory, Secretarial and Cost Auditors and external agencies including audit of Internal Financial Controls over Financial Reporting by the Statutory Auditors and reviews performed by the management and relevant Board Committees, including the Audit Committee, the Board is of the opinion that your Company’s Internal Financial Controls were adequate and effective during FY 2020-21. Accordingly, pursuant to Section 134(5) of Act, the Board of Directors, to the best of their knowledge and ability confirm that: (i) in the preparation of the Annual Accounts for the Financial Year ended March 31, 2021, the applicable accounting standards have been followed and there are no material departures; (ii) 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 ended March 31, 2021 and of the profit of the Company for the year ended on that date; (iii) 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) they have prepared the Annual Accounts on a going concern basis; (v) they have laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and are operating effectively; and (vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirement set out by Securities and Exchange Board of India (SEBI). The Report on Corporate Governance under Regulation 34 of the SEBI Listing Regulations read with Schedule V of the said Regulations forms an integral part of the Annual Report. The requisite Certificate from a Practising Company Secretary, KANJ & Co., LLP, Company Secretaries, Pune, confirming compliance with the conditions of the Corporate Governance is attached to the Report on Corporate Governance.
BUSINESS RESPONSIBILITY REPORT
BUSINESS RESPONSIBILITY REPORT The Securities and Exchange Board of India under Regulation 34(2) (f) of SEBI Listing Regulations read with National Guidelines on Responsible Business Conduct issued by Ministry of Corporate Affairs Government of India on March 13, 2019, requires top one thousand listed companies to prepare and present a Business Responsibility Report (‘BRR’) to its stakeholders in the prescribed format describing the initiatives taken by the company on Environmental, Social and Governance perspective. As on March 31, 2021, your Company is at 164th position on the basis of capitalization at NSE and at 167th position at BSE. The Business Responsibility Report, covering initiatives on Environmental, Social and Governance aspects forming part of this Report is annexed as Annexure - B.
INTEGRATED REPORTING Your Company believes that sustainable development calls for concerted efforts towards building an inclusive, sustainable and resilient future for people and planet through harmonising economic growth, social inclusion and environment protection. In furtherance to this commitment, the Company had taken paradigm shift from compliance based reporting to governance based reporting and accordingly, in the interest of its stakeholders, the Company, on voluntary basis adopted for the first time the Integrated Reporting (IR) framework of the International Integrated Reporting Council to report on all the six capital that the Company uses to create long term stakeholder value. The Integrated Report is a part of this Annual Report, which provides a clear, concise, and comprehensive vision of business model.
MANAGEMENT DISCUSSION AND ANALYSIS
MANAGEMENT DISCUSSION AND ANALYSIS In terms of Regulation 34 (2) (e) of SEBI Listing Regulations, read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for overall development and welfare of the society. The Company’s commitment to the development of weaker and underprivileged sections of society is continuing for four decades now. Through the group’s charitable trust “Deepak Foundation” and has upgraded its Corporate Social Responsibility (‘CSR’) activities to cover a larger section of the society encompassing social interventions in various developmental domains such as Health, Education, Livelihood, etc. in order to support the downtrodden, needy and marginalized citizens and also to create social infrastructure for their sustenance. During the year under review, the Company has spent ₹ 7.44 Crores on CSR activities, against the requirement of ₹ 7.44 Crores, being 2% of average of the Net Profits for the preceding three years. The Company has in place a CSR Policy which provides guidelines to conduct its CSR activities. The CSR Policy has been posted on the website of the Company at https://www.godeepak.com/wp-content/themes/twentysixteen/ companyfiles/corporate_governance_report/DNL_Corporate%20 Social%20Responsibility%20Policy.pdf The Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure - C, which forms part of this Report.
NOMINATION AND REMUNERATION POLICY
NOMINATION AND REMUNERATION POLICY Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Act and the Listing Regulations. The Nomination and Remuneration Policy of your Company is annexed as Annexure - D and is also available on the Company’s website on www.godeepak.com
PARTICULARS OF EMPLOYEES
PARTICULARS OF EMPLOYEES Disclosures 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 are annexed to this Report as Annexure-E. Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. Having regard to the provisions of the second proviso to Section 136(1) of the Act, the Annual Report is being sent to the members of the Company excluding the aforesaid information. Any member interested in obtaining such information may write to Company Secretary.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information pertaining to Conservation of Energy & Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure - F to this Report.
SIGNIFICANT AND MATERIAL ORDERS PASSED AGAINST THE COMPANY
SIGNIFICANT AND MATERIAL ORDERS PASSED AGAINST THE COMPANY Pursuant to the requirement of Section 134(3)(q) of the Act, read with Rule 8 (5)(vii) of the Companies (Accounts) Rules, 2014, it is confirmed that during FY 2020-21 there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Company’s operations in future.
SECRETARIAL STANDARDS OF ICSI
SECRETARIAL STANDARDS OF ICSI During the year under review, the Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS- 1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India as approved by the Central Government.
GENERAL DISCLOSURES Your Directors state that no disclosure or reporting is required in respect of the following matters as there is no transaction on these items during the year under review: (i) Issue of equity shares with differential rights as to dividend, voting or otherwise. (ii) Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except Employees’ Stock Options Schemes referred to in this Report. (iii) The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees. (iv) There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.
RESEARCH & DEVELOPMENT
RESEARCH & DEVELOPMENT Your Company has a Research and Development (‘R&D’) facility at Nandesari, Gujarat with pilot plants at Roha, Maharashtra and Nandesari, Gujarat. The Department of Scientific and Industrial Research (‘DSIR’), New Delhi, on behalf of the Government of India vide letter October 14, 2020, has recognized the Company’s in-house R&D facilities for a further period of extension up to March 30, 2023. The R&D center at Nandesari focuses on the innovation of new compounds to substitute imports of pharmaceutical and agrochemical intermediates, innovation and development of Speciality chemicals and personal care intermediates and value- added products from by-products. The Company’s R&D efforts are focused on process development of new and existing molecules. It is your Company’s constant endeavor to develop cost effective sustainable, cutting edge technologies for manufacturing of chemicals. Considerable attention is also paid to develop processes which will have minimal environment impact. The Company is in the process of developing different technology platforms for efficient manufacturing of chemicals, which will make the Company a reliable partner of choice for sustainable supply. Substantial efforts are made to develop new product applications, which meets customer demands.
SAFETY, HEALTH & ENVIRONMENT
SAFETY, HEALTH & ENVIRONMENT Your Company is committed to ensure a sound Safety, Health and Environment (‘SHE’) performance related to its activities, products and services. It is continuously taking various steps to develop and adopt Safer Process technologies and unit operations. The Company is investing in areas such as Process Automation for increased safety and reduction of human error element, Enhanced level of training on Process and Behaviour based safety, adoption of safe & environmental friendly production process, upgrading effluent treatment facilities, Reverse Osmosis plants, Multiple Effect Evaporator etc to reduce the discharge of effluents, commissioning of Waste Heat recovery systems, and so on to ensure the Reduction, Recovery and Reuse of effluents & other utilities. SHE Management System is monitored and reviewed periodically. Structured & regular safety meetings are carried out to Review Existing Process Safety Parameters. Systematic and well documented scale up procedure is in place for the development of product from R&D to Pilot to Commercial Scale. It includes risk assessment and process safety study at each stage to ensure inherently safe processes. The Company has policy and system in place to deploy internationally recognized guidelines, such as the principles of the United Nations’ Global Compact, the International Labour Organization (“ILO”) conventions and Responsible Care® Initiative. It has system in place to ensure social compliances related to human rights, labour & social standards, anti-discrimination, conflict of interest and anti-corruption. This is being audited by third party as a part of Together for Sustainability (“TfS”) system. Health and Safety remained a core area of importance for the Company with an aim to achieve accident-free workplace. Your Company believes that all injuries, occupational illnesses as well as safety and environmental incidents are preventable. This ensures that all employees strive for excellence in their own personal safety and the safety of others including employees, contractors, customers, and the communities within which the Company operates. The Company follows a strict incident reporting system. All incidents including near-miss and unusual occurrence are also logged into the Safety MIS. Each incident is analysed for their root-causes and required precautions are taken to prevent the recurrences. Each management of change and projects undertaken by the Company are made to undergo HAZOP studies before commencement. All plant-setting changes are first approved through Management of Change procedure before implementation. Workplace safety and Process Safety Management through employee engagement initiatives are continuously being strengthened. Your Company has a system of Internal and external Safety Audits and actions based on audit findings. All Manufacturing Units including Corporate Office are certified with the latest standard of ISO 9001, ISO 14001 and ISO 45001. The safety team regularly conducts safety awareness programs across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioural transformation. Logistic safety Management system The Company has, along with its peers, founded Nicer Globe, an independent platform which provides real-time monitoring of the movement of dangerous goods across the length and breadth of India. This helps in monitoring any deviations in speed or route or driving time restrictions, which results in minimizing transport related incidents. Almost all raw materials and products within supply chain framework of the Company are transported in a secure manner, with GPS for real-time monitoring for the safety of its customers, carriers, suppliers, distributors and contractors. Environment The Company is committed to the chemical industry’s Responsible Care® initiative and have set out the basic principles fully aligned with UN Sustainable Development Goals. Commitment to environmental protection extends beyond the scope of legal requirements. It has focused on recycle and reuse and reduction of pollution load and constantly working on to reduce environmental footprint and find innovative solutions that benefit the environment.
HUMAN RESOURCES Your Company recognizes its employees as most valuable resource and ensures strategic alignment of Human Resource Initiatives and practices to business priorities and objectives. Its constant endeavor is to invest in Human Talent and Talent Management Processes to improve capabilities and potentials of human capital of the organization to cope with challenging business environment, varying needs of the customers and bring about customers delight by focusing on the Customers’ needs. This approach has allowed the Company to withstand and overcome the challenges posed by COVID -19. Attracting, developing and retaining the right talent and keeping them motivated will continue to be a key strategic initiative and the organisation continues to be focused on building up the capabilities of its people to cater to the business needs. Given growth plans of the Company, an important strategic focus is to continue to not only nurture its human capital, but also proactively focus on preparing all employees for the challenges of the future. The Company strives to provide a healthy, conducive and competitive work environment to enable the employees excel and create new benchmarks of quality, productivity, efficiency and customer delight. The Company always believes in maintaining mutually beneficial, healthy and smooth industrial relations with the employees and the Unions which is an essential foundation for the success of any organisation. The proactive initiatives combined with fair Wage Settlements at Manufacturing Plants have ensured healthier and more transparent Industrial Relations based on foundation of mutual trust and co-operation. The Company is investing in areas such as Process Automation for increased safety and reduction of human error element, Enhanced level of training on Process and Behaviour based safety, adoption of safe & environmental friendly production process, upgrading effluent treatment facilities, Reverse Osmosis plants, Multiple Effect Evaporator etc to reduce the discharge of effluents, commissioning of Waste Heat recovery systems, and so on to ensure the Reduction, Recovery and Reuse of effluents & other utilities. SHE Management System is monitored and reviewed periodically. Structured & regular safety meetings are carried out to Review Existing Process Safety Parameters. Systematic and well documented scale up procedure is in place for the development of product from R&D to Pilot to Commercial Scale. It includes risk assessment and process safety study at each stage to ensure inherently safe processes. The Company has policy and system in place to deploy internationally recognized guidelines, such as the principles of the United Nations’ Global Compact, the International Labour Organization (“ILO”) conventions and Responsible Care® Initiative. It has system in place to ensure social compliances related to human rights, labour & social standards, anti-discrimination, conflict of interest and anti-corruption. This is being audited by third party as a part of Together for Sustainability (“TfS”) system. Health and Safety remained a core area of importance for the Company with an aim to achieve accident-free workplace. Your Company believes that all injuries, occupational illnesses as well as safety and environmental incidents are preventable. This ensures that all employees strive for excellence in their own personal safety and the safety of others including employees, contractors, customers, and the communities within which the Company operates. The Company follows a strict incident reporting system. All incidents including near-miss and unusual occurrence are also logged into the Safety MIS. Each incident is analysed for their root-causes and required precautions are taken to prevent the recurrences. Each management of change and projects undertaken by the Company are made to undergo HAZOP studies before commencement. All plant-setting changes are first approved through Management of Change procedure before implementation. Workplace safety and Process Safety Management through employee engagement initiatives are continuously being strengthened. Your Company has a system of Internal and external Safety Audits and actions based on audit findings. All Manufacturing Units including Corporate Office are certified with the latest standard of ISO 9001, ISO 14001 and ISO 45001. The safety team regularly conducts safety awareness programs across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioural transformation.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Company is committed to creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation. To empower women and protect women against sexual harassment, and as per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, a policy for prevention of sexual harassment is already in place and Internal Complaints Committee had been set up at all major locations of the Company. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair enquiry process with clear timelines. To build awareness in this regard, the Company has been conducting various programme on a continuous basis. During FY 2020-21, no complaint was received from any employee and hence no complaint is outstanding as on March 31, 2021 for redressal.
ACKNOWLEDGMENT Your Directors express their gratitude to customers, vendors, dealers, investors, business associates and bankers for their continued support during the year. We place on record our appreciation of the commitment and contribution made by the employees at all levels. Our resilience to meet challenges was made possible by their hard work, solidarity, cooperation and support. We thank the Government of India, the State Governments and statutory authorities and other government agencies for their support and look forward to their continued support in the future.