DCM SHRIRAM Directors Report

The Directors have pleasure in presenting the 28th Annual Report of the Company along with Audited Financial Statements, both standalone and consolidated, for the year ended 31st March, 2017.


Financial Highlights


The results for the year ended 31.3.2017 and 31.3.2016 are as under:


(Rs. in crores)


































































































































Particulars



Standalone



Consolidated



31.03.2017



31.03.2016



31.03.2017



31.03.2016



Total revenue from operations



6,060.94



5,984.91



6,117.19



6,030.23



Profit before finance cost, depreciation, tax and exceptional item



860.09



594.85



817.86



545.64



Profit before exceptional item and tax



676.13



415.08



632.70



362.28



Exceptional item :


Provision for impairment of investment in foreign subsidiaries (Bioseed business)



85.12



Profit before tax



591.01



415.08



632.70



362.28



Profit after tax



522.07



352.99



552.33



300.43



Share of profit/(loss) of joint venture



-



0.03



0.71



Non-controlling interest



-



(0.68)



0.61



Other comprehensive income (after tax)



(7.47)



(2.36)



(3.58)



(0.73)



Total comprehensive income (after tax)



514.60



350.63



548.10



301.02



Basic/Diluted - EPS (Rs. Per equity share)


- Before exceptional item


- After exceptional item



37.06


32.14



21.73


21.73



33.97


33.97



18.58


18.58



Retained earnings- opening balance



2,070.22



1,773.08



1,979.03



1,733.26



Add/(less):


Profit for the year



522.07



352.99



551.68



301.75



Dividends (including dividend tax) paid during the year



(113.37)



(54.74)



(113.37)



(54.74)



Others



(6.56)



(1.11)



(6.42)



(1.24)



Retained earnings -closing balance



2,472.36



2,070.22



2,410.92



1,979.03



State of Company’s Affairs/Performance


The Company recorded a healthy financial performance in FY17 driven by Sugar and Chemicals Business. Other businesses witnessed stable performance.


The Company’s total revenues from operations stood at Rs. 6,117 Crores in FY17 vs. Rs. 6,030 Crores last year. This was despite suspension of trading in imported bulk fertilisers (DAP/MOP) for FY17, which had a revenue of Rs. 688 Crores in FY16. Excluding this, the revenue increased by about 14.6% over last year.


EBITDA for FY17 stood at Rs. 817.9 Crores, a significant improvement from Rs. 545.6 Crores recorded last year. This improvement was lead by better volumes and margins in Sugar business and higher volumes in Chemicals business. Other businesses except Shriram Farm Solutions also recorded improvement in earnings.


Our Agri-input businesses of Shriram Farm Solutions and Bioseed were impacted by lower demand and change in sowing patterns towards lower value inputs, a result of two consecutive years of poor and erratic monsoons leading to weak farmer economics. Overall EBIDTA margins improved to 13% from 9% last year.


In the Standalone accounts (no impact on Consolidated financials), the Company has taken a write-down of Rs. 85.12 Crores in the value of investments in Bioseed International Business, keeping in view the longer gestation period and higher losses over last few years due to one time inventory write offs.


Net Profit for FY17 was up by 83% to Rs. 552 Crores from Rs. 302 Crores in FY16.


Net Debt stood at Rs. 928 Crores vs. Rs. 1057 Crores last year. Debt equity ratio stood at 0.37x vs 0.51x last year.


The Company completed capacity expansion projects for Chlor-Alkali (incl. captive power) at Bharuch & Power Cogeneration at Sugar business at total investments of ~Rs. 700 Crores. These plants have stabilised and have started contributing to the earnings of the Company.


During the year, the Company has announced new capital expenditure projects at an investment of ~ Rs. 300 Crores aimed at setting up a Distillery in Sugar Business to manufacture ethanol, Increase Chemicals capacity at Kota and to increase the fabrication capacity at Fenesta Business. These projects are expected to be completed by Q4 FY18 and will start adding to Company’s growth from FY19 onwards.


Dividend


Your Directors are pleased to recommend a final dividend @ 40% i.e. Rs. 0.80/- per equity share of Rs. 2/- each for the year ended 31.3.2017, which if declared by the Shareholders, the total dividend for the financial year 2016-17 will aggregate to 290 % i.e. Rs. 5.80/- per equity share of Rs. 2/-each (including two interim dividends @ 110%, i.e. Rs. 2.20 per equity share paid on 15th November, 2016 and @ 140%, i.e. Rs. 2.80 per equity share paid on 3rd March, 2017).


Further, as per the requirement of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Dividend Distribution Policy of the Company is attached as Annexure-1.


Number of Meetings of the Board


The Board met 4 times during the financial year on 10.5.2016, 9.8.2016, 27.10.2016and 13.2.2017.


Subsidiary/Associate/Joint Venture Companies


During the year, a subsidiary of the Company namely Hariyali Services Limited was struck off from the Register of Companies w.e.f. 15th November, 2016.


Report on Performance and Financial Position of Subsidiaries, Associate and Joint Ventures Company


The details regarding the performance and financial position of Company’s Subsidiaries, Associate and Joint Ventures are given in Annexure - 2 of this Board’s Report.


Risk Management Framework


The Company has in place a Risk Management Framework, which was approved by the Board on 28.1.2006 and was implemented w.e.f. 2.1.2007. The said framework includes risk identification, assessment, response and monitoring system for mitigation of risk.


Company’s Policy on Directors’ Appointment and Remuneration The criteria for Directors’ appointment has been set up by the Nomination,


Remuneration and Compensation Committee, which includes criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Sub-section (3) of Section 178 of Companies Act, 2013 (“the Act”). The Remuneration Policy is attached as Annexure - 3 to this Board’s Report.


Corporate Social Responsibility


The details about the Policy on Corporate Social Responsibility (CSR) including programmes/activities undertaken on CSR, Annual Report on CSR activities and the composition of CSR Committee are provided in a separate section, which forms part of this Board’s Report.


Business Responsibility Report


In compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Business Responsibility Report (BRR) forms part of this Annual Report. The report, inter-alia, describes the initiatives taken by the Company from environmental, social and governance perspective.


Vigil Mechanism


The Company has established a Vigil Mechanism/Whistle Blower Policy as per the requirement of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013. The same is also available on Company’s website at the following web link: (http://dcmshriram.com/sites/default/files/vigil-mechanism.pdf)


Related Party Transactions


The Company has formulated a Policy on dealing with Related Party transactions, which is also available on Company’s website at the following web link:


(http://dcmshriram.com/sites/default/files/Related%20Party%20Trnsaction%20%20-%20Final%20%28BM-12.11.2014%29.pdf)


Particulars of contracts or arrangements entered into with related parties as referred to in Section 188(1) of the Act, are disclosed in Form AOC-2 attached as Annexure-4.


Material Subsidiary Policy


The Company has formulated a Policy for determining ‘Material’ Subsidiaries, which is also available on Company’s website at the following web link:


(http://dcmshriram.com/sites/default/files/MATERIAL%20SUBSIDIARY%20PQUCY%20-%20FINAL.pdf)


Particulars of Loans, Guarantees or Investments


The details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act and relevant rules thereunder are given in the notes to Financial Statements.


Fixed Deposits


1. The details relating to deposits, covered under Chapter V of the Act:


a) accepted during the year: Rs. 88,70,000/-


b) remained unpaid or unclaimed as at the end of the year : Rs. 1,45,873/


c) there has been no default in repayment of deposits or payment of interest thereon during the financial year ended on 31st March, 2017.


2. There are no deposits, which are in non-compliance with the requirements of Chapter V of the Act.


Details in respect of adequacy of Internal Financial Control with respect to Financial Statements


The Company has in place adequate Internal Financial Controls with respect to financial statements. No material weakness in the design or operation in such controls was observed during the year.


DCM Shriram Employee Stock Purchase Scheme The Company has an Employee Stock Purchase Scheme (DCM Shriram ESPS) duly approved by Members, vide Special Resolution passed on August 13, 2013 and aligned in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014. DCM Shriram ESPS provides for grants of equity shares through Trust, purchased from Secondary Market, to the eligible Employees as may be decided by the Nomination, Remuneration and Compensation Committee from time to time. DCM Shriram ESPS is a secondary market scheme and hence no fresh issue of shares was made. There are no voting rights exercised on the shares held by the Trust. Further, there are no material changes in the DCM Shriram ESPS and it is in compliance with the applicable regulations. The details required as per SEBI (Share Based Employee Benefits) Regulations, 2014 is available at the following web link of the Company: (http://www.dcmshriram.com/DCM-Shriram-ESPS-Report)


Directors and Key Managerial Personnel (KMP)


Mr. Ajit S. Shriram and Dr. N.J. Singh, Directors retire by rotation, and being eligible, offer themselves for re-appointment.


During the year, Justice (Retd.) Vikramajit Sen and Mr. Pravesh Sharma were appointed as Additional Directors of the Company in the category of Independent Director, w.e.f. 9.8.2016, whose appointments are being placed for the approval before the Shareholders in the ensuing Annual General Meeting (AGM).


Dr. S.S. Baijal, Mr. Arun Bharat Ram and Mr. D. Sengupta ceased to be Independent Directors of the Company on completion of their tenure on 9.8.2016.


The Company has received declaration from all the Independent Directors of the Company under Section 149(7) of the Act, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.


The details of familiarization programme for Independent Directors are available on Company’s website at the following web link: (http://dcmshriram.com/sites/default/files/Details%20of%20 Familiarization%20 Programme%20for%20Independent%20Directors%202016-17.pdf) Manner & Criteria of formal annual evaluation of Board’s performance and that of its Committees and Individual Directors In compliance with requirements of the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the formal annual performance evaluation of the Board, its Committees and Individual Directors has been conducted as under:


A. Manner of evaluation as recommended to the Board by the Nomination, Remuneration and Compensation Committee (“NRCC”)


1. The Chairman of the Board consulted each Director separately about the performance of Board, Committees and other Directors and sought inputs in relation to the above. The Chairman then collated all the inputs and shared the same with the Board.


2. In respect of the evaluation of Chairman of the Board, the Chairman of the NRCC collated the inputs from Directors about Chairman’s performance as a Chairman/Director of the Board and/or Chairman or the Member of the Board Committees and shared the same with the Board.


The Board as a whole discussed the inputs on performance of Board/Committees/Individual Directors and performed the evaluation, excluding the Director being evaluated.


B. Criteria of evaluation as approved by the NRCC


The aforesaid evaluation was conducted as per the criteria laid down by the NRCC as follows:






















Performance of



Evaluation Criteria



(I) Board as a whole



- Structure of Board including Composition/Diversity/ Process of appointment /qualifications/experience, etc;


- Fulfillment of functions of the Board (for instance guiding corporate strategy, risk policy, business plans, corporate performance, monitoring Company’s governance practices etc., as per the Act and Listing Regulations).


- Meetings of Board (Number/Manner of Board meetings held during the year including quality/ quantity/timing of circulation of agenda for Board Meetings, approval process/recording of minutes and timely dissemination of information to Board.


- Professional Development and Training of Board of Directors as required.



(II) Board Committees



- Composition of Committee


- Fulfillment of functions of the Committee with reference to its terms of reference, the Act and the Listing Regulations.


- Number of committee meetings held during the year.



(III) Individual Directors



- Fulfillment of responsibilities as a director as per the Act, the Listing Regulations and applicable Company policies and practices.


- In case of the concerned director being Independent Director, Executive Director, Chairperson of the Board or Chairperson or member of the Committees, with reference to such status and role;


- Board and/or Committee meetings attended; and General meetings attended.



Particulars of Employees


The details required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, in respect of Employees of the Company, are given in Annexure - 5 of this Board’s Report.


However, in terms of Section 136 (1) of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the Statement of Particulars of Employees as required under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended. The said statement is available for inspection by the Members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting.


Composition of Board Audit Committee


As on the date of this report, the Board Audit Committee comprised of 4 Non - Executive Independent Directors, viz., Mr. Pradeep Dinodia as Chairman and Mrs. Ramni Nirula, Mr. Sunil Kant Munjal & Mr. Pravesh Sharmaas Members.


Extract of Annual Return


The Extract of Annual Return of the Company as on 31.3.2017 in Form No MGT-9 is attached as Annexure - 6 to this Board’s Report.


Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo


The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under the Companies (Account) Rules, 2014 are given in Annexure - 7 of this Board’s Report.


Secretarial Audit Report


The Board appointed M/s. Sanjay Grover & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2016-17. The Secretarial Audit Report for the financial year ended 31st March, 2017 is attached as Annexure - 8 to this Board’s Report. The Secretarial Audit Report does not contain any qualification or reservation or adverse remark or disclaimer.


Unclaimed Shares Suspense Account


In terms of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company reports the following details in respect of equity shares lying in the suspense account, which were issued in physical form:



































Balance as on 1.4.2016



No. of Members who approached the Company for transfer of shares and shares transferred from Suspense Account during the year



Balance as on 31.3.2017



No. of



No. of



No. of



No. of



No. of



No. of



holders



shares



holders



shares



holders



shares



4525



667380



10*



2410



4515



664970



* Approached -12; Pending -2.


The voting rights on the shares in the suspense account as on 31st March, 2017 will remain frozen unless the rightful owners of such shares claim the shares.


Corporate Governance


The Company is committed to adhere to best corporate governance practices. The separate sections on Management Discussion and Analysis, Corporate Governance and a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, forms part of the Annual Report.


Auditors


M/s. Deloitte Haskins & Sells, Chartered Accountants were appointed as Statutory Auditors of the Company in the last Annual General Meeting of the Company held on 9.8.2016 to hold office till the conclusion of the ensuing Annual General Meeting. Pursuant to the provisions of the Companies Act, 2013, the term of M/s. Deloitte Haskins & Sells shall be completed at the conclusion of ensuing AGM and they are not eligible for re-appointment.


The Board has recommended for the approval of shareholders, the appointment of Price Waterhouse Chartered Accountants LLP, (FRN 012754N/N500016) as Statutory Auditors of the Company at the ensuing AGM for a term from the conclusion of ensuing AGM of the Company till the conclusion of 33’d AGM, subject to ratification at every AGM of the Company.


Cost Auditors


The Board appointed M/s. Bahadur Murao &Co., Cost Accountants, New Delhi (FRN 000008) and M/s. J. P Sarda & Associates, Cost Accountants, Kota (FRN 000289) as Cost Auditors for the financial year 2017-18 to audit the cost accounting records of the Company Directors’ Responsibility Statement Your Directors state that:


a) in preparation of annual accounts for the year ended 31st March, 2017, the applicable accounting standards have been followed and there are no material departures;


b) 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 as at 31st March, 2017 and of the profit of the Company for that period;


c) 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;


d) they have prepared the annual accounts on a going concern basis;


e) they have laid down internal financial controls as followed by the Company and that such internal financial controls are adequate and are operating effectively; and


f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively


Industrial Relations


The Company continued to maintain harmonious and cordial relations with its workers in all its Divisions, which enabled it to achieve this performance level on all fronts.


Acknowledgements


The Directors wish to thank Customers, the Government Authorities, Financial Institutions, Bankers, Other Business Associates and Members for the co-operation and encouragement extended to the Company. The Directors also place on record their deep appreciation for the contribution made by the employees at all levels.


On behalf of the Board


New Delhi AJAYS. SHRIRAM


May 01,2017 Chairman &Sr. Managing Director


DIN:00027137

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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