DIRECTORS' REPORT 

To,

The Members,

Meghmani Organics Limited 

Your Directors have pleasure in presenting Twenty Second Annual Report for the Financial Year ended on 31st March, 2016. and Audited Statement of Accounts of the Company 

DIVIDEND:-

During the year, the Board of Directors had declared and paid an Interim Dividend @ 0.30 paise per share on 25,43,14,211 (including 3,74,33,450 Equity Shares represented by Singapore Depository Shares (SDSs)) Equity Shares of Rs. 1/- each fully paid up for the Financial Year 2015-2016. The Interim Dividend entailed an out flow of Rs. 7.63 Crores (excluding Dividend Distribution Tax). The Interim Dividend was tax free in the hands of shareholders.

Your Directors have considered it financially prudent in the long-term interests of the Company to reinvest the profits into the business of the Company to build a strong reserve base and grow the business of the Company. No final dividend has therefore been recommended for the year ended March 31, 2016.The interim Dividend paid is to be considered as final dividend.

In terms of Section 125 of the Companies Act, 2013, unclaimed dividend relating to the Financial Year 2008-09 is due for transfer on 10.08.2016 to the Investor Education and Protection Fund (IEPF) established by the Central Government.

SHARE CAPITAL:-

The Paid up Equity Share Capital as on March 31, 2016 is Rs. 25.43 Crores. During the year under review, the Company has not issued shares with differential voting rights nor granted Employee Stock Options or Sweat Equity Shares. 

OPERATING RESULTS:-

The Sales of the Company has increased by Rs. 40.03 Crores (4.34 %) i.e. from Rs. 921.88 Crores in FY 2015 to Rs. 961.91 Crores in FY 2016.

1) DOMESTIC SALES:-

The Domestic Sales increased by Rs. 44.72 Crores (21.18%) i.e. from Rs. 211.10 Crores in FY 2015 to Rs. 255.82 Crores in FY 2016.

The Domestic Sales of Pigment Division increased by Rs. 39.13 Crores (51.56%) i.e. from Rs. 75.91 Crores in FY 2015 to Rs. 115.04 Crores in FY 2016.

The Domestic Sales of Agro Division increased by Rs. 11.20 Crores (8.72%) i.e. from Rs. 128.37 Crores in FY 2015 to Rs. 139.57 Crores in FY 2016.

2) EXPORT SALES :-

The Export Sales decresed by Rs. 4.69 Crores (0.66%) i.e. from Rs. 710.78 Crores in FY 2015 to Rs. 706.09 Crores in FY 2016.

The Export Sales of Pigment Division increased by Rs. 3.10 Crores (0.89%) i.e. from Rs. 348.52 Crores in FY 2015 to Rs. 351.62 Crores in FY 2016.

The Export Sales of Agro Division decreased by Rs. 1.52 Crores (0.49%) i.e. from Rs. 309.60 Crores in FY 2015 to Rs. 308.08 Crores in FY 2016.

3) OTHER INCOME :-

Other income decreased by Rs. 15.50 Crores mainly due to decrease in dividend income of Rs. 14.56 Crores received during last year from it Subsidiary Company.

4) PROFITABILITY :-

Profit before Tax increased by Rs. 23.28 Crores (i. e. by 72.19%) while Profit after Tax increased by Rs. 13.88 Crores (i.e. by 52.96%). The main reasons for increase in Profitability are:-

1. Sales increased by Rs. 40.03 Crores.

2. Finance Cost reduced by Rs. 6.82 Crores.

3. Raw Material Cost of certain materials reduced.

4. Increase in quantity sales of pignment division.

INSURANCE:-

The Company's plant, property, equipments and stocks are adequately insured under the Industrial All Risk Policy. The Company has insurance coverage for Product Liability, Public Liability, Marine Coverage and Commercial General Liability (CGL). The Company has Directors' and Officers' Liability (D & O) Policy to provide coverage against the liabilities arising on them.

FINANCE:-

1) REDEMPTION OF DEBENTURE

During the year, Non Convertible Debentures (NCD) Series II (INE974H07028) of Rs. 50 Crores were redeemed on 12.10.2015. With this repayment, the Company has repaid Non Convertible Debentures (NCD) Series I and Series II aggregating Rs. 100 Crores.

2) RENEWAL OF WORKING CAPITAL FACILITY:-

The consortium bank has renewed Fund based and Non Fund based Working Capital Credit facilities up to Rs. 475 Crores. To avail the enhancement, execution of Security documents are in process.

The Company has replaced term loan of Rs. 61.75 Crores of Yes Bank Limited and Rs. 45 Crores of ICICI Bank Limited with low interest rate Rupee Term Loan of Rs. 106.75 Crores from State Bank of India. 

3) CREDIT RATING:-

CRISIL vide its letter no. MEGORGN/147219/BLR/011600259 dated 12th January, 2016 has assigned the Company, Long-term bank facilities rating as 'CRISIL A/Stable, while Short-term bank facilities has been assigned rating as 'CRISIL A1'.

REGISTRATIONS :-

To date, we have 183 export registrations including Co-partner registrations world wide. The Company has 309 registrations of Central Insecticides Board (CIB), Faridabad, 27 registered Trade Marks and 400 Export registrations are in pipe line.

RESEARCH & DEVELOPMENT:-

Research and Development (R & D) Center of our Chharodi plant is approved and registered under Council of Scientific & Industrial Research (CSIR), New Delhi. R & D Center carries out development of off-patent molecules, improvements in process parameters, time cycle optimization and scale up of new technology from laboratory to production level. During the year the Company has spent Rs. 1.39 Crores as Research & Development Expenses.

CORPORATE SOCIAL RESPONSIBILITY

As part of "Corporate Social Responsibility (CSR), the projects identified are:- 

These projects are largely in accordance with Schedule VII of the Companies Act, 2013. The Company has spent Rs. 0.85 Crores towards Corporate Social Responsibility.

CONSOLIDATED FINANCIAL STATEMENT:-

The Consolidated Financial Statements of the Company for the Financial Year 2015-16 are prepared in compliance with the applicable provisions of the Act, Accounting Standards and Regulations as prescribed by Securities and Exchange Board of India (SEBI) under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Consolidated Financial Statements have been prepared on the basis of the audited financial statements of the Company and its Subsidiary Companies, as approved by their respective Board of Directors.

Pursuant to the provisions of Section 136 of the Companies Act, 2013, the Financial Statements of the Company, the Consolidated Financial Statements along with all relevant documents and the Auditor's Report thereon form part of this Annual Report. The Financial Statements as stated above are also available on the website www.meghmani.com of the Company.

INDIAN ACCOUNTING STANDARDS (IND AS) - IFRS CONVERGED STANDARDS:-

The Ministry of Corporate Affairs vide its notification dated February 16, 2015 has notified the Companies (Indian Accounting Standard) Rules, 2015. In pursuance of this notification, the Company and its Subsidiaries will adopt IND AS with effect from April 01, 2016, with the comparatives for the periods ending March 31, 2016.

The implementation of IND AS is a major change process for which the Company has established a project team and is dedicating considerable resources. The impact of the change on adoption of IND AS is being assessed. 

SUBSIDIARY COMPANIES:-

Pursuant to Section 129(3) of the Companies Act, 2013 a statement in Form ''AOC 1" containing the salient features of the Financial Statements of each of the Subsidiaries is attached.

FIXED DEPOSITS:-

The Company has not accepted any fixed deposits during the year under report. ANNUAL LISTING FEE:-

The Company has paid the annual listing fees for the financial year 2016-2017 to National Stock Exchange of India Limited and BSE Limited.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:-

As per Clause 34(2) (e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report, is appended to this report.

CORPORATE GOVERNANCE:-

A separate section on Corporate Governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance forms an integral part of this Report, as per SEBI Regulations. This report also forms part of Singapore Stock Exchange listing requirements.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure- A and is attached to this report.

DIRECTORS/ KEY MANAGERIAL PERSONNEL (KMP):-

APPOINTMENT OF DIRECTORS:

At the last Annual General Meeting held on July 27, 2015, the Members:-

(1) Re-appointed Mr. Jayaraman Vishwanathan and Mr. Kantibhai Patel as Non Executive - Independent Directors for a period of five years;

(2) The appointment of Ms. Urvashi Shah as Non Executive Independent Woman Director on the board of the Company for a period of five years.

Mr. Jayantibhai Patel, Executive Chairman and Mr. Ashish Soparkar, Managing Director of the Company, who retires by rotation and being eligible offer themselves for reappointment. The details of Directors seeking appointment/re-appointment at the ensuing Annual General Meeting has been provided in the Notice of the Annual General Meeting, forming part of the Annual Report. 

INDEPENDENT DIRECTORS:

The Independent Directors hold office for a fixed term of five years and are not liable to retire by rotation. In accordance with Section 149(7) of the Act, each independent director has given a written declaration to the Company confirming that he/she meets the criteria of independence as mentioned under Section 149(6) of the Act and SEBI Regulations.

BOARD EVALUATION:-

Pursuant to the provisions of the Companies Act, 2013, SEBI Regulations, and Singapore Listing requirements, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

The following persons have been designated as Key Managerial Personnel of the Company pursuant to Section 2(51) of the Companies Act, 2013 read with the Rules framed there under.

1. Mr. Ashish Soparkar - CEO & Managing Director

2. Mr. Kamlesh Mehta - Company Secretary & Vice President (Company Affairs)

3. Mr. Dinesh Shah - Chief Financial Officer

Mr. Dinesh Shah, Chief Financial Officer since resigned and relieved on 15th June, 2016

REMUNERATION POLICY:-

The Board on the recommendation of Remuneration Committee has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

DIRECTORS' RESPONSIBILITY STATEMENT:-

To the best of their knowledge and belief and according to the information and explanations obtained by them, your directors make the following statement in terms of Section 134 of the Companies Act, 2013;-

a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b) The directors had 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, 2016 and of the profit of the Company for the period ended on 31st March, 2016.

c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) The directors had prepared the annual accounts on a going concern basis.

e) The directors had laid down internal financial controls and that such internal financial controls are adequate and have been operating effectively.

f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems have been found adequate and operating effectively.

EXTRACT OF ANNUAL RETURN:-

As required by Section 92(3) of the Companies Act, 2013 and the Rules framed there under, the extract of the Annual Return in Form MGT 9 is annexed herewith as "Annexure B". 

VIGIL MECHANISM / WHISTLE BLOWER POLICY:-

The Company has a WHISTLE BLOWER POLICY to deal with instance of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct, if any. The details of the WHISTLE BLOWER POLICY are posted on the website of the Company.

AUDITORS:-

(A) STATUTORY AUDITORS:-

As per Section 139 (1) of the Companies Act, 2013 (Act), the terms of appointment of M/s. Khandwala & Khandwala, Chartered Accountants, expires at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for re-appointment.

Section 139 (2) of the Act provides that every company, existing on or before the commencement of this Act which is required to comply with provisions of this sub-section, shall comply with the requirements of this sub-section within three years from the date of commencement of this Act. Accordingly, M/s. Khandwala and Khandwala is eligible for re-appointment for the Financial Year 2016-2017.

The Company has received letter from them to the effect that their reappointment, if made, would be within prescribed limit under Section 141 of the Companies Act, 2013 read with Rule 4(1) of the Companies (Audit & Auditors) Rules, 2014 and that they are not disqualified for reappointment.

To meet with the Singapore Listing Rules requirement, the Company is required to appoint Joint Auditor. The Company had appointed KPMG as Joint Auditor for FY 2015-16 to comply with IFRS requirements. KPMG has offered themselves for re-appointment for the Financial Year 2016-17. They will be appointed as Joint Auditor at the next Annual General Meeting.

(B) SECRETARIAL AUDITOR:-

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Shah & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for FY 2015-2016. The Secretarial Audit Report is appended to this report.

(C) COST-AUDITOR:-

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the Cost Audit records maintained by the Company in respect of certain Pigment and Agrochemicals products are required to be audited by a qualified Cost Accountant.

Your Directors have on the recommendation of the Audit Committee, appointed M/s. Kiran J Mehta & Co. Cost Accountants (Firm Registration number 00025) to audit the cost accounts of the Company for the Financial Year 2016-2017. As required under the Act, the remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification.

A Resolution seeking appointment and remuneration payable to M/s. Kiran J Mehta & Co., Cost Accountants, is included in the Notice convening the Annual General Meeting.

AUDITORS REPORT

There is no qualification, reservation or adverse remarks or disclaimer made by the Auditors in their report on the financial statement of the Company for the financial year ended on 31st March, 2016.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:-

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 

RELATED PARTY TRANSACTIONS (RPT):-

All transactions with Related Parties are placed before the Audit Committee for approval. The Company has obtained prior omnibus approval of the Audit Committee for the transactions which are of foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving the details of all related party transactions is placed before the Audit Committee for their approval on a quarterly basis. The Company has also taken members' approval at its Annual General Meeting held on 28th July, 2014 for entering into the transactions with Related Parties for the period of Three (3) years i.e. from 01/04/2014 to 31/03/2017.

All transactions entered into with related parties during the financial year were on an Arm's Length pricing basis and were in the ordinary course of business. There were no materially related party transactions i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements entered into during the year. Hence, no transactions are required to be reported in Form AOC2.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website.

MEETINGS:-

BOARD MEETINGS

During the year, five Board Meetings were convened and held, the details of which are given in the Corporate Governance Report.

AUDIT COMMITTEE MEETINGS

During the year, four Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report.

ENVIRONMENT:-

As a responsible corporate citizen and as a chemicals manufacturer environmental safety has been one of the key concerns of the Company. It is the constant endeavour of the Company to strive for compliant of stipulated pollution control norms. The Company has upgraded environment system and has invested Rs. 57.53 Crores till 31st March, 2016.

INDUSTRIAL RELATIONS:-

The relationship with the workmen and staff remained co-ordial and harmonious during the year and management received full cooperation from employees.

ACKNOWLEDGMENT:-

Your Directors thank various Central and State Government Departments, Organizations and Agencies for the continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year.

The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company. 

For and on behalf of the Board

Jayanti Patel

Executive Chairman DIN - 00027224 

Place: Ahmedabad

Date: 28th May, 2016