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Tamil Nadu Petro Products Ltd.

BSE: 500777 Sector: Consumer
NSE: TNPETRO ISIN Code: INE148A01019
BSE 00:00 | 24 Apr Tamil Nadu Petro Products Ltd
NSE 05:30 | 01 Jan Tamil Nadu Petro Products Ltd
OPEN 31.60
PREVIOUS CLOSE 30.70
VOLUME 15578
52-Week high 48.00
52-Week low 18.55
P/E 4.67
Mkt Cap.(Rs cr) 301
Buy Price 31.85
Buy Qty 1.00
Sell Price 33.50
Sell Qty 25.00
OPEN 31.60
CLOSE 30.70
VOLUME 15578
52-Week high 48.00
52-Week low 18.55
P/E 4.67
Mkt Cap.(Rs cr) 301
Buy Price 31.85
Buy Qty 1.00
Sell Price 33.50
Sell Qty 25.00

Tamil Nadu Petro Products Ltd. (TNPETRO) - Director Report


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Company director report

Dear shareholders

Your directors have pleasure in presenting the thirty fourth annual report togetherwith the audited financial statements for the year ended 31st March 2019. Themanagement discussion and analysis report which is required to be furnished as per SEBI(listing obligations and disclosure requirements) regulations 2015 (the listingregulations) is also presented as part of the Directors' report.

Financial results

The summary of the financial results is as shown below which has been prepared as perthe indian accounting standards (ind as) adopted since last year.

(Rs. in crore)
Description 2018-19 2017-18
Earnings before interest depreciation 98.53 96.62
And tax
Interest 6.85 6.72
Depreciation 20.00 22.22
PBT (before exceptional item) 71.68 67.68
Exceptional income (insurance claim) - 9.22
Tax expenses 17.41 25.20
Profit after tax 54.27 51.70

Highlights of operations

During the year under review revenue from operations was Rs.1245.33 crore vis a visRs.1085.09 crore in the previous year registering an increase of about 15%. Profit aftertax increased by 5% over the previous year. This is mainly on account of the improvedperformance of both the linear alkyl benzene (lab) and chlor alkali divisionsnotwithstanding the lab plant shut down for about 21 days in april 2018 for periodicalmaintenance.

Your company continued its policy of prudent inventory management ensuring growth inmargins in spite of variations in the crude prices.

The performance of the chlor alkali division producing caustic Soda and chlorineimproved and contributed significantly to the bottom-line during the year mainly onaccount of increased demand for caustic soda in addition to higher realisations.

Improved plant efficiency further contributed to better performance.

Your company completed the project for conversion of the erstwhile ephichlorhydrine(ech) division for manufacture of propylene oxide (po) and the commercial productioncommenced during the last quarter. With this the ech facility which was defunct from 2013has now been put to effective use.

Financial review

Your company has availed working capital facilities which are used judiciouslyachieving reduction in finance costs. There are no long term debts and all the capexrequirements are met from internal accruals.

Based on the improved performance care the credit rating agency has improved yourcompany's credit rating to care bbb+ (plus) with outlook stable from bbb for long-termbank facilities upto Rs.56 crore and care bbb+ outlook stable / care a3+ from Bbb stable /care a3 for long/short-term bank facilities upto Rs.63 crore.

Dividend

Your directors have recommended a dividend of 10% i.e. Rs.1.00 per equity share ofRs.10/- each fully paid up for the year 2018-19 aggregating to Rs.8.97 crore excludingdividend distribution tax.

Industry structure and developments

Linear alkyl benzene (lab) also known as detergent alkylate belongs to the family oforganic compounds. Lab is used as a chemical intermediate to form linear alkylbenzenesulfonate (las) which is used as surfactant in detergents and cleaning products. Lab isproduced exclusively from various petroleum derivatives. Lab is a compound that hassignificant commercial importance and enjoys a good demand from the detergent industry.The applications for las have been further segmented on the basis of end use viz. heavyduty laundry liquids light duty dishwashing liquids and laundry powders industrial andhousehold cleaners. Lab also has a very minor presence in a few other applications likeemulsions polymerisation wetting agents ink solvents cable oil etc.

Detergent industry is expected to grow at a faster pace due to both population increaseand lifestyle changes. The asian region is both the largest lab producing and consumingregion in the world. At present the major producers are from india and china but newcapacities are coming up in middle east region.

In india the lab industry dates back to 1978 with the commissioning of first lab plantby ipcl at vadodara. Ipcl was later acquired by reliance industries limited (ril). Yearslater TPL ril and nirma set up facilities across india as import substitution measure.However in the recent years the industry is facing stiff competition from imports mainlyfrom china and middle east due to globalisation and changed import regulations.

Worldwide more than 95% of all the lab manufacturers including TPL have adopted theuop technology which is considered as superior and the most cost-effective technologythan the only other chlorination technology. In spite of this in india because of highcost of key inputs and feedstock quality the cost of production of Lab is relativelyhigher than international standards.

The domestic players always find it difficult to compete with the overseas supplierswho have modern facilities with large capacity and plants integrated with refinery whichhelps them in achieving lower cost of production.

Caustic soda a most commonly used industrial chemical finds wide applications intextile pulp and paper aluminium and soaps and detergents industries. The annualincrease in demand is expected to be around 5%. In spite of power intensive process thenational level capacity utilisation is about 85% of the aggregate capacity of around 4.0million tons. During the year under review caustic imports came down by about 38%compared to previous year. The capacities across europe and other countries have come downon account of the change in process mandated by the governments. Thus plants all aroundthe globe are currently converting to newer membrane technology which your company hasalready embraced.

Chlorine a co-product of caustic soda is widely used in sectors like vinyl chloridechlorinated paraffin wax (cpw) pulp and paper water purification chlorinated solventsetc. Chlorine demand will be a major driver for chlor-alkali capacity utilisation.

Lack of integrated plants and downstream chlorine utilisation projects are majorimpediments for disposal of chlorine which in turn restricts the caustic production.

Propylene oxide is an organic volatile flammable colorless liquid compound which issoluble in both ether and alcohol. It is mainly used as the feedstock for variousderivative products such as propylene glycol polyols and other industrial intermediates.It is a chiral epoxide although it is commonly used as a mixture. The global propyleneoxide market is expected to grow at a cagr of 6.2% during the period 2018-2022. Yourcompany is only the 2nd manufacturer of po in india and uses thehydrochlorination route which helps in captive consumption of the chlorine and thusprovides a good opportunity to improve the production of caustic soda.

Opportunities and threats

Growing preference for bio-based surfactants awareness pertaining to hygiene are setto boost the demand for detergents & cleaners and thus positively impact the linearalkyl benzene market for surfactant application. Rapid industrialisation and urbanisationdue to increasing population are also expected to contribute to the market growth. Theglobal market for linear alkyl benzene is lucrative and is expected to witness a steadygrowth owing to the expansion collaborations or partnerships strategies adopted by keyplayers.

With the help of visual advertisements the detergent manufacturers have found iteasier to reach remote areas. Moreover consumers have the privilege of choosing from awide variety of product range and hence the companies are constantly upgrading theirproducts and making every effort to maximise their market share through innovativeadvertising campaigns. Since these companies target the bottom of the pyramid marketthere is a huge potential for the Lab industry to grow.

However india being an attractive market it is targeted by the overseas lab playerswhich has resulted in increased imports to India. Addition of new plants in the middleeast is a big threat to the lab market in india as a major percentage of production islikely to flow into india. This could continue to be a factor in pricing and margins.

Caustic soda continues to be an important industrial intermediary finding applicationin many industries. With the demand for textiles and apparels increasing on account ofurbanisation and larger spending on personal effects the market for caustic soda isexpected to grow further.

Higher cost of power which is the major input for caustic production and highlyunpredictable salt prices due to erratic climatic conditions affect the ability of yourcompany to face the competition from imports. However in the european union phasing outof mercury cell technology has been mandated and hence many old chlor alkali plants arebeing shut down resulting in curtailed supplies. This has brought down the otherwisehigher imports into india and hence the company could increase its production to optimumlevels and earn better margins. The effect is likely to be seen during the first half ofthe coming year. Also as it has been insisted that caustic sold in india is to be biscertified this has curtailed some of the imports from other countries. This trend isexpected to continue at least for one more year as the international producers are in theprocess of getting certification.

As stated earlier your company has converted the erstwhile ech facility which wasclosed down due to continued huge losses.

This has proved to be gainful in many ways besides beneficial use of a defunctfacility a new avenue has been opened up for advantageous use of chlorine which in turnhas paved way for higher capacity utilisation of the chlor alkalis division. Also yourcompany has added a different product to its portfolio which is expected to uncoverfurther opportunities. The unit is highly water intensive and the acute water shortage inchennai due to failure of monsoon in the last two years is a threat to operate the plantat full capacity.

Outlook

Lab

Improved awareness about hygiene and the focus on cleanliness during the past few yearshas improved the demand for surfactants and detergents. The trend is expected to continuein the coming years as the government's attention in the interim budget for fy2019-20 has been more on the rural economy and improving the economic condition of theagricultural sector.

Despite stiff competition from overseas suppliers TPL continues to sustain itsposition as a major player in the lab market. TPL over the past three decades hasestablished itself as a reliable supplier of lab to major companies. TPL has been able tosustain its market share across india with a dominant presence in the southern part ofindia.

With the demand for lab looking up options to further increase the existing capacityand/ or setting up new facilities in other locations including overseas are also beingexplored.

The continuing of anti-dumping duty (add) on lab from specific countries has not madeany big impact in the lab price. The import from saudi arabia continues to be an area ofconcern though it is not expected to have any significant impact in south India where yourcompany is the market leader.

Caustic soda /chlor alkali

The fall in import of caustic soda into india is expected to be sustained for some moretime as the old plants have been shut down and it may take a while for the new capacitiesto come up.

Your company would utilise the opportunity to reap the benefits.

Sustenance and growth of the caustic soda business depends on the opportunities forchlorine disposal. As explained earlier the new po plant has provided an additionalopportunity to your Company to dispose of chlorine more beneficially and so the scope forhigher caustic production has improved substantially.

Propylene oxide

The much awaited conversion of ech facility to produce propylene oxide was commissionedin the year 2018 -19 and has in place arrangements for sale of the entire production.While there would be no problem in sale of the product as mentioned earlier achievinghigher production would be dependant on the water availability.

Risk management process

Your company has a structured methodology to effectively monitor and manage the risksby setting up two employee level and one board level committees to identify the riskssuggest mitigation actions and monitor implementation. The employee-level subcommittee hassenior personnel from each function and the apex committee is headed by the wtd(operations) with functional heads as other members.

As part of the risk mitigation process the board has constituted a risk managementcommittee of directors which comprised of ms. Sashikala srikanth as thechairperson Mr. S visakan ias and Mr. D senthikumar as members. During the year thecommittee met four times viz. 14th may 2018 10th august 2018 24thoctober 2018 and 12th february 2019. As required under section 177 of the actthe audit committee also reviews the risk management process periodically.

Risks and concerns

As explained earlier import of lab caustic soda and chlorine (in indirect form) intothe country continues to be the major risk faced by TPL. Though your company togetherwith other major domestic producers of lab got anti-dumping duty levied on supplies fromselect countries this has had no impact as the overseas suppliers bear the cost in theform of additional discount or supply at adjusted prices.

A large lab manufacturing unit with annual capacity of 1.20 lakh tons is coming up insaudi arabia which is expected to be on stream in the year 2020 and market seeding hasalready commenced for the same. This is expected to further intensify the competition inthe domestic market.

While caustic imports have reduced in the recent past due to reasons explained earlierthe importers are taking actions to comply with the new requirements and hence there is apossibility that the imports could rebound shortly. Since import in large volumes wouldaffect product pricing tackling the risk of lower margins would be an important issue tobe resolved.

In order to overcome the above your company is focussing on higher production andproductivity so that the per unit cost is under control providing flexibility in productpricing. Further the dependency on spot markets is also being reduced so that committedvolumes are in place.

Petitions have been filed before the national green tribunal against the marinedisposal of the treated effluent which are defended by your company. It may be noted thatyour company is complying with all the parameters fixed for such disposal and so isconfident of facing the challenges in this regard.

Safety health & environment

Adequate safety standards have been prescribed and being followed by your companywithout any compromise. Utmost importance is given to protection of the employees assetsand environment at all times. It may be noted that the new po plant was commissionedsafely without any untoward incident.

Your company has implemented ‘ban on one time use & throwaway plastic rule' inletter and spirit and the directives of the Government are complied with strictly toachieve "plastic free TPL".

Your company also conducted awareness training to sensitise the employees about theevils of plastic and the need to adhere to the requirements in the larger interest of thesociety.

National safety day was celebrated as a month long event with great spirit to enhanceawareness amongst the employees and contractors. As part of this various competitions wereconducted for employees and other contractors to reiterate our commitment towards safety.Safety exhibition was organised and all safety & fire equipment and demo on ‘firesafety' ‘chemical protective suit' and ‘sprinkler system' were displayed.

World environment day is also celebrated every year and tree plantation programs areorganised for planting saplings towards green initiative to promote carbon offset.

Subsidiaries

As at the year end your company had one wholly owned subsidiary (wos) and two stepdown subsidiaries (sds) all of which are incorporated outside india. The financials ofall these subsidiaries have been consolidated and the salient features of financial andother information have been furnished in the Consolidated financial statement (cfs)attached to this report.

Certus investment and trading ltd.

Certus investment and trading ltd. (citl) mauritius was promoted as a special purposevehicle (spv) to set up lab and Np projects in the middle east and south east asia.However due to changed business environment the projects could not be taken up. Atpresent the wos is not carrying on any major activity. Since your company is in theprocess of enhancing the np capacity in phases to meet the entire requirement in-housethere may not be scope for taking up np project. However it is being explored ifproposals for setting up or acquiring lab plants overseas could be taken up for suppliesto the units of the existing mnc majors to whom your company is supplying lab in india.

Certus investment and trading singapore private ltd.

In the past TPL was exporting a large quantity of lab and also importing variousmaterials such as np benzene etc. Therefore citl mauritius set up citl singapore as awos in order to function as a coordinator for TPL's overseas procurement and marketingactivities. At present there are no significant exports or imports and so the above sds isnot engaged in any activities.

Proteus petrochemical private ltd. (proteus) is another wos of citl formed forsetting up a normal paraffin (np) plant in singapore. The proposal was to establish agreen-field np project plant along with associated utilities and off-sites. However afterinitial engineering the project encountered certain problems and so the implementationcould not commence. At present the sds is not carrying on any activities.

As explained above the subsidiaries were floated several years ago for specificpurposes. Due to change in circumstances and also opportunities opening up in india it isbeing examined if other opportunities would be available for the subsidiaries. A decisionon the usefulness of these subsidiaries would be taken in due course after judiciouslyreviewing the situation.

Human resources

Your company strongly believes that its strength is directly proportional to thestrength of its employees in terms of knowledge experience and decision making skills.Your company has been practicing various hr initiatives such as recognition empowermentpersonality development decentralisation delegation of powers etc. to retain talent andto enhance capabilities. A balanced staffing system has been adopted in your Companywherein competent fresh talent have been infused into the stream of experienced hands.

The training needs of employees have been identified at regular intervals throughperformance appraisal systems and necessary training is being imparted through in-houseand external programmes.

The manpower strength as on 31st March 2019 was 437.

Details of significant changes in key financial ratios

The inventory turnover ratio was better by 28% as compared to the previous financialyear. The positive variance is on account of effective inventory management and improvedsales performance.

Details of change in return on net worth

Return on networth was 15% for 2017-18 and 14% for 2018-19.

Details of loans guarantees or investments

Information on loans guarantees and investments covered under section 186 of thecompanies act 2013 forms part of the notes to financial statements.

Fixed deposits

Your company has not accepted any deposits from the public during the year underreview.

Related party transactions

During the year under review there were no transactions not at arms' length within themeaning of section 188 of the companies act 2013 ("the act") or any materialtransactions with the related parties in terms of the policy framed by the audit committeeof the company as published in the website of the company viz.http://tnpetro.com/corporate-governance-policies/.

As required under regulation 23(2) of the listing regulations approval of the memberswill be obtained for transactions upto Rs.200 crore in 2019-20 with manali petrochemicalslimited at the ensuing agm.

Audit committee

The details are furnished under the corporate governance report (CGR) annexed to thisreport. All the recommendations of the committee were accepted by the board.

Vigil mechanism

As required under section 177 of the act and regulation 22 of the SEBI (listingobligations & disclosure requirements) regulations 2015 your company has establisheda vigil mechanism for directors and employees to report genuine concerns through thewhistle blower policy of the company as published in the website of the company. Asprescribed under the act and the listing Regulations provision has been made for directaccess to the chairperson of the audit committee in appropriate or exceptional cases.

Board of directors and related disclosures

As on the date of this report the board comprises of twelve directors of whom six areindependent including a woman director. All the independent directors have furnishednecessary declarations under section 149 (7) of the act and regulation 25(8) of thelisting regulations. As per the said declarations they meet the criteria of independenceas provided in section 149 (6) of the Act and the listing regulations.

The board met five times during the year under review and the relevant details arefurnished in the CGR.

The board has approved the remuneration policy as recommended by the nomination andremuneration committee (nrc) which inter alia contains the criteria for determining thepositive attributes and independence of a director as formulated by the nrc. The policy onremuneration is available in the website of the companyviz.http://tnpetro.com/corporate-governance-policies/.

There has been no change in the key managerial personnel since the last annual generalmeeting.

The following changes took place in the constitution of the board since the last annualgeneral meeting (agm):

- Dr. N. Sundaradevan ias (retd) (din: 00223399) lt. Col. (retd.) C s shankar (din:08397818) Mr. G d sharma (din: 08060265) and Mr. Debendranath sarangi ias (retd.) (din:01408349) have been appointed as additional & independent directors of the company fora period of five years subject to approval of the members at the ensuing agm. Dr.Sundaradevan was appointed on 1st september 2018 lt. Col. (retd.) Shankar andMr. Sharma effective 1st april 2019 and Mr. Sarangi on 21st may2019.

- Mr. D senthikumar (din: 00202578) wholetime director (operations) and Mr. Ktvijayagopal (din: 02341353) wholetime director (finance) & cfo were re-appointed fora period of 3 years from 12th february 2019 and 18th february2019 respectively at the board meeting held on 12th february 2019.

- Mr k gnanadesikan ias (din: 00111798) Mr. S visakan ias (din: 06578414) bothnominees of tidco resigned effective 15th March 2019 and 29th March2019 respectively and board places on record its appreciation for their services duringtheir tenure.

- Mr. N muruganandam ias (din: 00540135) and dr. Aneesh sekhar.s ias (din:07887010) nominees of tidco have been appointed as additional directors effective 25thMarch 2019 and 5th april 2019 and they hold office till the ensuing agm.Proposals for their appointments as directors would be considered at the ensuing agm.

- Mr. C ramachandran ias (retd.) (din: 00050893) Mr. N.r. Krishnan ias(retd.)(din: 00047799) and dr. K. U. Mada (din: 00011395) independent directorsof the company retired on 31st March 2019 pursuant to Regulation 17 (1a) ofSEBI (lodr) regulations. Board places on record its appreciation for their invaluableservices to the company and guidance to the board during their long association of over adecade.

- Mr dhananjay n mungale (din: 00007563) and ms. Sashikala srikanth (din:01678374) would be completing their first term of five years as independent directors on26th may 2019 and 11th august 2019 respectively. Based on theevaluation of their performance and the recommendation of the nomination and remunerationcommittee the board views that they can be reappointed for a further term of five years.Accordingly in terms of section 149 (10) read with schedule iv to the act proposals fortheir reappointment as Independent directors for five years from 27th may 2019and 12th august 2019 respectively would be considered at the ensuing agm.

The appointment of Mr. N muruganandam ias and dr. Aneesh sekhar.s ias as directorshas been duly recommended by the nomination and remuneration committee. Therefore pursuantto the proviso to section 160(1) there is no requirement of any deposit for the proposalsrelating to their appointment and also for appointment of independent directors.

Mr. Ramesh chand meena ias (din: 08009394) retires by rotation and being eligibleoffers himself for reappointment.

Annual evaluation of the board committees and directors

The performance of the board was evaluated taking the following aspects into accountviz. structure meetings functions risk Evaluation process adopted grievance redressalmechanism stakeholder value and responsibility corporate culture and ethics and othermatters. Board also took into account facilitation to the independent directors tofunction independently and perform their roles as another important parameter forevaluation. The performance of each of the committees was evaluated taking into accountthe composition mandate working procedures effectiveness independence and contributionto the board in decision making process.

The evaluation of the two executive directors was done based on their assigned rolesand responsibilities. As regards the other directors including the independent directorsthe evaluation was done taking into account the following parameters viz. qualificationexperience competency adequacy of knowledge about the company and its sector ofoperation understanding about the strategic direction ethical behavior participation inthe risk evaluation process resolving conflict of interests attendance and preparationfor the meetings ability to work as a team player and voluntary sharing of informationfor the larger benefit of the Company and the like.

In compliance with the requirements of schedule iv to the act and also the regulationsa separate meeting of the independent directors was held during the year at which thedirectors evaluated the performance of the non independent directors the chairman andalso the adequacy of flow of information to the board and Committees.

Directors' responsibility statement

Pursuant to the requirement of sub-sections 3 (c) and 5 of section 134 of the companiesact 2013 it is hereby confirmed that

(a) in the preparation of the annual accounts for the financial year ended 31stMarch 2019 the applicable accounting standards had been followed along with properexplanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profits of the company for the year under review;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the accounts for the financial year ended 31stMarch 2019 on a "going concern" basis;

(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Corporate governance

Your company has complied with the requirements of corporate Governance stipulatedunder regulation 27 of the SEBI listing Regulations. A report on corporate governanceforms part of this Report and a certificate from the secretarial auditors regardingcompliance with the requirements of corporate governance is given in annexure – i tothis report.

Auditors

M/s. R.g.n. Price & co. chartered accountants chennai having firm registrationno. 002785s was appointed as the auditors of the company. As per the extant provisions ofthe act they will hold office for a period of five years till the conclusion of 37thagm to be held in the year 2022. The audit committee has recommended a remuneration ofRs.30 lakh plus reimbursement of out of pocket expenses and applicable taxes for the auditof the accounts and all other related services as the auditors of the company for eachyear until end of their present term for approval of the members at the ensuing agm.

Secretarial audit report

As required under section 204 of the act read with rule 9 of the companies (appointmentand remuneration of managerial personnel) rules 2014 the secretarial audit report issuedby ms. B chandra (cp no.7859) company secretary in practice chennai is given in annexure– ii to this report. The report contains a mention about the company's view ontransfer of shares to iepf authority under section 124 of the act. The company has beenadvised that the transfer of shares to the iepf authority is required consequent tonon-payment/non-claiming of dividend in terms of section 124(6) for a consecutive periodof seven years or more and so there necessarily has to be declaration of dividend in thefirst instance and also that there has to be 7 such consecutive instances. In the case ofTPL there has been no consecutive declaration/payment of dividend for seven years andhence it has been viewed that the requirements of section 124 (6) are not applicable toyour company. The legal opinion has however pointed out that the circulars issued by theministry of corporate affairs have created certain ambiguity in the matter. Though thecirculars have to be read in a manner that sub-serves the statutory provision they cannotoverride or dilute the same. Your company has been advised to seek clarification from themca and take further action based on its directions. Accordingly your company would betaking steps to seek clarification from the ministry in this regard.

Your company has complied with the requirements of all the applicable secretarialstandards.

Maintenance of cost records & cost audit

Your company is required to maintain cost records as specified by the centralgovernment under section 148 (1) of the act which is duly complied with by your company.Your company is also covered under cost audit.

M/s. M. Krishnaswamy & associates cost accountants have been appointed as thecost auditors of the company for conducting the audit of cost records for the financialyear 2018-19 on a remuneration of Rs.2.50 lakh plus applicable taxes and reimbursement ofout of pocket expenses and they will hold office till submission of their report or 30thseptember 2019 whichever is earlier.

As required under section 148 of the act read with the relevant ratification rules ofthe remuneration to the cost auditor for the year 2018-19 will be considered by themembers at the ensuing agm of the company.

Adequacy of internal financial controls

Your company has in place adequate internal financial control systems with periodicalreview of the process. The control system is also supported by erp internal audits andmanagement reviews with documented policies and procedures. The system was also earlierreviewed by an external agency and no major weaknesses were reported. To ensure effectiveoperation of the system periodical reviews are made by the internal auditors and theirfindings are discussed by the audit committee and with the auditors. The auditors of thecompany have also furnished

In this regard which are attached to their reports.

Conservation of energy and other disclosures

As required under section 134 of the companies act 2013 (‘the act') read withrule 8 of the companies (accounts) rules 2014 information on conservation of energytechnology absorption foreign exchange earnings and outgo to the extent applicable aregiven in annexure - iii and form part of this report.

Extract of annual return

The extract of the annual return in form mgt-9 is given in annexure iv

Disclosure under the sexual harassment of women at workplace (prevention prohibitionand redressal) act 2013

Your company has constituted internal complaints committees under the provisions ofsexual harassment of women at workplace (prevention prohibition and redressal) act 2013.

During the year under review there were no cases filed pursuant to the above act.

Particulars of employees and other disclosures

The disclosures prescribed under section 197(12) of the companies act 2013 read withrule 5(1) and rule 5(2) of the companies (appointment and remuneration of managerialpersonnel) rules 2014 are given in annexure -v to this report.

It is hereby affirmed that the remuneration to the employees is as per the remunerationpolicy of the company.

CSR policy and related disclosures

The brief outline of CSR policy of the company and such other details and disclosuresas per the prescribed format are furnished in annexure –vi to this report.

Acknowledgement

Your directors are grateful to the government of india the Government of tamilnadufinancial institutions banks other lending institutions promoters technicalcollaborators suppliers customers joint venture partners and marketing agents for theirassistance co-operation and support. The directors thank the shareholders for theircontinued support.

The directors also place on record their appreciation for the contributions by allcadres of employees of the company.

Disclaimer

The management discussion and analysis contained herein is based on the informationavailable to the company and assumptions based on experience in regard to domestic andglobal economy on which the company's performance is dependent. It may be materiallyinfluenced by changes in economy government policies environment and the like on whichthe company may not have any control which could impact the views perceived or expressedherein.

For and on behalf of the board of directors
D senthikumar Kt vijayagopal
21st may 2019 Din: 00202578 Din: 02341353
Chennai – 600 068 Wholetime director (operations) Wholetime director (finance)