annual report 2005 navin fluorine

7/30/2019 Annual Report 2005 Navin Fluorine

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ARVIND MAFATLAL GROUP

NAVIN F L U O R I N EI N T E R N A T I O N A L L I M I T E D

Y O U R I D E A L P A R T N E R


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ANNUAL REPORT 2004-2005

CONTENTS

Board of Directors etc.

Notice 2

Directors' Report 5

Auditors' Report 20

Balance Sheet 22

Profit and Loss Account .23

Cash Flow Statement 24

Schedules 1 to 18 26-44

Statement Pursuant to Section 212 45

Subsidiary Company ;Sulakshana Securities Limited 46-55

Consolidated Financial Statement 56-78

SHAREHOLDERS' INFORMATION

1. Trading in Equity Shares of the Company is permitted only in Dematerialised form as per thenotification issuedbySEBI.

Demat Code of Navin Fluorine International Limited

ISIN: INE 048 G01018 - Fully Paid Shares

ISIN: IN 9048 GO1016 - Partly Paid Shares

2. The Shares of the Company are listed on Mumbai and Ahmedabad Stock Exchanges and the listing fees for boththe exchanges have been paid by the Company for the year 2005-2006.

3. The Company's Share Registrar & Transfer Agents :

Sharepro Services (I) Pvt. Ltd. :

Satam Estate, 3rd Floor, Above Bank of Baroda, Chakala, Andheri (East), Mumbai 400 099.Phone:022-28215168, 28202114, 28202108, Fax:022-28375646

The Shareholders are requested to notify change in address, if any, immediately to the R & T Agents at theabove address mentioning their Folio Numbers.

7th Annual General Meetingon Wednesday,the 27th July, 2005At 3.00 p.m. at S.N.D.T. Womens' University,Patkar Hall,1, Nathibai Damodar Thackersey Road,Churchgate, Mumbai 400 020.

1. Shareholders intending to require information aboutaccounts to be explained in the Meeting are requestedto inform the Company at least seven days in advanceof the Annual General Meeting.

2. Shareholders are requested to bring their copy of theAnnual Report to the Meeting as the practice of handingou t copies of the Annual Report at the Annual GeneralMeeting has been discontinued in view of the highcost of paper and printing.


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BOARD OF DIRECTORS:.

SHRI H.A. MAFATLAL

SHRI A.K. PURI

SHRI T.M.M. NAMBIAR

SHRI P.N. KAPADIA

SHRI S.S. LALBHAI

SHRI V.P. MAFATLAL

SHRI D.S. UMALKAR

SHRI A.K. SRTVASTAVA

Chairman & Managing Director

Director

Director

Director

Director

Director

Chief Executive O ff i c e r

Finance Director

COMPANY SECRETARY:SHRI NIRAJ B. MANKAD

BANKERS:STATE BANK OF HYDERABAD

AUDITORS:MESSRS C. C. CHOKSHI & CO.Chartered Accountants

REGISTERED OFFICE:

1st floor, Kalpataru Point,KamaniMarg,

Stem.(East),Mumbai 400 022

UNITS:Navin Fluorine, Surat 395 023. (Gujarat)Navin Fluorine, Dewas 455 022. (M.P.)

REGISTRAR & SHARE TRANSFER AGENTS:

Sharepro Services (I) Pvt. Ltd.,Satam Estate, 3rd Floor,Above Bank of Baroda,Chakala, Andheri (East),Mumbai 400 099.


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NAVIN FLUORINE ESTTERNAT1ONAL LIMITED(Formerly known as Polyolefins Rubber Chemicals Limited)

NOTKE

NOTICE IS HEREBY GIVEN THAT the Seventh AnnualGeneral Meeting of the Members of the, Company will beheld on Wednesday, 27th JULY, 2005 at 3.00 p.m. atS.N.D.T. Womens' University, Patkar Hall, 1, NathibaiDamodar Thackersey Road, Churchgate, Mumbai 400020, to transact the following business :

1) To consider and adopt the Directors' Report, AuditedFinancial Statements including Profit & Loss Accountfor the year ended March 31, 2005 and the BalanceSheet as at that date and Auditors' Report thereon.

2) To declare dividend. .

3) To appoint a Director in place of Shri A.K. Srivastava,who retires by rotation, and being eligible, offers himselffor re-appoiptment,

4) Ib appoint a Director in place of Shri V.P. Mafatial,whoretires by rotation, and being eligible, offers himself forre-appointment. /

5) To consider and, if thought fit, to pass the following Resolution, with or without modifications, a a

SPECIAL RESOLUTION: ' $

"RESOLVED THAT pursuant to Sections 224 and224-A and other applicable provisions, if any, of theCompanies Act, 1956, M/s. C.C. Chokshi & Co.,Chartered Accountants, Mumbai, be and are herebyappointed as Auditors of the Company to hold officefrom the conclusion of this meeting until the conclusionof the next Annual General Meeting on such remunerationas may be fixed by the Board apart from reimbursementof out-of-pocket expenses as may be incurred by themfor the purpose of audit."

6) To consider and, if thought fit, to pass the followingResolution, with or without modifications, as aSPECIAL RESOLUTION:

"RESOLVED THAT pursuant to Section 372 A and. othef applicable provisions, if any, of the Companies

Act, 1956, sanction be and is hereby given to the Boardof Directors of the Company to invest upto a limit ofRs.1,00,000/- towards the purchase of 10,000 equityshares of Rs,10/- each of Mayflower Textiles Pvt. Limitedfrom the existing Members."

"RESOLVED FURTHER THAT the Directors of theCompany be and are hereby authorised to obtain suchapprovals as may be required and agree to such termsand conditions as they, deem fit and settle any questionor difficulty that may arise for giving effect to the aboveResolution."

) To consider and, if thought fit, to pass the followingResolution, with or without modifications, as a

SPECIAL RESOLUTION:

"RESOLVED THAT pursuant to Section 372 A andother applicable provisions, if any, of the CompaniesAct, 1956, sanction be and is hereby given to the Boardof Directors of the Company to invest upto a limit ofRs.1,00,000/- towards the purchase of 10,000 equityshares of Rs.10/- each of Myrtle Textiles Pvt. Limitedfrom the existing Members."

"RESOLVED FURTHER THAT the Directors of theCompany be and are hereby authorised to obtain suchapprovals as may be required and agree to such termsand conditions as they deem fit and settle any questionor difficulty that m ay arise for giving effect to theaboveResolution,"

8) To consider and, if thought fit, to pass the followingResolution, w i t h or without modifications, as aSPECIAL RESOLUTION:

"RESOLVED THAT pursuant to Section 372 A andother applicable provisions, if any, of the CompaniesAct, 1956, sanction be and is hereby given to the Boardof Directors of the Company to invest upto a limit ofRs.5,00,000/- by way of subscription to, or purchaseof, shares of a Company proposed to be incorporatedfor the purpose of providing ready customised enterprisesolutions to domestic chemical business."

"RESOLVED FURTHER THAT the Directors of theCompany be and are hereby authorised 'to obtain suchapprovals as may be required and agree to such termsand conditions as they deem fit and settle any questionor difficulty that m ay arise for giving effect to the aboveResolution."

9) To consider and, if thought fit, to pass the followingResolution, with or without modifications, as anORDINARY RESOLUTION:

"RESOLVED THAT the Board of Directors of theCompany be and is hereby authorised to fix and pay thesitting fees for attending meetings of the Board ofDirectors and/or^Committees thereof to the Non-

Executive Directors (including independent Directors)within the limits prescribed by the .Central Governmentunder provisions of Section 310 of the Companies Act,1956, as may be amended from time to time."

By Order of the Board,

Niraj B MankadCompany Secretary

Regd. Office :1st floor, Kalpataru Point,Kamani Marg, Sion (East) ;

Mumbai 400 022. .Mumbai,Dated : 27th May, 2005


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Associates with these Companies.With the acquisition of10,000 equity shares each in theabove two Com panies, they will become w holly ownedsubsidiaries of the Company.To take benefitof businessopportunityand to have flexibilityfor investments,it isproposed to acquire equity shares of saidMayflowerTextiles Pvt.Ltd. and Myrtle TextilesPvt. Ltd.The Board recomm ends passing of the Resolutions.None of the Directors of the Company exceptShri H.A.Mafatlal, who is a Director of Vibhadeep Investmentsand Trading Limited, one of the existing members inboth the Companies from whom shares are to beacquired, is concerned or interested in the Resolutions.In respect of Item No. 8The Com pany hassuccessfully been using world leadingEnterprise Resource Planning (ERP) business solution

for the last few years resulting in development ofinhouse competency and professional skill in usagethereof. The C ompany desires to extendits ERP expertiseto other growing chemical enterprises. The Com pany iscontemplating to have professional relationship withleading business software solution provider and leadingsoftware project delivery organisation. This is atremendous opportunity due to the Company's domainexpertise in chemical industry and with.right kindoftechnical softwarealliances, the Companycan offer costeffective and rapid softwarebusiness solutions. As such,enterprise softwaresegment happensto be fastestgrowingsection in India. The Company proposes to promote aspecialist enterprise solutions company which willprovide ready and customised enterprise solutions todomestic chemical business. It is proposed to invest uptoRs. 5,00,0007-in such Company. SuchCompariy maybecome a subsidiary or a wholly owned subsidiary ofthe Company.The Board recommends passing of the Resolution.

None of the Directors of the Company are concernedor interested in the Resolution.In respect of Item No. 9The am ended Clause 49 of the Listing A greement to beimplemented by all the Listed Companies w.e.f. 1stJanuary, 2006, inter alia, providesthat fees / commissioncan be paid to the Non-ExecutiveDirectors (includingindependent directors) onlyafter prior approval ofshareholders in General Meeting.Pursuant to Rule 10-B of the Companies (CentralG overnment's) General Rules & Forms, 1956 readwithSection 310 of the CompaniesAct,.1956, the Company

NOTES:1. A MEMBE R ENTITLEDTO ATTEND AND VOTE

IS ENTITLED TO APPOINT A PROX Y O R PROXIESTO ATTEND AND VO TE INSTEAD O F HIMSELFO N A POLL AND THAT A PROXY NEED NOT BEA MEMBER.

. The relevant Exp lanatory Statement pursuant to Section

173 of the Com panies Act, 1956, in respect of Item Nos.5 to 9 m entioned in the above Notice is annexed hereto.

. The Register of Membersand the Share Transfer Booksofthe Com pany will remain closedfrom Tuesday the 28thJune, 2005 to Thursday the 30th June,2005 (both daysinclusive)for the purposeof paymentof dividend, if any.

. The.dividendas recomm ended by the Board of Directors,if declared at the AnnualG eneral Meeting, willbe paid onor after 29th July, 2005.

A1SNEXURETO NOTICE

Explana tory Statement as required by Section 173 (2) of theCompanies Act, 1956.

n conformitywith the provisions of Section 173 (2) of theCompanies Act, 1956, the following Explanatory Statementets out all materialfacts in respect of Item Nos. 5 to 9

mentioned in the above Notice.

n respect of Item No. 5Section 224A of the Companies Act, 1956, provides that inase of a Company in which no t less than 25% of the

Subscribed Share Capital is held by Public Financial

nstitutions or any'Government or Nationalised Banks orther Financial Institutions referredto therein, suchppointm ent or re-appointment of Auditors in such

Company shall be made by a Special Resolution. As morehan 25% of the Subscribed Share Capital of the Com pany is

held by the Institutions as mentioned above, the SpecialResolution is required to be passed for the re appointm ent ofM/s. C.C. C hokshi & Co., CharteredAccountants, Mumbai.

The Board recomm ends the re-appointment of M/s. C.C.Chokshi & Co. as the Auditors of the Company.

None of the Directors of the Com pany are concernedor interested in the Resolution.

n respect of Item Nos. 6& 7t is desired to purchase10,000 equity shares of Rs.10/-

each of Mayflower Textiles Pvt. Limited and MyrtleTextiles Pvt. Limited which were incorporated on 30thApril, 2004. These Companiesare authorizedto do thebusiness in Textiles and also business of investments,holding of shares, tradingin shares and such otherbusiness within the scope of the object clause in theirMemorandum of Association. The Com pany hasentered into a partnership in the nam e and style ofUrvija


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NAVIN FLUORINE INTERNATIONAL LIMITED(Formerly known as Polyolefins Rubber Chemicals Limited)

can pay upto Rs.20,000 by way of Sitting Fees to theDirectors. ^The Resolution is proposed to authorise Board ofDirectors to fix and pay the Sitting Fees within the limitsprescribed under the said Rule 10-B.In addition to the commission as authorised by theresolution passed at the Company's Annual General

Meeting held on 29th September 2003, the Company isalso presently paying Sitting Fees to its existing Non-Executive Directors (including Independent Directors) asunder (which is within the limits prescribed unde'rSection 310):

1. For attending meetings of the Board, Audit andRemuneration CommitteeRs.3,000/-permeeting.

2. For attending meetings of other CommitteesRs.1,500/- permeeting.

The said .Resolution is proposed to comply with thsaid requirement of Clause 49 of the Listing Agreement.

The Non-Executive Directors (including IndependentDirectors) viz. Shri A.K. Puri, Shri T.M.M. Nambiar, ShP.N. Kapadia, Shri S.S. Lalbhai and Shri V.P. Mafatlalwill be entitled to the Sitting Fees and hence arinterested in the Resolution.

By Order of the Board,

Niraj B MankadCompany Secreta

Regd. Office :1st floor, Kalpataru Point,Kamani Marg, Sion (East),Mumbai 400 022.

Mumbai,Dated : 27th May, 2005

Particulars of the Directors seeking Appointment / Re-appointment at the ensuing Annual General Meeting pursuantto Clause 49 of the Listing Agreement

Mr. A.K. Srivastava Mr. V.P. Mafatlal

Date of Appointment 21.01.2003 21.01.2003

Expertise in functional area Finance, Accounting, Taxation andCommerce

Textiles & Chemicals

Brief Resume B. Sc. (Hons.), FCAHavingexperience of over 27 years in largecorporates in the areas of Finance,Accounting, Taxation and Commerce.

B. Sc. (Economics) Univers ity ofPennsylvania, Wharton School, USA.

. Industrialist having business experience

of more than 8 years in Textiles andChemicals.

Names of the Companies in which heholds Directorship / CommitteeMemberships.

Director in :

Silvia Apparel Ltd.Navin Fluorine International Ltd.

Committee Membership :

Investors Grievance Committee

Navin Fluorine International Ltd.

Director in :

Mafatlal Services Ltd.Mafatlal Burlington Industries Ltd.Sunanda Industries Ltd.Tropical Clothing Co. Pvt. Ltd.Cebon Apparel Pvt. Ltd.eyeindia.com Pvt. Ltd.

Suvin Technologies Ltd.Suvin Technologies Pte. Ltd., SingaporeIntouch Communications Pte. Ltd.Mafatlal Fabrics Pvt. Ltd.Silvia Apparel Ltd.Sarvamangala Holdings Pvt. Ltd.eyeglobal technologies Pvt. Ltd.Marigold International Pvt. Ltd.Myrtle Chemtex Trading Pvt. Ltd.Mayflower Chemtex Trading Pvt Ltd.Navin Fluorine International Ltd.

Committee Membership : NIL


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NNUALREPORT 2004-2005

ECTORS' REPORT

.Members,

in Fluorine International Limited

r Directors are pleased to present the Seventh Annualott together with the Audited Accounts for the Year endedMarch, 2005.

FINANCIAL RESULTS

The Financial Results of the Company for the Year ended31st March, 2005 are as under :

Current PreviousYear Year

Rupees RupeesLacs Lacs

Sales (Net of excise duty) 22579 19373Other Income (including interest/

profit on sale of fixed assets) 2133 625Gross Profit before Interest,Depreciation, ExceptionalItems ami Tax 5578Less : Depreciation 657

Interest . . 710Provision for Tax (includingDeferred Tax Income/Loss) 1788 (246)

Net Profit after Taxbut before Exceptional Items 2423 3709Less Exceptional Items:

Provision /(write back ofprovision)for doubtful advances (7229) 3959Provision for Diminutionin Value of Long termInvestments - 5940 Loss on Sale of Long TermInvestments - 2970 Stamp Duty, registration andother expenses 500 .

2181 3959

Profit / (Loss) after Tax andavailable for appropriation 242 (250)Add Surplus broughtforward from previous year 623 987AmountavaflabtefwAppropriation 865 737Appropriations:Transfer to General Reserve 18 Proposed Dividend . 124 101Corporate Dividend Tax thereon 17 13Surplus carried to Balance Sheet 706 623

: Figures have been regrouped wherever necessary to

make the information comparable.

The name of the Company has been changed to NavinFluorine International Limited with effect from 6* October,2004. The name now represents the true nature of its corebusiness i.e. manufacturing and selling fluorine chemicals.

During the year, the Company disbursed Rs.495 lacs tocomplete the obligatory infusionpfRs.9,000 lacs into M afatlalIndustries Limited (MIL) by September 2004, as mandatedby theBoard for Industrial & Financial Reconstruction (BIFR)

throughthe Sanctioned Scheme of Demerger (SS) of MILdated30* October 2002, The entire amounthas since been convertedinto 9,00,00,000 Optionally Convertible Fully RedeemableNon-Cumulative Preference Snares of Rs.lO/-each of MIL.

As you are aware, Sulakshana Securities Limited (SSL) wasidentified through the 'SS' of MIL for the purpose of settlingdues worth Rs.25721 lacs of the Term Lenders of MIL byliquidating certain identified assets of equal value, as on thedate of the 'SS', within thirty months from that date. The'SS'. mandated that the Company will give a guarantee to theTerm Lenders such that any shortfall in their settlement

amount will be made good by the Company with rights, asavailable to a guarantor under Sections 140 and 141 of theIndian Contract Act, over the remaining assets of SSL aftercompletion of the settlement. In this regard, dues valued atRs.9858 lacs, including interest, to IDBI were settled duringthe year through a debt-asset swap. The Company gave aCorporate Guarantee for Rs.1000 lacs to IDBI to make goodshortfall, if any, between.the swap value and the actualconsideration at which the lender may sell these assetsbetween the 5 ft and the 9* year of^he date of this debt assetswap. The Company was required to bear, to the extent of

Rs.500 lacs, stamp duty, registration and other expenses,pertaining to this debt asset swap. This is expensed out inthe Profit)& Loss Account under the head 'Exceptional Items'.Amount outstanding to MIL's Secured Term Lenders as on31al March, 2005, in the books of SSL, therefore, stands atRs.5276 lacs. The rnatter is under active consideration and isexpected to get settled shortly.

2. INCREASE IN CAPITAL

Pursuant to the 'SS' of MIL, the Company successfullycame out with a Rights Issue of 50,49,999 equity shares

of Rs.10/-each,in the ratio of

1:1at a price of

Rs.60/-pershare including premium. The terms of payment wereRs.30/- per share on application and balance Rs.30/-payable on firstand final call within one year. The issuewas open between 21" August, 2004 and 24* September ..2004, It was oversubscribed by 1.30 times and the subjectshares were allotted on 20* October 2004; Consequently,the issued and subscribed share capital of the Company

. stands increased to 1,00,99,889 equity shares at a facevalue of Rs.1010 lacs. The Paid up Capital'of theCompany as on 31" March 2005 is Rs.757.81 lacs.

3. INVESTMENTS :As mentioned earlier, during the year under review the


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(Formerly known as Polyolefins Rubber Chemicals Limited)

entire amount of Rs.9QOO lacs funded to MIL .wasconverted into 9,00,00,000 Optionally Convertible FullyRedeemable Non-Cumulative Preference Shares of

. Rs.10/- each of MIL. Out of the above, 3,00,00,000Preference Shares were sold at an aggregate value of Rs.30lacs resulting into a Rs.2970 lacs loss on sale ofinvestment. Further, in view of MIL's negative networthof Rs.39223 lacs as at 30* September, 2004, their lastaudited Balance Sheet date, it is decided to write downthe value of the remaining investment in theaforementioned Preference Shares of MIL to 1 % ofthen- nominal value. The Profit & Loss Account isappropriately charged in this regard under the headingExceptional Items.

During the year the Company invested Rs. 15 lacs in theequity shares of SSL making it a wholly owned subsidiaryof the Company in terms of the SS.

The Company, during the year, also contributedRs.80,000/- to the Capital of Urvija Associates, aPartnership Firm, in which the Company has an 80 %share of Profit or Loss.

In 2004-05, the Company is required to publish itsConsolidated Financial Statements, comprising of thefinancial statements of Mafatlal Burlington IndustriesLimited (MBIL), Sulakshana Securities Limited (SSL),Urvija Associates (UA) an d Molex Mafatlal MicronPrivate Limited (MMMPL). However, the financialdataof MMMPL has not been consolidated due to non-availability of it's Audited Accounts.

The Company, has 50% shareholding in MBIL a denimJoint Venture with Burlington Mills, Inc., USA. TheCompany has exercised its right, as per the Shareholders'Agreement between the JV partners, to acquire thebalance shares in MBIL from Burlington Mills, Inc. Thematter is currently in Arbitration.

The Company and its wholly owned subsidiary.SSLholds 13.71 lac and 57.49 lac equity shares of MMMPLrespectively, which brings the aggregate holding of theCompany, including shares held through subsidiary, to

49 % of the paid up equity capital of MMMPL.4. BORROWINGS:

The, *SS' of MIL envisaged term loans aggregating toRs.6500 lacs to be raised by the Company to fulfill theobligation of funding MIL. The Company drew downthe last tranche of Rs.1000 lacs out of Rs.6500 lacs ofterm loans tied up during the previous year.

In order to augment the emerging working capital needsthe Company also increased die working capital facilities,both fund based and non-fund based, to Rs.2250 lacs.

5. DIVIDEND:The Board of Directors are pleased to recommend a

dividend of 20% for the year as under: /

Rs.2/- per share on 50,49,999 fully paid equityshares of the nominal value of Rs.10/- eacaggregatingto Rs. 101 lacs.

For Shares issued during the year 2004-2005, Re.0.89per share on 6,337 fully paid equity shares of Rs.1- each and Re.0.45 per share on 50,43,553 partpaid equity shares (Rs.5/- paid-up), prp-rata frothe date of allotment, i.e. 20* October, 2004.Aggregate amount of dividend payable on partpaid equity shares issued during the year is Rs.22.52

. lacs and on fully paid equity shares is Rs.0.06 lacs.

6. YEAR IN RETROSPECT:The year ended on 31 st March 2005 was a challengingyear for your Company which saw a near stagnationthe domestic market and almost all .the growth camefrom the exports.

During theyear the US Dollar continued to remainweakvis-a-vis the Indian Rupee. As a result the pressure oexport realizations continued. In the home markets yoCom pany had tocombat the cascading impact of loweimport tariffs and a strong .Rupee. The feed stock anraw material prices spiralled up during the currentyeaas a consequence of crude oil price hike and exertedsignificant adverse impact on product margins.

In spite of these adverse factors, your Company hamanaged to grow its top line by 16% and reach a turnovof Rs. 225 crores. Tfiis growth could be achieved

primarily due to 15% more production of basic rawmaterial HF in a newly commissioned plant and itsderivatives. The additional capacity of basic raw materiallike HF has removed one of the principal hurdles involumegrowth and added intrinsic strength to the fluochemical business of your Company.

Other significant achievement of your Company was design, develop and commission one of the largestFluorobenzene plant in theworld. This was donein a recordnine months from conceptualising to commissioning. Thisis the first successful plant in India that has started

producingthis value added basic specialty intermediate folocal and export markets. The other attempt of producingfluorobenzene in India based on Chinese technology wmade by ourcompetitor in the, late nineties but wasaborteddue to technoeconomic failures.

Your Company was also successful in inventing a novelprocess for aminbbenzotrifluorideby a unique route thahas improved the selectivity of the desired product bsix times than the conventional process. This has givena tremendous advantage to the marketing of this productin. the international arena. . ' ,

The specialty chemical business of your cdmpany i


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NNUAL REPORT 2004-2005

technology driven with R&D as its growth engine. Thisis borne out by the fact that fifteen new products/processes were successfully developed by in house R&Defforts and are now in various stages of commercialization.The specialty product basket has since swelled to fiftyfive and the range is ever increasing. The result of all thisis evident from the export growth of specialtyfluorochemicals which was 300%.

Refrigerant gases continue to be the backbone of yourcompany's business and will continue to do so in times tocome. Though CFC business is declining as per therequirements of Montreal Protocol and your company isfully compliant, HCFC business is showing definitivesigns of growth commensurate with air conditioningindustry and is making up partly for the CFC businessattrition. There is a growth in CFC substitutes market aswell and your company is present with more than 30%share in this future growth area. The substitute growth isled by HFC 134a and your company is contemplating aninvestment in themanufacturingof thishigh tech refrigerantgas subject to techno economic feasibility.

Smelter fluorides, which once constituted the core ofour business are steadily loosing ground to competitiveproducts like low density aluminum fluoride and recycledbath material. As a result of this shift, the domesticvolumes have shown a drastic decline over last year andthe Company will be looking more to exports to maintainthe volumes.

In April 2004, your Company completed the investmentin 2.7 MW Gas based captive power plant with a wasteheat recovery system at its Surat unit. It was fullyoperational during the last year with commensuratebenefits of cost of power and the co-generated steam.The waste heat recovery system also helped inaugmenting the overall steam balance at the Surat facility.

Your company has prepared a blueprint of Capex and Rs.63 Crores were invested over the last three years. Thesewere fully funded out of cash flows generated frombusiness. During the current year, your Company plansinvestment of another Rs 50 crores in Capex. -

SAP, the best ERP (Enterprise Resource Planning) isthe platform for Sales & Distribution, MaterialsManagement and Financial Information functions sincelast year. During the year, it went live with ProductionPlanning, Quality Systems, Plant Maintenance andControlling modules. Consequently, all the majorbusiness processes have now been mapped andintegrated at all the five regional offices, twomanufacturing locations and the Head Office.

Your Company, as always, has been aware of itsresponsibilities as a good corporate citizen, in health,

safety and environment management. This isdemonstrated by the fact that the year under reviewpassed without any major accident in both themanufacturing plants. The industrial relations at boththe manufacturing units remained cordial.

7. SUBSIDIARY:

During the year Sulakshana Securities Limited (SSL) hasbecome a" wholly owned subsidiary of the Company.

As required under Section 212 of the Companies Act,1956, the audited Balance Sheet as at and the Profit &Loss Account along with the Directors' Report of SSLfor the year ended 31.03.2005 is attached herewith.

8. INDUSTRIAL RELATIONS:

The relations between the employees and theManagement have remained cordial.

9. INSURANCE:

The properties and insurable interest of your Companylike Building, Plant & Machinery, Stocks, etc., areproperly insured.

10. PARTICULARS OF EMPLOYEES:

Incompliance with the provisions of Section 217(2A)of the Companies Act, 1956, a statement giving requisiteinformation is annexed hereto.

11. ENERGY, TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGE EARNINGS AND OUTGO:

Additional information on conservation of energy,technology absorption, foreign exchange earnings andoutgo as required to be disclosed in terms of Section217(l)(e) of the Companies Act, 1956 read with the.Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988 is annexed hereto andforms part of this Report.

12. REPORTS ON CORPORATE GOVERNANCE ANDMANAGEMENT DISCUSSION AND ANALYSIS:

As required under the Listing Agreement with Stock-Exchanges,reports on "Corporate Governance" as wellas "Management Discussion and Analysis" are attachedand forms part of the Directors' Report.

13. DIRECTORATE:

Shri A.K. Srivastava and Shri V.P. Mafatlal retire byrotation at the ensuing Annual -General Meeting, andbeing eligible, offer themselves for re-appointment.

14. DIRECTORS' RESPONSIBILITY STATEMENT:

As required under the provisions of Section 217 (2AA). of the Companies Act, 1956, your Directors report that:

(i) in the preparationof theannualaccounts, (heapplicableaccounting standards have been followed along withproper explanation relating to material departures;


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(Formerly known as Polyolefins Rubber Chemicals Limited)

(ii) the directors had selected such accounting policiesand applied them consistently and made judgmentsand estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs ofthe Company at the end of theFinancial Year and ofthe profit of the Company for the year under review;

(iii) the directors have taken proper and sufficient carefor the maintenance of adequate accounting recordsin accordance with the provisions of this Act forsafeguarding the assets of the Company and forpreventingand detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts ona going concern basis.

15. AUDITORS:

At the Annual General Meeting, Members are requestedto appoint Auditors for the current year and fix theirremuneration. The specific notes forming part of theaccounts referred to in the Auditors' Report are self-explanatory and give complete information.

16. APPRECIATION:

The Directors wish to place on record their appreciationof the devoted services of the workers, staff and theofficers who have largely contributed to the efficientmanagement of the Company.

For and on behalf of the Board

H.A.MAFATLALChairman

Mumbai

Dated : 27* May, 2005

ANNEXURE TO THE DIRECTORS*REPORT 2004-2005:

Disclosure of particularswith respect to Conservation of Energy,Technology Absorption and Foreign Exchange Earnings andOutgo as required under the Companies (Disclosure ofParticulars in the Board of Directors' Report) Rules, 1988.

1) CONSERVATION OF ENERGY

A) Energy Conservation Measures taken

1. During the year the Company implemented aproject to set up an environment friendly 2700Kw h natural gas based captive power plant withwaste heat recovery system. This has come onstream in the mon th ofApril 2004 thereby reducingthe 'per unit cost' of power and steam substantially.

2. Recycling of flugases for Flourspar drying in newhydrofluoric acid plant thereby reducing the energynorms of the products.

3. Drives of heavy-duty motors are being

progressively rationalized to reduce the fixed powerconsumption losses.

4. Old refrigeration compressor in new hydrofluoricacid plant has been replaced by a new screw typecompressor resulting in lower energy consumption.

5. Cooling tower in the BF3 plant have been revampedto improve energy efficiency.

6. Vacuum pumps are being progressively replacedby steam jet ejectors.

B) ADDITIONAL INVESTMENTS AND PROPOSALS,

IFANY,BEINGIMPLEMENTEDFORREDUCTIONIN CONSUMPTION OF ENERGY

The 2700 Kwrj Captive Power Plant with waste heatrecovery system was implemented during the year andhas resulted in substantial savings in the perunit powerand steam costs. In addition, the Company as a matterof practice keeps exploring process improvements andnewer ways of rationalizing energy costs.

> As indicated in (A) and (B)above.

% TOTAL ENERGY CONSUMPTION AND ENERGYCONSUMPTION PER UNIT OF PRODUCTION

The above information is furnished in the prescribedForm 'A' annexed hereto.

(2) TECHNOLOGY ABSORPTION

Efforts made in technology absorption are furnished .inprescribed Form 'B' annexed hereto.

A) Activities relating to export initiatives taken toincrease exports, developments of new exportmarkets for products and services and export plans.

The export teams regularly visits the markets, customersand end users of the different products. Along with thetechnical team, the export group also attends importantindustry exhibitions in different continents, where theyget exposed to the newer developments in the industry,markets, end users of the products. During the year theCompanyparticipated in Chemspec Exhibition held.inHyderabad on 23 ri and 24 h February 2005 which wasattended by many international pharma andagro majors.

B) Total Foreign Exchange used and earned

Total foreign exchange used and earned (in Rs.Lacs)

Current PreviousYear Year

Total foreign exchange used 6052.95 4791.92Total foreign exchange earned 9275.43 6634.66


11/82


FORMAForm-for Disclosure of Particulars with respect to Conservation of Energy

CurrentYear

TOTAL

PreviousYear

TOTAL

. POWER AND FUEL CONSUMPTION:1. Electricity :

a) Purchased :Units(in Kwh)Total Cost (Rs.)Rate/Unit(Rs.)

b) Own Generation: .(i) Through Diesel Generator:

Units (in Kwh)Unit per litre of diesel oil (Kwh)Cost/Unit (Rs.) ;

(ii) Through Captive Power PlantUnits (m Kwh)Unit per M3 of Natural G as (Kwh) .....Cost/Unit (Rs.)

2. Furnace Oil : Quantity(K.Ltrs.)Total Amount (Rs.)Average Rate (Rs./K.Ltr.)

3. OthersA. High Speed Diesel (HSD.)

Quantity (K. Ltrs.)Total Cost (Rs.)Rate/Unit (Per K. Ltr.)

B. Natural GasQuantity (Cub.Mtrs.)Total Cost (Rs.)Rate (Rs.7Cub.Mtrs.)

C. WaterQuantity (K. Ltrs .) ....Total Cost (Rs.)Rate (Rs./K.Ltrs.)

D. Light Diesel Oil (L.D.O.)Quantity (K.Ltrs.)Total Cost (Rs.)Rate (Rs./K.Ltrs.)

CONSUMPTION PER UNIT OF PRODUCTION. 1. Electricity (Kwh/Mt.)

2. Furnace Oil (K.Ltrs/Mt.) ........3.

NaturalGas (

Cub.Mtrs/Mt)4. O thers (K.Ltrs/Mt.)

428681833245982

7.76

484561.56

14.64

191344003.742.56

5716874477

12033

932126081463325

8.74

1186837

56295664,74

621303299

20990

14060.03

558.3371.10

1768811089732251

5.07

843822.27

166517754076

10660

4092829

37346097

9.12

1348998

38365332.84

18 5

304833916450

10580.10

243.5780.28


12/82

(Formerly known as Polyolefins .ubber Chemicals Limited)

B)

2.

A) RESEARCH AND DEVELOPMENT FORMB1. Specific areas in which R&D is carried out by the

CompanyThe Company carried out R&D efforts in the followingareasA) Process Chemistry

i) Catalytic hydrogenationii) Catalytic dechlorination and nitro

dechlorination processesiii) Halex reactions using metal fluoridesiv) Acylation and Fries rearrangement of

fluorochemicalsv) Diazotization, Bromination and Deamination

B) CFC Substitutesi) Synthesis and isolation of HCFC R123a, was

successfully carried out to produce R123a,which is a substitute of CFC 11.

ii) Work is continuing on process optimizationof HFC 134a.

Benefits derived as a result of the above R&DA) Following products were developed on commercial

scaleBF. acetonitrite complexBf3 THF complex

Hexafluorpphosphoric acidDifluoroanilinesDifluorobenzenesChlorotrifluoro ethyleneBromotrifluoro ethyleneBromo BTFFluoro BTFDichlorobenzotrifluorideDifluorobiphenylTrifluoro ethanol3 Fluoro AniUneTrifluoromethyl Anisol

B) Import substitution and savings in foreign currencyoutgo.

C) Commercialization of the molecules consolidatedthe Company's product basket and boosted exportsand domestic turnover.Helped the Company emerge as a low cost producer

3.

.of high quality fluorochemicals in theface of globalcompetition. Improved export market share.

Future Plan of ActionYour Company is committed toemerge as a global supplierof repute fo r a) value added fluorochemicals an db) environment friendly CFC substitutes.All the R&D efforts are singularly directed towardsachieving this goal.

CapitalE x p e n d i t u r eR e c u r r i n g E x p e n d i tu r eTotalTo ta lR & D E x p e n d i t u r ea s a % o f t o ta l t u r n o v e r

Current Year2004-2005

41770.8775.04

031

Rs. in LacsP r e v i o u s Ye

2003-20043.66

77 .7681.42

0.38

D)

TECHNOLOGY ABSORPTION ADAPTATION ANDINNOVATION1. Efforts in brief made towards technology absorption,

adaptation and innovation:As stated earlier, the Company primarily works on its in-house R&D strengths. Once a process is developed on thelab scale, the in-house technical team takes on the job of

scaling up and commercialization of the process andproduct. Thereafter, these capabilities are commerciallyexploited.

2. Benefits derived as a result of above efforts.As stated in A2 above.

3. Information regarding technology imported duringthe last 5 years.A) Technology imported -LiPF6 (Lithium

Hexafluorophosphate)B) Year of Import -Technology was imported during

the year 2003 - 04C) Has Technology been fully absorbed - YesD) If not fully absorbed, no t taken place, reasons

therefore and future plans of action - Though the

technology has been imported and absorbed, theCompanyhas decided to monitor the global demand-supply and pricing trends before embarking on aninvestment to set up a commercial scale plant.

Statement of Particulars of Employees pursuant to the provision of Section 217(2A) of the Companies Act, 1956 andforming part of the Directors' Report for the year ended 31st March, 2005. -

Designation/Nature of duties

Date ofcommencementof employment

Last Employment heldName of Employer, Postheld and period (years)

(I ) (2) (3) (4) (5) (6)A. Names of Employees employed throughout the year and were in receipt of not less than Rs. 24,00,0007-I) Mr. H.A.Mafatlal Chairman & Rs.5,585,323/- B.Com (Hons.) 01-05-2003 The Mafatlal Fine

( 5 1 ) , Managing Director (29) Spg. & Mfg. Go. Ltd.-Vice-Chairman (17 years)He is also the Vice-Chairrnan of MafatlalIndustries Ltd. (12 years)

II) Mr. A.K. Srivastava Finance Director(53)

Rs . 3,373,1087- B.Sc. (Hons.) FCA01-05-2003(28)

III) Mr. D.S. Umalkar(53)

Chief Executive-Officer

Rs. 5,826,5077- M.Tech( 2 7 )

Mafatlal IndustriesLtd.,Sr. V.P. - Finance(5 years)

01-05-2003 Mafatlal Industries Ltd.ExecutiveDirector(Chemicals Division)(1 7 years)

B. Names of Employees employed for part of the year and were in receipt of remuneration of notless than Rs. 2,00,0007-per monthN JL

NOTES:1.- Remuneration, as above, includes Salary, Dearness Allowance, Company's contribution to Provident FtTnd and SuperannuationScheme, Leave Encashment,

Holiday Travel Benefits, Reimbursement of Medical Expenses, Medical Insurance Premium, House Rent Allowances, Additional House Rent Allowance,Compensatory Allowances, Personal Allowance, Voluntary Retirement Benefit, Commission, where applicable, Personal Accident Insurance, monetary valueof

perquisitescalculated in

accordance with provisionof

IncomeTax

Act, 1961and

Rules made thereunderin

respectof

Housing, Company'sfurniture and

equipments etc. but does not include Company's contribution to Gratuity Fund.2. The nature of employment in all the above cases is contractual.3. None of the above employees is related to any Director of the Company.

10


13/82


MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your Company is primarily engaged in the business ofmanufacturing and selling fluorochemicals. The targetmarkets ma^ be broadly classified under the followingcategories e.g. refrigerant gases for refrigeration and air-

conditioning industry (RAC), bulk chemicalsfor themetal industry, specialties for the pharma and agroindustry and some non fluorine chemical inter-mediatesfor dyes and drugs.

The Refrigerant G asesbusiness,is undergoing a CFCphase out and your Company faces competitionfrommajor international players and three other domesticproducers. Despite competition the exports of HCFCair-conditioning gases increased substantiallyand theCompany has become active in markets hitherto

unexplored.

Your Company has successfully established itself as apreferred global supplier of specialty chemicals, in itsproductrange&However,some of the products are facingcompetition from existing and some new entrants. Inthe future also, we may not rule out the possibility offacing competition from domestic as well as overseassuppliers. Appropriate steps willbe taken to maintainthe leadership position primarily through intense R&Defforts, process improvemen ts and partnershipalignment with customers.

As a result of lower importtariffs, weakening of U SDollar against the Rupee and availability of cheaperalternative chemicals some of the bulk fluoridessufferedserious set back. Market shares had to be given up*'-n

addition to the small-scale r>rc&ucersYiacescompetitionfrom two other manufacturers iromft\e ot

B) Opportunities and threats

The domestic refrigerantgases business which wasdominated by the CFCs and HCFCs(Hydrochlorof luorocarbons) unt i l recent ly isexperiencing a change over the last couple of years. HFC134a, a CFC substitute, gainedfurther ground duringthe year. The developments in this market are beingclosely monitoredand at an appropriate time,it is onlylogical that your Company may decide to put up amanufacturing facility, to participate in this growingbusiness, as 134a has the customer base and. tradechannels which the Company has been catering to for

the last thirty-seven years.

As you may beaware, the CFCs havea finite life tillend2009. All the O riginal Equipmentmanufacturersare usingCFC alternatives now . Therefore,we mayassumethat alarge part of CFC demand has bottomed out and tforthcoming decline till2009 will be more g radual. ThHCFCs though regulated by the Montreal Protocol

Substances that Deplete the Ozone Layer, have amuchlonger window (till year2040) for the Indian Producerwhereas the manufacturers in developed countrialready have a production cap. Therefore, it is expectthat the HCFC business of the Company, catering m ainto the air-conditioning industry willcontinue togrow inthe near future.

In view of sharp competition in the Dye-Intermediatebusiness, the management is in the process of re-orientiits product portfolio so that newer markets can

addressed by utilizing the same m anufacturing facilitfor value added Agro and Pharma Intermediates.

During the year under review,the Com pany faced steepprice escalations in most of the major raw materialsUnprecedented rise in global crude oil prices drove uthe prices of organic feedstock chemicalsand also thefreight cost to the Com pany, both inwardon itsimportsand outwardon its exports thereby bringingthe overallmargins under pressure. The m argins may continue remain under pressure.

Over the last three years the Company invested largamounts in capital expenditure. As a result, depreciaticharge to the P&L will continue to remain high.With thefull draw downof the term loansand increase in workingcapital borrowings the interest cost has increased and

The Company is primarily engaged in theManufactureand Sale of chemicals. Therefore, it is considered to boperating in a single business segment. However, thproducts of the company have significant presenceinthe Domestic as well as in the international markeHence, they can be considered as two differengeographical segments. Appropriate segment-widisclosures have been made in the Accounts.

D) Business Outlook

Currently the specialty business of your Company ion a grow th phase. N ewer products are being explore

and new customers are being added. The CFCs are o

11


14/82

ormerly known as Polyolefins Rubber Chemicals Limited)

their last leg and the residual demands are expected tobottom out gradually. However, if the national econom ycontinues to grow at the current rate, the CFC declinewill get more than offset by the HCFC growth as theHCFCs are used in air -conditioners and their demandsare directly related to the general health of the nationaleconomy and the purchasing powerof the people. Theexport market for HCFCs will demonstrate moderategrowth if the multinationals from developed countriesprefer to remain comparatively less active in the ASEANand Middle-Eastern markets.

However, in the medium to long term, the performanceof the Company would largely hinge on its ability toharness the newly installed capacities, introduceandcomm ercialize newer value added moleculesat the microlevel and emergence of the IndianPharma companies asmajor suppliers to globalpharma and agro m ajors at themacro level.

The R&D and technology capabilitiesof the Companywill play a primary role in positioning the Com pany asa 'solutions p rovider'and notonly a 'product supplier'.

Internal Control Systems

All the major business processes of the companycurrently run on SAP, the latest in ERR The Companyhas an adequate Internal Audit System commensuratewith its size and nature of operations. An independentfirm of Chartered Accountants carries out the internalaudit at one of its m anufacturingsites. A team from thein-house internal audit resources of the group covers theother locations.

The internal auditors periodically interact w ith the AuditCommittee of the Board of Directors to discuss the termsof reference and frequencyof the audits, significant auditobservations and their disposals and remedies, if any.

Operating Financial Performance

The year under reviewhas been, financially,one of themost challenging.

As explained earlier, the business has been under allround pressures on account of unprecedented escalatioin input and freight costs. Margins in some of theproducts suffered as there w ere cheaper alternativ esavailable.

The cashflows w ere under stressin view of heavy CapitalExpenditure on account of the Captive Power Plant,capacity increase in AHF andflourobenzene. Thebenefits from these investments will startflowing in

With the change in product profileof your Company,the working capital requirements have also goneupnecessitating augm entationof workingcapital facilities.Due to complete draw down of the term loans andincrease in working capitalfunding the interest costswere also on the rise.

G) Human Resources

The relat ions b e tw e e n . t h e Management and theemployees remained cordial duringthe year. A longstanding dispute conc erning 110 contract wo rkm enwasamicab ly set t led by negotiat ing with theunion.Negotiations fo r long term settlementof Workmen'swages at the Surat unit are underway.

H) Cautionary Statement

Statements in this Report on Managem ent Discussionan d Analysis describing the Com pany's objectives,projections, estimates, expectations or predictions maybe forward looking statements withinthe meaning ofapplicable securi ty Lawsor Regula t ions. Thesesta tements are based on cer ta in assumpt ionsandexpectation of future even ts. Actual results couldhowever differ materiallyfrom those expressed orimplied.

The Company assumesno responsibilityin respect offorward looking statements herein whichmay undergo

changesin future on thebasisof subsequent developments,information or events.

12


15/82


CORPORATE GOVERNANCE REPORT

COMPANY PHILOSOPHY ON CORPORATE GOVERNANCE:

Company's philosophy of Corporate Governance is intended to bring about :

Transparency and Professionalism in activities of the organisation

Implementation of policies and procedures prescribed by the Company to ensure high ethical standard in all its businessactivities

andresponsible

andresponsive management.

1. Board of Directors :

Th e Board of Directors of the Company consists of Directors having varied experience in different areas and few ofthem areacknowledged asleading professionals in their respective fields. The composition of the Board is in conformity with theprovisionsof Clause 49 of the Listing Agreement. The Board is headed by Shri Hrishikesh A. Mafatlal who is the Chairmanand Managing Director of the Company. The Board consists of one Executive Promoter Director, one Non-ExecutivePromoter Director, two Executive Directors and four Independent Non-Executive Director.

SrNo

1

2

3

4

5

6

7

8

Names of theDirectors

Mr H. A. MAFATLAL

MR A.K. PURI

MR T.M.M. NAMBIAR

MR P.N. KAPADIA

MR S.S. LALBHAI

MR V.P. MAFATLAL

MR D.S. UMALKAR

MR A.K. SRIVASTAVA

Category(Executive/Non-Executive)

Promoter-Executive

IndependentNon-Executive

IndependentNonexecutive



Promoter-Non Executive

Executive

Executive

No. ofBoard

Meetings

attended

7

7

1

1

6

1

7

6

WhetherLastAGM

held on

27th July,2004

attended

YE S

YES

YE S

YE S

YE S

YES

YE S

YES

OtherDirectorship

held (including

PrivateCompanies)

*20

2

4

** 5

2

**# ig

' -

1

No. ofCommittee

Membership/

Chairmanshipin other

DomesticCompanies.

5

4 J

5

-

I

i

annual report 2005 navin fluorine

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