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DIRECTOR'S REPORT

GHCL Ltd.

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Market Cap. (₹) 1979.49 Cr. P/BV 1.03 Book Value (₹) 196.07
52 Week High/Low (₹) 277/189 FV/ML 10/1 P/E(X) 5.65
Bookclosure 30/05/2019 EPS (₹) 35.70 Div Yield (%) 2.48
Year End :2018-03 

BOARD’S REPORT

To The Members of GHCL Limited,

We are pleased to present the 35th Annual Report together with the audited financial statements of the company for the financial year ended March 31, 2018.

OPERATIONAL RESULTS

The summary of the financial performance of the Company for the financial year ended March 31, 2018 compared to the previous year ended March 31, 2017 is given below:

(Rs in Crores)

Standalone

Particulars

Year ended

Year ended

March 31,

March 31,

2018

2017

Net Sales /Income

2,992.27

2,980.17

Gross profit before interest and depreciation

649.17

724.39

Finance Cost

124.16

133.77

Profit before depreciation and amortisation - (Cash Profit)

525.00

590.62

Depreciation and Amortisation

109.53

85.69

PBT before exceptional items

415.48

504.93

Exceptional items

-

3.04

Profit before Tax (PBT)

415.48

501.93

Provision for Tax - Current

106.76

113.61

Tax adjustment for earlier years

-89.81

-40.18

Provision for Tax - Deferred

34.02

41.73

Profit after Tax

364.51

386.77

Other comprehensive income (OCI)

3.48

1.39

Total Comprehensive income for the period

367.99

388.16

Balance brought forward from last year

1,142.63

817.87

Appropriations

Reserve created on account of

2.61

0.55

buy back during the year

FVTOCI Reserve

-1.40

-2.65

Interim Dividend

-

15.01

Final Dividend

34.20

35.01

Tax on Dividend

6.96

10.18

Balance carried to Balance Sheet

1,407.04

1,142.63

PERFORMANCE HIGHLIGHTS AND STATE OF COMPANY’S AFFAIRS

SODA ASH

As per latest estimates of IHS Chemical (Market Advisory Service), the total Global Demand in 2017 was approximately 59 Million Tons against an estimated capacity of approximately 68 million MT. Soda Ash demand remains strong in most global regions other than winter supply issues and China's restriction problems which cause temporary pockets of tightness. There has been an influx of new supply of natural soda ash from Turkey, which is cost-competitive and hence more sustainable than synthetic production; in fact during 2017 Turkey has added 4 streams totalling 2.0 million MT which has caused significant disruption on the supply side. As a result of this cheaper supply, more costly synthetic supply from high-cost producers, particularly in Europe, has come under increasing pressure.

Soda Ash demand in Europe has improved over the last year and is expected to remain stable for some time. However, the supply side is disturbed due to new supplies from Turkey have started having an effect. Delayed commissioning of Kazan's 5th line and high demand/low supplies from China into Asia and East Europe has been helping maintain some balance.

In spite of increasing economic problems that are affecting the financial viability of some operations, China continues to be the largest Soda Ash player in the world, having a capacity of 31 million tpa, which is 46% of the global capacity. Even after various restrictions and disturbances, overall Chinese soda ash output continues ahead of the 2 million MT month mark. Currently, another round of environmental inspections is carrying on in various provinces causing some disruptions and lower rate of operations. As per IHS Chemical report China's operating rates were around 88% in 2017, reporting a production of 27 million tpa and domestic consumption of 25 million tpa, with 1.5 million tpa being exported. Our assumption of domestic growth in China is around 4 to 5% due to downstream improvement, especially flat glass.

US producers continue to enjoy the highly competitive production costs. Around 58% of US Soda Ash production is sold to export markets and shipment volumes have been increasing year by year. US capacity is 13 million tpa and they produced around 12 million tpa of soda ash and their annual production represents 91% operating rate. The US production is stated to have grown by 1% in 2017 where as domestic demand for soda ash also saw a growth of 1% versus 2016. The total domestic consumption was estimated at around 5 million tpa and they exported around 7 million tpa recording 3% growth. US exports are supported by good demand from South America, South East Asia (especially due to lower Chinese exports), Australia and parts of Europe. However, in future, US will face competition from Turkey in their traditional markets of South East Asia & Asia Pacific owing to the natural freight advantage that Turkey enjoys over US. In fact US may vacate some of these markets in favour of Turkey in this year.

Globally there is no major mismatch expected between Demand and Supply in soda ash industry, except for temporary disturbance caused due to Turkey's additional volumes.

As regards Domestic Soda Ash market is concerned, after couple of years, the demand has witnessed a growth of 11% in FY 2017-18 as against last year. Indian soda ash markets remain strong with excellent growth in most of the downstream sectors. Our market estimate indicates that the momentum in the downstream demand growth will remain. The coming fiscal should see stable demand for soda ash with the main drivers being a strong detergent and float glass sector followed by a reasonably silicate and chemical sectors.

Total Soda Ash installed capacity in India is 3.5 million tons, with an estimated production of about 3 million tons in last financial year (2017-18). The total size of the Indian soda ash market is about 3.75 million tons and almost all the major industry players are located in the state of Gujarat due to the closeness and ready availability of the main raw materials namely limestone and salt.

At present your Soda Ash plant has a capacity of 9.75 lacs tpa. During the financial year 2017-18 your company has produced 9.37 lacs tons soda ash. This year, the Company has also achieved highest domestic sales i.e. 8.47 lacs tons and total sales of Soda Ash is 8.69 lacs tons including exports.

Our ongoing 1.25 Lacs MT Brownfield expansion is likely to get completed by Q4 FY19. Going forward we are looking at another Brownfield expansion of 1.25 lacs metric ton to be completed over a period of 2 year. Your company is also aggressively working on Greenfield expansion of 5 lacs MTPA which is likely to be completed in 4-5 years.

BI-CARBONATE (BICARB)

During the year, the Company achieved production of BiCarbonate 35342 tons against 27677 tons in the previous year. During the year the Company achieved sales of Bi-Carbonate 34888 tons against 27638 tons in the previous year. Your company has doubled the capacity to 60000 MTPA which has been completed in January 2018. The full benefit of the expansion will be achieved in the coming year.

R & D INITIATIVES IN SODA ASH

Your company had initiated R&D activities for last five years to achieve following objectives (a) Introduce latest and economical technologies in the plant; (b) Provide innovative solutions to recurring problems and save natural resources; (c) To improve carbon foot print of company and contribute in national saving and environment improvements; (d) Energy conservation projects and (e) To improve soda ash production and plant productivity.

The R&D department operates with focused mandate (a) to Identify latest technology, superior design of equipment, improving process efficiency leading to reduced raw material consumption and reduced utility consumption resulting in better life of equipment and reduced cost of manufacture (b) to identify the possibility of producing value added products from wastes of soda ash manufacturing; (c) to identify suitable expert agencies who can find permanent solution to recurrent process problems; (d) to study possibility of catering to specific requirements of customers like soda ash briquettes (e) to suggest practices and procedures which can focus on reducing the energy consumption & reducing raw material consumption thus reducing carbon foot print .

We carry out above activities with the help of research department of premier chemical engineering institutes, reputed consultants & in house capabilities. During the year, your company has carried out following activities:

1) Alternate binder supplier.

We had only one briquette plant binder supplier capable of supplying binder suitable for our plant. We worked closely with various vendors and modified their process to manufacture binder confirming to our quality requirements. Now we have three alternate suppliers thereby strengthening our supplier base as well as better quality product.

2) Reduction of binder consumption.

Plant trials with higher viscosity of Pre-gel starch binder in coke briquetting plant have been taken up by working in co-ordination with few suppliers. Initial plant trials have indicated reduction of binder consumption by 1-1.2 %. Further trials are going on.

3) Value added product from our wastes.

In co-ordination with a leading Engineering College of South India, we have developed product equivalent to paver blocks from our wastes viz. fly ash, limestone fines & waste plastics. The blocks are water resistant having properties almost similar and strength equal to concrete. These blocks can be used for constructing path way, canal linings, floorings etc.

4) In close co-ordination with an International agency, exhaustive work has been carried out for improving the efficiency of carbonation towers. Expert guidelines issued by them are in implementation stage.

5) De-bottlenecking of certain carbonation towers has been successfully achieved resulting in increase in tower capacity by 50%.

6) Lump formation in Refined Sodium Bicarbonate bags:

After exhaustive studies and experimentation in association with an international agency through R & D efforts, we have developed solution for preventing soft lump formation in our refined sodium bicarbonate bags. We made changes in manufacturing stage of purge liquor during Refined Sodium Bicarbonate Manufacture resulting in saving of 5 MTPD of internal soda consumption.

7) We have adopted belt filter technology and installed same in our expansion phase for reducing steam consumption in Calciners. Further, high speed filter with technology from Germany is being commissioned. This shall also reduce the steam consumption in Calciners.

We stand committed in our endeavor to remain focused on our R&D initiatives in line with our Mission and Vision thus creating value for our stakeholders.

TEXTILES

The domestic textile industry in India is projected to reach US$ 250 billion by 2019 as per recent IBEF (India Brand Equity Foundation) report from US$ 150 billion in July 2017. Rising per capita income, favourable demographics and a shift in preference to branded products are likely to boost demand. Textile and apparel exports from India is expected to increase to US$ 82 billion by 2021 from US$ 37 billion in 2017. The Indian Textile Industry contributes to around 10% of industry output in value terms, 2% of India's GDP and to 15% of the country's export earnings. With a production of over 6,000 million kgs, India was the largest producer of cotton in the world in 2016-17. India is also the 2nd largest producer of man-made fibre and filament globally, with a production of over 2 million kgs in 2016-17. India is the second largest supply country with a share of 11% after China, with a share of 39%. Over 25% of the US imports in this industry originate from India.

Rising government focus and favourable policies is leading to growth in the industry. 100% FDI, under the automatic route, is allowed in the sector and US$ 140 billion worth of foreign exchange investments are expected. Under the Union Budget 2018-19, Government of India allocated around US$ 1.1 billion for the textile industry. Huge investments are being made by the government under the Scheme for Integrated Textile Parks (SITP) to the tune of US$ 185 million and the Technology Up gradation Fund Scheme (TUFS) to the tune of US$ 216 million, to encourage more private equity and to train workforce.

Your company has integrated textile manufacturing facilities centring around Spinning on one hand with 1.76 Lakh spindles and 3320 rotors and Home Textiles (Weaving, Processing and Cut & Sew of Bed Textiles) on the other. Our state-of-the art

Home Textiles facility in Vapi, Gujarat comprises of 190 Air Jet looms, 45 million meter of wide width processing capacity, 12 million meter of weaving capacity and 30 million meter of cut & sew. The Home Textiles division has recently increased weaving capacity by 18% and processing capacity by 25%. GHCL has also stepped up its focus on the domestic market and is working with major organized retail stores and brands in India.

The operating performance of the textiles business faced various industry level challenges like oversupply situation in USA resulting in the drop in the prices as well as margin, impact of GST and demonetisation, reduction in duty drawback etc. However, the Company has strengthened its marketing, product development and operating teams and has altered its focus to work around sustainability and innovation - two areas that are clearly competitive advantage drivers and are likely to see a huge improvement in the proliferation of business across geographies, with better margins, in times to come. As informed above, our Home Textile business is well integrated with our spinning business. Our Spinning units situated in Tamil Nadu are considered to be one of the most efficient and modern yarn manufacturing facilities in India. Our spinning units manufacture multiple varieties of yarn ranging from 100% cotton to blended yarns. This part of the business has performed well during the FY2017-18 and we expect that with the new cotton crop and buoyant yarn demand, the coming year should be even better.

The Revenue of Textiles division is at Rs. 1046 Crores during the financial year 2017-18 against Rs. 1229 Crores in 2016-17.

Our belief is that with our strong marketing and product development teams in place and launch of new innovative concepts such as REKOOP and FABFIT, we shall be able to create a differentiation through sustainability and innovation. We anticipate that with the acceptance of these two concepts, this business will not only grow top line and but also improve the profitability.

DIVIDEND

Your Directors are pleased to inform that your Company has a consistent track-record of dividend payment for last 24 years. The Board of Directors in its meeting held on May 19, 2016, had approved a Dividend policy of the Company. As per said policy, dividend pay-out (including tax, if any) will be 15 to 20 % of net profit of the Company.

Pursuant to the Dividend Policy, your Directors are pleased to recommend a dividend of Rs. 5.00 per Equity Share of Rs.

10 each (i.e. 50% on the paid-up capital) for the financial year ended March 31, 2018. Total dividend payout for the financial year 2017-18 shall be Rs. 58.60 crores comprising of dividend amounting to Rs. 48.70 crores and dividend tax of Rs. 9.90 crores. This dividend pay-out amounts to 16.29% of net profit of the Company for the financial year 2017-18 and the same is in line with the approved dividend policy of the Company.

SHARE CAPITAL

The paid up Equity Share Capital of the Company as on March 31, 2018 is Rs. 97,42,32,860/- comprising of 9,74,23,286 equity shares of Rs. 10/- each.

Details of changes in the paid-up share capital (after Buyback of equity share capital and Allotment of equity shares against ESOP) are as under:

Sl.

No.

Particulars

No. of Equity shares of Rs. 10/- each

1.

No. of Equity Shares as on March 31, 2016 (Pre - Buyback)

10,00,19,286

2.

Less: Shares Bought back

(during February 15, 2017 to August 14,

2017)

31,56,000

3.

No. of Equity Shares (Post - Buyback) (i.e. 1-2)

9,68,63,286

4.

Equity Shares allotted against conversion of ESOP (on October 24, 2017)

Note: Final Listing & Trading approval was given by BSE & NSE effective from November 10 & November 14, 2017 respectively).

5,60,000

5.

No. of Equity Shares after allotment i.e. present shares (3 4)

9,74,23,286

BUYBACK OF SHARES

The Board of Directors of GHCL Limited in their meeting held on January 31, 2017 had given their approval for Buy Back of the Company's fully paid-up equity shares of Rs. 10/- each from the Open Market through Stock Exchange route, at a Maximum Buyback price of Rs. 315/- per Equity Share excluding transaction costs, for an aggregate amount of Rs. 80 Crores. The information in this regards had already been given in last annual report.

Your Directors are pleased to inform that in line with the said approval, since starting of buyback process, the Company had bought back 31,56,000 equity shares and extinguished the same. Out of which 5,73,438 equity shares were bought back and 546,550 equity shares were extinguished in Financial Year 2016-17 and balance 25,82,562 equity shares are bought back and 26,09,450 equity shares are extinguished during financial year 2017-18. Consequently after said extinguishment of equity shares, the issued & paid-up capital of the Company stands reduced to Rs. 96,86,32,860/- consisting of 9,68,63,286 equity shares (i.e. 10,00,19,286 equity shares minus 31,56,000 equity shares) as on September 30, 2017.

Your Directors are pleased to further inform that the price at which the equity shares were bought back was dependent on the price quoted on the stock exchanges. The highest and lowest price at which equity shares were bought back was Rs. 277.00 and Rs. 233.50 per equity share respectively. The average price (excluding brokerage and other charges) at which the equity shares have been bought back is Rs. 252.04 per equity share and the total amount deployed in the Buyback is Rs. 79.54 crores, which represents 99.43% of the Maximum Buyback Offer Size (excluding transaction cost).

EMPLOYEES STOCK OPTION SCHEME

Your company has Employees Stock Option Scheme for its permanent employees as per the scheme approved by shareholders in their Annual General Meeting held on July 23, 2015. The Company had obtained in-principle approvals from the Stock Exchanges for issue of 50 lakh equity shares through Employees Stock Option Scheme. During the year, the Nomination and Remuneration Committee in its meeting held on October 24, 2017 had granted 2.30 Lacs Stock Options to its 14 employees at an exercise price of Rs. 170 each. Subsequent to the year end, the Nomination and Remuneration Committee in its meeting held on April 25, 2018 had granted 21.30 Lacs Stock Options to its 58 employees (including three KMPs) at an exercise price of Rs. 150 each. Employees may exercise their options after vesting period, subject to compliance of other terms and conditions of the Scheme approved by the shareholders.

Further, the Committee in its meeting held on October 24, 2017 made allotment of 5.60 lakhs Equity Shares of Rs. 10 each to forty employees (including three KMPs) of the Company against conversion of Stock Options pursuant to GHCL ESOS 2015 -Series -1. Consequent to above allotment of 5.60 lakh Equity Shares, the Issued & Paid-up Capital of the Company stands increased to Rs. 97,42,32,860/- consisting of 9,74,23,286 equity shares of Rs. 10/- each from Rs. 96,86,32,860/- consisting of 9,68,63,286 equity shares of Rs. 10/- each.

The details of the Employee Stock Options plan form part of the Notes to accounts of the financial statements in this Annual Report and is also annexed herewith as Annexure-I and forming part of this Report.

FINANCE I. Soda Ash Expansion Loan

After successful completion of Soda Ash Expansion Phase

- I, your Company has started Phase - II with a Project Cost of Rs. 300 crores. Your company successfully tied up Term Loan for Rs. 225 Crores for a period of 10 years including moratorium period of 2 years at interest rate of 8.75% p.a. and availed disbursement of Term Loan of Rs. 80 crores during the current year.

II. Capex Program

Your company has also undertaken several Capex program in Home Textile and Yarn Divisions at the project cost of Rs. 88 Crores and your company has successfully tied up term loans for Rs. 58 crores for a period of 10 years including moratorium period of 2 years at an average interest rate of 8.5% p.a. Your company has availed term loan of Rs. 26 crores during the current year for the said capex program.

III. Conversion of Rupee Term Loan into Foreign Currency Loan

During the year, your company successfully converted some of high cost Rupee term loans carrying interest rate at 10% p.a. into Foreign Currency Loan at an average rate of 3.80%.

IV. Short Term Loan

During the year 2017-18 short term requirements were met through Cash Credit / Short Term Loan / Working Capital Demand Loan / Export Packing Credit / Pre-shipment in Foreign Currency / Buyers Credit whereby your company could manage to borrow at Weighted Average Interest rate at 6.32%.

V. Also your company could borrow Long Term Loans which includes Rupee Term Loans and Foreign Currency Loans at an average rate of 8.49%

Thus your company could manage to borrow Long Term Loans and Short Term Loans at an average rate of 7.61%.

Due to efficient cash flow management and timely repayment of interest and principal to various banks, CARE (Credit Analysis & Research Ltd) has upgraded rating from CARE A- to CARE A for long term facilities and from CARE A2 to CARE A1 for short term facilities of the Company.

During the financial year, your Company has transferred to investors' education and protection fund account (IEPF) a sum of Rs. 32.48 lacs towards unclaimed dividend/unclaimed deposits along with interest thereon.

DEPOSITS

Your Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014.

AWARDS AND RECOGNITION

Your Directors are pleased to inform that during the financial year 2017-18, your Company has received various awards and recognition. The major ones among them are as follows:

(i) Special Commendation for Golden Peacock Award for Excellence in Corporate Governance for the year 2017.

(ii) Golden Peacock Award for Corporate Social Responsibility

- 2017 for the year 2017.

(iii) GHCL Limited has been declared as the Winner of ‘Golden Peacock National Quality Award' for the year 2018.

(iv) GHCL Limited achieved 16th rank in Great Place to Work survey among India's Great Place to Work manufacturing sector.

(v) The President of Association Other ways Management & Consultancy France, certify that GHCL Limited has been selected to receive the Green Era Award for Sustainability.

SUBSIDIARIES

Grace Home Fashion, LLC, a subsidiary of the Company in USA engaged in Home Textile segment is catering to some of the popular Home-Textile Retailers like Bed Bath Beyond, Wood and Steinmart. In addition, Grace Home Fashion is also doing online Home-Textile Business in USA through JC Penny and Kohls. com. As reported in the previous year, Rosebys Interiors India Limited (RIIL) an Indian subsidiary, is under liquidation with effect from 15th July 2014.

Pursuant to requirement of Section 136 of the Companies Act, 2013, which has exempted companies from attaching the financial statements of the subsidiary companies

along with the Annual Report of the Company. The Company will make available the annual financial statements of the subsidiary company and the related detailed information to any members of the company on receipt of a written request from them at the Registered Office of the Company. The annual financial statements of the subsidiary company will also be kept open for inspection at the Registered Office of the Company on any working day during business hours. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies, associates etc. Details regarding subsidiaries have been provided in note no. 45 (refer page no. 171 of Annual Report) and also in the statement u/s 129(3) of the Companies Act, 2013 (refer page no. 120). The statements are also available on the website of the Company

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to the requirement of Regulation 33 & Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 201 5 (hereinafter referred as

Listing Regulations) read with other applicable provisions and prepared in accordance with applicable IND AS, for financial year ended March 31, 2018.

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of Regulation 34 of the Listing Regulations read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management's Discussion and Analysis Report which forms part of this Annual Report. The report on Management's Discussion and Analysis is annexed with the Report.

CORPORATE GOVERNANCE

Pursuant to Regulation 34 of the Listing Regulations read with Schedule V to the said Regulations, a compliance report on Corporate Governance has been annexed as part of the Annual Report along with Auditor's certificate for the compliance.

SECRETARIAL AUDIT REPORT

In line with the requirement of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with other applicable provisions, if any; the Board of Directors of the Company had appointed Mr. S Chandrasekaran, representing Chandrasekaran & Associates, Practicing Company Secretaries, New Delhi, to conduct Secretarial Audit of the Company for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed with the Board's report and formed as part of the Annual Report. This report is self-explanatory and does not call for any further comments.

LISTING OF THE EQUITY SHARES

The equity shares of your Company are listed at BSE Limited, Mumbai (BSE) and National Stock Exchange of India Limited, Mumbai (NSE). The annual listing fees for the year 2017-18 have been paid to all these Stock Exchanges.

DIRECTORS

Mr. Sanjay Dalmia and Mr. Anurag Dalmia directors retire by rotation and being eligible, offer themselves for re-appointment. The Board of Directors in their meeting held on January 31, 2018, had re-appointed Mr. Raman Chopra as a Whole-time Director designated as CFO & Executive Director (Finance) of the Company for a period of five years with effect from April 1, 2018, subject to the approval of the shareholders. The Board recommends their appointments at the ensuing Annual General Meeting.

Your directors would like to confirm that all Independent Directors of the Company have given their declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the Listing Regulations.

During the year, Mr. Sanjiv Tyagi, one of the Independent Director of the Company, has ceased from the directorship of the Company with effect from October 24, 2017, as per the provisions of Section 167(1) read with Sections 164 (2) of the Companies Act, 2013 on account of his disqualification in other companies. The Board of Directors placed on record their gratitude and appreciation for the immense contribution made by the outgoing director during his tenure as director of the Company.

MEETING OF THE BOARD

During the financial year ended March 31, 2018, the Board of Directors meets regularly to review strategic, operational and financial matters and has a formal schedule of matters reserved for its decision.

During the financial year ended March 31, 2018, four Board Meetings were held on May 20, 2017, July 29, 2017, October 24, 2017 and January 31, 2018. More details about the Board Meetings are mentioned in the Corporate Governance Report.

BOARD EVALUATION

In line with the provisions of the Companies Act, 2013 and SEBI Guidance Note on Board evaluation issued on January 5, 2017 read with relevant provisions of the SEBI Listing Regulations, 2015, the Board has carried out an annual evaluation of its own performance and that of its Committees and individual Directors through the separate meeting of independent directors and the Board as a whole.

The performance of the independent directors was evaluated by the entire Board except the person being evaluation in their meeting held on January 31, 2018. The performance of the Committees was evaluated by the Board seeking inputs from the Committee Members.

A separate meeting of Independent Directors was held on January 31, 2018, to review the performance of Non-Independent Directors', performance of the Board and Committee as a whole and performance of the Chairman of the Company, taking into account the views of Executive Directors and the Non-Executive Directors.

The performance evaluation of the Board and its constituents was conducted on the basis of functions, responsibilities, competencies, strategy, tone at the top, risk identification and its control, diversity, and nature of business. A structured questionnaire was circulated to the members of the Board covering various aspects of the Board's functioning, Board culture, execution and performance of specific duties, professional obligations and governance. The questionnaire was designed to judge knowledge of directors, their independence while taking business decisions; their participation in formulation of business plans; their constructive engagement with colleagues and understanding the risk profile of the company, etc. In addition to the above, the chairman of the Board and / or committee is evaluated on the basis of their leadership, coordination and steering skills.

Thereafter, the Nomination and Remuneration Committee used to review the performance of individual Directors on the basis of their contribution as a member of the board or committee. The quantum of profit based commission, payable to directors is decided by the Nomination and Remuneration Committee on the basis of overall performance of individual directors.

REMUNERATION POLICY

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

EXTRACTS OF ANNUAL RETURN

The extract of annual return as on the financial year ended March 31, 2018 in Form MGT - 9 is annexed herewith as Annexure-II and forming part of this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for overall development and welfare of the society. GHCL's commitment to the development of weaker sections of society is continuing since more than two decades. GHCL through its “GHCL Foundation Trust” has upgraded its CSR activities to cover a larger section of the society and included to provide support to the downtrodden, needy and marginalized citizens and also to create social infrastructure for their sustenance.

As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Sanitation, Vocational training institute, Education, Agro Based Livelihood, Health, cancer early detection camps, Rain Water Harvesting, Woman Empowerment, Animal Husbandry etc. These projects are covered under Schedule VII of the Companies Act, 2013. Pursuant to the provisions of Section 135 of the Companies Act, 2013 and Rules thereto, a Corporate Social Responsibility (CSR) Committee of the Board has been constituted to monitor CSR related activities, comprising of Mr. Mahesh Kumar Kheria as the Chairman of the Committee, Mr. Neelabh Dalmia and Mr. R S Jalan as members of the Committee. Subsequent to the year end, the Board of Directors in its meeting held on April 25, 2018, has reconstituted CSR Committee comprising of Mrs. Vijaylaxmi Joshi as the Chairperson of the Committee, and Mr. Mahesh

- Kumar Kheria, Mr. Neelabh Dalmia, Mr. R S Jalan and Mr. Raman Chopra as members of the Committee. The Annual Report of CSR activities are annexed herewith as Annexure-III and forming part of this Report

BUSINESS RESPONSIBILITY REPORTING

As per Regulation 34 (2) (f) of the Listing Regulations, listed companies shall submit, as part of their Annual Reports, Business Responsibility Report, describing the initiatives taken by them from an environmental, social and governance perspective, in the prescribed format. At present this provision is applicable to top 500 listed companies, based on market capitalisation as on March 31, 2018. As on March 31, 2017, GHCL Limited was on 456th position under NSE list and on 462nd position under BSE list. Hence, this clause was first time applicable to GHCL Limited in the last year. But, based on market capitalisation as on March 31, 2018, GHCL Limited is not part of the list of top 500 listed companies of NSE & BSE. However, your company will continue to publish Business Responsibility Report (BRR), for the purpose of establishing and strengthening the norms of Corporate Governance and setting the highest principle envisaged by SEBI under BRR reporting. The Business Responsibility Report of the Company for the financial year ended on March 31, 2018 is annexed herewith as Annexure-IV and forming part of this Report.

COMPOSITION OF AUDIT COMMITTEE

Audit Committee of the Board has been constituted as per Section 177 of the Companies Act, 2013 and rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014 and read with Regulation 18 of the Listing Regulations. Presently, the Audit Committee consists of four Independent directors having expertise in financial and accounting areas, comprising of Dr. B C Jain, Mrs. Vijaylaxmi Joshi, Mr. G C Srivastava and Mr. K. C. Jani. Details regarding Audit Committee and other Committees are also stated in the Corporate Governance Report.

COMPOSITION OF STAKEHOLDERS RELATIONSHIP COMMITTEE

The Stakeholders Relationship Committee has been constituted as per section 178 (5) of the Companies Act, 2013 read with Regulation 20 of the Listing Regulations. The Stakeholders Relationship Committee shall consider and resolve the grievances of the security holders of the company including complaints related to transfer of shares, non-receipt of annual report and non-receipt of dividend etc. The Stakeholders Relationship committee consists of Executive and NonExecutive directors comprising of Mr. Mahesh Kumar Kheria, Mr. Neelabh Dalmia, Mr. R S Jalan and Mr. Raman Chopra.

COMPOSITION OF NOMINATION AND REMUNERATION COMMITTEE

Nomination and Remuneration Committee of the Board has been constituted as per Section 178 of the Companies Act, 2013 and rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014 and read with Regulation 19 of the Listing Regulations. The Nomination and Remuneration Committee shall determine qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to the remuneration of the directors, Key Managerial Personnel and other employees. The Nomination and Remuneration Committee consists of three Non-Executive directors comprising of Mr. K C Jani, Mr. Sanjay Dalmia and Dr. B C Jain.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

As a conscious and vigilant organization, GHCL Limited believes in the conduct of the affairs of its constituents in a fair and transparent manner, by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In its endeavour to provide its employee a secure and fearless working environment, GHCL Limited has established the "Whistle Blower Policy". The Board of Directors in its meeting held on May 28, 2014, had approved the Whistle Blower Policy, which is effective from October 1, 2014 & the same has been duly amended effective from December 1, 2015. Mr. Mahesh Kumar Kheria, Independent Director of the Company is Ombudsperson.

The purpose of the policy is to create a fearless environment for the directors and employees to report any instance of unethical behaviour, actual or suspected fraud or violation of GHCL's code of conduct or Ethics Policy to the Ombudsperson. Details regarding Whistle Blower Policy are also stated in the Corporate Governance Report. The Whistle Blower Policy is posted on the website of the Company. There are no complaints reported during the year under Vigil mechanism.

RELATED PARTY TRANSACTIONS

There are no material related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. A statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors on a quarterly basis. The statement is supported by a Certificate from the CFO. All Related Party Transactions are placed before the Audit Committee and also before the Board.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. None of

the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.

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.

RISK MANAGEMENT POLICY

Pursuant to the requirement of Regulation 21 of the Listing Regulations, the Company had voluntarily constituted a Risk Management Committee. The details of Committee and other details are also set out in the Corporate Governance Report forming part of the Board's Report. The policy on Risk Management as approved by the Board is uploaded on the Company's website.

CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 are given in Annexure-III forming part of this Report.

MANAGERIAL REMUNERATION & PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company are given in Annexure-IV forming part of this Report.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT 2013

Your Company is committed in creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation. To empower women and protect women against sexual harassment, a policy for prevention of sexual harassment had been rolled out and Internal Complaints Committee as per legal guidelines had been set up at all major locations of the Company. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair inquiry process with clear time lines. There are no complaints reported during the year regarding sexual harassment.

STATUTORY AUDITORS

Your directors would like to inform that in the 33rd AGM held on July 19, 2016, M/s S. R. Batliboi & Co. LLP, Chartered Accountants (Firm Reg. No. 30100CE / E300005), was appointed as statutory auditors of the Company for a period of five years i.e. from the conclusion 33rd AGM till the conclusion of 38th AGM subject to ratification by members at every AGM. Ratification of appointment of M/s S. R. Batliboi & Co. LLP is being sought from the members of the Company at the ensuing AGM. The Board recommends their ratification.

AUDITOR’S REPORT

There is no qualification, reservation, adverse remark or disclaimer made by the Statutory Auditors and/or Secretarial Auditors of the Company in their report for the financial year ended March 31, 2018. Hence, they do not call for any further explanation or comment U/s 134 (3) (f) of the Companies Act, 2013.

COST AUDITORS

The Board has appointed M/s R J Goel & Company, Cost Accountants, New Delhi as Cost Auditors of the Company for all its divisions (i.e. Soda Ash, Yarn and Home Textile) for the financial year 2018-19.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

DIRECTORS’ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them and also based on the representations received from the Operating Management, your directors make the following statement in terms of Section 134 (3) (c) of the Companies Act, 2013 that:

a. in the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. such accounting policies as mentioned in the Notes to the Financial Statements have been selected 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 March 31, 2018 and of the profit and loss of the Company for the financial year ended March 31, 2018;

c. the proper and sufficient care has been taken by them for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts for the financial year ended March 31, 2018 have been prepared by them on a going concern basis;

e. proper Internal financial controls have been followed by the company and that such internal financial controls are adequate and were operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGMENT

The Directors express their gratitude to Financial Institutions, Banks, and various other agencies for the co-operation extended to the Company. The Directors also take this opportunity to thank the shareholders, customers, suppliers, lenders, distributors and other stakeholders for the confidence reposed by them in the Company. The employees of the Company contributed significantly in achieving the results. The Directors take this opportunity of thanking them and hope that they will maintain their commitment to excellence in the years to come.

For and on behalf of the Board of Directors

For GHCL Limited

SANJAY DALMIA

Chairman

Date : April 25, 2018

Place : New Delhi

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