To
The Members,
Your Directors are indeed pleased to present the Fourth Annual Report along with Audited financial statements of the Company for the financial year ended March 31, 2023. These financial statements have been prepared in accordance with Indian Accounting Standards (Ind-AS) as required under The Companies Act, 2013.
FINANCIAL RESULTS:
(Rupees in Lakhs, unless otherwise stated)
OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS:
During the year under review, the revenue from operations were Rs. 64,804.10 lakhs, which is nearly flat. The Profit before tax stood at Rs. 5,859.25 lakhs, which is sharply lower by about 35.78 %. This performance needs to be evaluated considering the relatively weaker second and third quarters. The silver lining in the annual performance is equally sharp revival during January March, 2023 quarter over immediately preceding quarter.
CHANGE IN NATURE OF BUSINESS:
There is no change in the nature of business of the Company during the year.
DIVIDEND:
Your Directors are pleased to recommend a dividend of Rs. 7.50 (i.e. 75%) per equity share for the financial year ended March 31, 2023, subject to the approval of the shareholders at the ensuing Annual General Meeting of the Company. Dividend will be paid to those shareholders whose names appear in the Register of Members as on Book Closure / Record Date to be fixed by the Company.
The Company has formulated Dividend Distribution Policy in compliance with Regulation 43A of SEBI (LODR) Regulations, 2015. The Dividend Distribution policy is placed on the Website of the Company at https://www.fairchem.in/investor-relations/ Policies/Dividend-Distribution-Policy.pdf
Pursuant to the Scheme of Arrangement and Amalgamation between FAIRCHEM SPECIALITY LIMITED (FSL) (‘Demerged Company' / ‘Transferee Company') (Now known as PRIVI SPECIALITY CHEMICALS LIMITED) AND FAIRCHEM ORGANICS LIMITED (FOL) ‘Resulting Company') AND PRIVI ORGANICS INDIA LIMITED (‘Transferor Company') AND their respective Shareholders, all the assets and liabilities of Demerged Undertaking of the Demerged Company were transferred to Resulting Company. Accordingly, along with Rsall' the assets and liabilities, four banking accounts, being Unpaid Dividend accounts for the financial years 2015-16, 2016-17, 2017-18 and 2018-19 along with corresponding liability of Equity Dividend Payable for each of the years were also transferred from the books of erstwhile FSL to the books of FOL.
Pursuant to the provisions of The Companies Act, 2013 and / or Rules made thereunder, such unpaid dividend accounts need to be carried in the books for seven years. As the RsCompany' FSL (whose name was subsequently changed to Privi Speciality Chemicals Limited RsPSCL') is under the management of Privi group, the periodical compliance under all applicable laws including the Company Law in respect of the above accounts is to be done by the said PSCL. In view of this, after taking the consent of the Boards of both the companies, the above banking accounts, being the assets along with corresponding liabilities have been transferred from the books of FOL to the books of PSCL as at March 31, 2023. This transfer per se does not impact the net worth of any of the companies.
TRANSFER TO RESERVE:
Your Directors have decided not to transfer any amount to the Reserve for the year under review.
MATERIAL CHANGES AND COMMITMENTS:
There have been no material changes and commitments which have occurred between the end of the financial year to which the financial statements relate and the date of this Report, affecting the financial position of the company.
CAPITAL STRUCTURE:
The Company has only one class of Equity Shares having equal voting rights. The present issued, subscribed and paid up share capital of the Company is Rs. 13,02,09,020/- divided into 1,30,20,902 Equity Shares of Rs. 10/- each fully paid up. There is no change in the Capital structure of the Company during the year.
IMPACT OF COVID-19 PANDEMIC:
Health scares due to COVID-19 Pandemic had resulted in global economic disruption for an extended period of nearly 2 years over its various phases. However, due to robust vaccination programmes, particularly by countries with large population, the pandemic could be controlled to a substantial extent. The Company was not directly adversely impacted due to this pandemic during the year under review.
SIGNIFICANT EVENT DURING THE YEAR UNDER REVIEW:
BSE Limited and National Stock Exchange of India Limited, vide their letters dated February 27, 2023, had approved the application for reclassification of 17 applicants of Privi Group from “Promoter” to “Public”.
MEETINGS OF THE BOARD:
During the Financial Year 2022-23, 4 (four) meetings of the Board of Directors took place at which sufficient quorum was present throughout all the meetings. In respect of these meetings, proper notices were given, and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. For further details, please refer Report on Corporate Governance.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS:
The Company has not given any loan, made investment, given any guarantee or provided any security to the persons covered u/s. 186 of the Companies Act, 2013.
CORPORATE GOVERNANCE, MANAGEMENT DISCUSSION AND ANALYSIS REPORT AND BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT:
A Report on the Corporate Governance along with a certificate from a practicing Company Secretary regarding the compliance of conditions of Corporate Governance as stipulated in Regulation 34(3) of SEBI (LODR) Regulations, 2015 read with Schedule V of the said regulations and the Management Discussion and Analysis Report are attached as a separate section of this Annual Report.
Pursuant to Regulation 34(2)(f) of the Listing Regulations as amended from time to time, the Business Responsibility and Sustainability Report (‘BRSR') and initiatives taken from an environmental, social and governance perspective in the prescribed format is attached as a separate section of this Annual Report.
AUDIT COMMITTEE:
The Audit Committee of the Company is duly constituted in compliance with Regulation 18 of SEBI (LODR) Regulations 2015. The Composition of Audit Committee is given in the Corporate Governance Report forming part of this Report.
DEPOSITS:
The Company has not accepted nor renewed any deposits falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014.
CREDIT RATING:
CARE Ratings Limited carried out annual review of credit facilities of HDFC Bank and vide its letter dated August 12, 2022, has assigned/reaffirmed its rating as under: 1. For Long-term Bank facilities: CARE A+; Stable (Single A Plus; Outlook Stable) 2. For Long-term / Short term Bank facilities: CARE A+; Stable / CARE A1+ (Single A Plus; Outlook: Stable / A One Plus) 3. Short Term Bank facilities: CARE A1+ (A One Plus)
INVESTOR EDUCATION AND PROTECTION FUND (IEPF):
The Company was incorporated during 2019 and has not completed period of seven years. Hence, the provisions of Companies Act, 2013 read with Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 (“IEPF Rules”) which provides that all unclaimed dividends are required to be transferred by the Company to the IEPF, after completion of seven (7) years, are not applicable. Further, according to IEPF Rules, the shares on which dividend has not been claimed by the shareholders for seven (7) consecutive years or more shall be transferred to the demat account of the IEPF Authority. As this is only the fourth financial year of the Company, this provision is also not applicable to the Company.
TECHNICAL ACHIEVEMENT:
The Company keeps on exploring the possibility of technical improvement and process optimization for better yields / product mix / energy efficiency.
DIRECTORS:
In accordance with the provisions of Section 152 of the Act, Shri Nahoosh Jariwala (DIN: 00012412) shall retire at the forthcoming Annual General Meeting of the Company and being eligible, has offered himself for re-appointment. The tenure of Shri Nahoosh Jariwala as Managing Director of the Company, will come to an end on August 12, 2023 and hence, the Board of Directors, upon the recommendation of the Nomination and Remuneration Committee, had re-appointed Shri Nahoosh Jariwala for a further period of three years w.e.f. August 13, 2023 to August 12, 2026, subject to approval of the members at the ensuing Annual General Meeting of the Company.
Shri Utkarsh Shah, one of the Promoters of the Company, post his resignation as Director, has applied for reclassification of his status from ‘Promoter' to ‘Public' category of the Company pursuant to Regulation 31A of SEBI (LODR) Regulations, 2015, which was approved by the Board of Directors in their Meeting held on 28.03.2022. The Company has then submitted the application to both the Stock Exchanges for reclassification of his status from ‘Promoter' to ‘Public' category of the Company.
Thereafter, due to sudden demise of Shri Utkarsh Shah on 22.08.2022, 23,333 Equity Shares held in the sole name of Shri Utkarsh Shah were transmitted in favour of Shri Aadarsh Shah (first holder) and Mrs. Radhika Shah (joint holder) on 08.09.2022 and as per SEBI Regulations, they have now become the promoters of the Company. Based on the application by them, the Company has applied to both the Stock Exchanges for their re-classification to ‘Public' category. The application, as on date, is under process.
DECLARATION OF INDEPENDENCE GIVEN BY INDEPENDENT DIRECTORS:
The Company has received declarations from all the 4 Independent Directors of the Company, inter alia, confirming that they meet the criteria of Independence and that they are not disqualified for continuing as an Independent Director as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (LODR) Regulations, 2015, as amended, respectively.
COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF A DIRECTOR ETC.:
Pursuant to the provisions of Section 178 and other applicable provisions, if any, of the Companies Act, 2013 read with the Rules made thereunder and Regulation 19 of SEBI (LODR) Regulation, 2015, the Board of Directors at their Meeting held on 12.08.2020 approved the Nomination and Remuneration Policy. The salient features of the said policy covering the policy on appointment and remuneration and other matters have been explained in the Corporate Governance Report. Copy of Nomination and Remuneration Policy of the Company can be accessed from the website of the Company https:/ /www.fairchem.in/investor-relations/Policies/Nomination-&-Remuneration-Policy-FOL.pdf
BOARD EVALUATION:
Based on the criteria for evaluation of Independent Directors and the Board as recommended by the Nomination and Remuneration Committee and as adopted by the Board, Board carried out evaluation of its own performance, the individual Directors and the Committees. The evaluation of Independent Directors, as provided in Regulation 17 (10) of Listing Regulations, was done by the Board which included their performance and fulfillment of independence criteria as specified in Listing Regulations and their independence from the management.
The Independent Directors reviewed the performance of (1) Non-Independent Directors and Board as a whole and (2) the Chairman of the Company, taking into account the views of the Managing Director and Non-executive non-independent Director in their separate meeting held on March 10, 2023. They expressed their satisfaction with the performance of Non-Independent Directors and Board as a whole and also of the Chairman of the Board.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement of Section 134(3)(c) of the Companies Act, 2013 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby make the following statements: (i) that in the preparation of the financial statements for the year ended March 31, 2023, the applicable accounting standards read with requirements set out under Schedule III of the Companies Act have been followed and there are no material departures from the same; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year viz. March 31, 2023 and of the profit of the Company for that period; (iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a ‘Going Concern' basis; (v) that the Directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and (vi) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
LISTING:
The securities of the Company are listed with BSE Limited and National Stock Exchange of India Limited with effect from December 24, 2020. SEBI (LODR) Regulations, 2015 became applicable to the Company from the said date. The Company has paid the listing fees for F.Y. 2023-24 on the paid up equity share capital to both the Stock Exchanges.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:
All contracts / arrangements / transactions with related parties entered into by the Company during the financial year were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material as described under the Regulation 23(1) of SEBI (LODR) Regulations 2015.
The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. Copy of Policy on Related Party Transactions can be accessed from the website of the Company https://www.fairchem.in/investor-relations/ Policies/Related-Party-Transactions-Policy-FOL.pdf
INTERNAL CONTROL AND ITS ADEQUACY:
The Company has, commensurate with its size, single operational location and resultant requirement, Internal Control system. A well-known firm of Chartered Accountants carried out internal audit of the said system. Based on the recommendation / report of the said Internal Auditors which are presented to the Audit Committee, required corrective actions were initiated / taken by the Company.
INTERNAL FINANCIAL CONTROLS:
The Directors have laid down policies and procedures which are adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company‘s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;
FRAUD:
During the year under review, no fraud was reported by the statutory auditors under section 143(12) of the Act.
CORPORATE SOCIAL RESPONSIBILITY:
The Board had approved Corporate Social Responsibility Policy in its meeting held on 12.08.2020. The copy of Corporate Social Responsibility Policy is placed on the website of the Company at https://www.fairchem.in/investor-relations/Policies/ CSR-Policy-FOL.pdf.
The Corporate Social Responsibility Committee of the Board is duly constituted in compliance with provisions of Section 135 of Companies Act 2013. The Committee comprises of 1. Shri Nahoosh Jariwala 2. Shri Sumit Maheshwari 3. Ms. Sonal Ambani The other details of the CSR activities as required U/s. 135 of The Companies Act, 2013 are given in the CSR Report as Annexure A to Directors' Report.
PARTICULARS OF EMPLOYEES:
Details pertaining to remuneration as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) and 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided under Annexure B to this Directors' Report.
RISK MANAGEMENT POLICY:
The Company has put in place Risk Management Policy and Plan. The Company has identified (i) Business Risk (ii) Technological Risk (iii) Financial Risk (iv) Liquidity Risk (v) Exchange Rate Risk (v) Country specific Risk (vi) Safety Risk (vii) Employee Risk and (viii) Risk of Natural Calamities which in the opinion of the Board may threaten the existence of the Company.
The team of top 3 officials of the Company under the supervision and guidance of the Managing Director monitor the above mentioned or any other unforeseen / unexpected risks and ensure the smooth and clinical implementation of mitigation measures as outlined in the plan and / or as are in the best interest of the company under the circumstances.
STATUTORY AUDIT REPORT:
The auditors M/s. B S R & Co. LLP, Chartered Accountants LLP were appointed at the 1st Annual General Meeting held on December 31, 2020 for a term of five years, from the conclusion of first AGM till the conclusion of sixth AGM to be held in the year 2025. The Auditors' report during the year under review does not contain any qualification/ remarks nor any instance of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board's report.
SECRETARIAL AUDIT REPORT:
As required by Section 204 of The Companies Act, 2013 read with The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed M/s. Parikh Dave & Associates, Company Secretaries, Ahmedabad, a peer reviewed firm of Company Secretaries in Practice to conduct Secretarial Audit for the Financial Year 2022-23. The Report of the Secretarial Audit for the financial year ended on March 31, 2023 is enclosed as Annexure C to this Directors' Report.
The Secretarial Audit Report of the Company for the F.Y. 2022-23 is qualified with following observation
As mandated under provision of Regulation 19 and 20 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, no meeting of Nomination and Remuneration Committee and Stakeholders Relationship Committee respectively was held.
During the year under review, conduct of meetings of Nomination and Remuneration Committee & Stakeholders Relationship Committee were inadvertently missed out. The Company will conduct such meetings during the year 2023-24 and will be more cautious in future.
CONFIRMATION OF COMPLIANCE OF SECRETARIAL STANDARDS:
During the year under review, the Company has complied with the applicable Secretarial Standards i.e. SS-1 and SS-2, relating to “Meetings of the Board of Directors” and “General Meetings”, respectively, issued by The Institute of Company Secretaries of India (ICSI). The Company confirms compliances of applicable secretarial standards.
MAINTENANCE OF COST RECORDS:
As per the Companies (Cost Records and Audit) Rules, 2014 as amended by Companies (Cost Records and Audit) Amendment Rules, 2014, issued by the Central Government, the Company is required to get its cost records maintained by it for the products covered under Chapters 2917 and 3823 of Sr. No. 18 of table mentioned under Rule 3 (B) Non-regulated Sectors audited by a Cost Auditor.
As specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, the Company has maintained cost accounts and records.
COST AUDITOR:
The Company had appointed M/s. Rajendra Patel and Associates, as Cost Auditors for financial year 2022-23. The Board of Directors has approved their appointment as Cost Auditor for F.Y. 2023-24 also and has recommended remuneration of Rs. 75,000/- plus applicable tax. The necessary resolution for ratification of their remuneration by members has been put in the notice convening the 4th Annual General Meeting.
VIGIL MECHANISM:
As required under Companies Act and SEBI (LODR) Regulations, the Company has put in place Vigil Mechanism / Whistle Blower Policy for Directors and Employees so that the Directors and employees can report concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct Policy and SEBI Insider Trading
Regulations. Whistle Blower Policy is disclosed on the website: http://fairchem.in/investor-relations/Policies/Whistle-Blower-Policy.pdf
POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE:
Company has constituted Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Act). There is no female employee on the payroll of the Company itself. The Company, therefore, has appointed a woman employee under the contract as the Presiding Officer to comply with the requirement of the Act.
Company has framed a policy on Sexual Harassment at workplace which aims to provide protection to women employees at workplace and prevent and redress complaints of sexual harassment and for matters connected therewith or incidental thereto, with the objective of providing a safe working environment, where employees feel secure.
The Company has not received any complaint under the Sexual Harassment of women at Workplace during the financial year under review.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED:
No significant and material orders were passed during the year under review by regulators or courts, or tribunals impacting the going concern status and Company's operations in future,
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:
(Initiatives of the Company for Energy conservation, and Technology absorption, if any and details of Foreign Exchange earnings and out go).
(A) Conservation of energy-
(i) The steps taken or impact on conservation of energy:
Based on an internal / external energy audit which is a regular periodical feature, required measures are taken for optimization of energy.
(ii) the steps taken by the company for utilising alternate sources of energy : None. (iii) the capital investment on energy conservation equipment : None.
(B) Technology absorption :
(i) the efforts made towards technology absorption:
Technology absorption is an ongoing process in the Company. The Company keeps on exploring new processes at Laboratory scale and then implements the same at Plant level.
(ii) the benefits derived like product improvement, cost reduction, product development or import substitution: The Company continuously works on increasing yield of prime products which helps in overall cost reduction. (iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year): (a) the details of technology imported: Nil (b) the year of import: Not Applicable (c) whether the technology been fully absorbed: Not Applicable (d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof: Not Applicable (iv) the expenditure incurred on Research and Development: Rs. 19.48 Lakhs.
C. Foreign exchange earnings and Outgo :
DETAILS OF SUBSIDIARY, JOINT VENTURE, ASSOCIATE COMPANY:
The Company does not have any subsidiary company or associate company. Company has not entered into any joint venture. Hence, no further disclosures are required in this regard.
EXTRACT OF ANNUAL RETURN:
As per the provisions of section 92(3) read with section 134(3)(a) of the Act, the Annual Return as on March 31, 2023 in the prescribed form no. MGT-7 is available on the website of the Company and web link of the same is https://www.fairchem.in/ investor-relations-fol.html - Annual Reports.
GENERAL DISCLOSURE
Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions/ instances on these items during the year under review:
1. Issue of equity shares with differential rights as to dividend, voting or otherwise.
2. Issue of Shares (including Sweat Equity Shares) to employees of the Company under any scheme.
3. Voting rights which are not directly exercised by the employees in respect of shares for the subscription/purchase of which loan was given by the Company (as there is no scheme pursuant to which such persons can beneficially hold shares as envisaged under section 67(3)(c) of the Companies Act, 2013).
4. Application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016.
5. One time settlement of loan obtained from the Banks or Financial Institutions.
ACKNOWLEDGMENTS:
Your Board of Directors wishes to place on record its appreciation to the contribution made by the employees of the Company. The Company was able to hold on to its share on the domestic market for two prime products during the year through the competence, hard work, solidarity, cooperation and support of employees at all levels. The Directors also wish to thank the Company's vendors, Stock Exchanges, Government authorities, bank and shareholders for their cooperation and assistance extended to the Company.