TO THE MEMBERS
Your Directors have pleasure in presenting the Twenty-Fourth Annual Report and the Audited Financial Statements, including Consolidated Financial Statements, of the Company for the year ended 31 March 2024.
1. FINANCIAL RESULTS
The salient features of the Company's working are:
2. DIVIDEND
In February, 2024, the Board declared and paid a Special Interim Dividend of 5 per equity share of 10 each aggregating 2,495.73 million to commemorate the occasion of the Company entering its silver jubilee year. Your Directors have recommended a final 0.90 (previous year 1.20) per equity share on 499,145,736 dividendof shares of 10 each aggregating 449.23 million (previous year 598.97 million). The Directors consider this appropriate in view of having paid Special Interim Dividend of 5 per equity share in February, 2024 and further having regard to the requirements for funds for business and future growth of the Company.
3. OPERATIONS
During the year under review, the sales decreased from 34,732.57 million in the previous year to 28,062.81 million. Domestic sales turnover decreased from 26,068.92 million to 22,509.79 million and the export turnover also decreased from 8,663.65 million to 5,553.02 million. After making provision for depreciation, interest and Tax, the Net profit during the year under report stands at 3,696.74 million as against 5,034.37 million in the previous year. In FY 2023-24, monsoon was deficient and erratic and its time-spread was not conducive for agricultural operations. High cost raw material opening inventory, wide fluctuations in raw material costs and its sharp decrease in the middle of the season impacted generic- products pricing and led to slow liquidation of high cost inventory. Unfavourable weather conditions resulted inventory pile-up with channel partners. Similar unfavourable market conditions prevailed in international agrochemicals markets as well impacting exports. Geopolitical situations like continued Russia-Ukraine conflict and Red sea situation leading to high logistics costs impacted the business. Uncertainties continued for major part of the financialyear due to erratic monsoon and volatile pricing. Low demand, high costs and pressure of high working capital threw up unprecedented challenges to the agrochemicals industry.
4. REGULATORY ORDER FOR GLYPHOSATE USE
In October 2022, the Central Government issued a Notification mandating that Glyphosate, a broad spectrum and an important product for the Company, will be used only through Pest Control Operators. Several industry players and associations filed petitions before the Hon'ble Delhi High Court (“Hon'ble Court”) challenging the Notification. The petitions are under hearing. The Central Government has undertaken before the Hon'ble Court not to implement the Notification till disposal of the said petitions.
5. NEW PRODUCTS/IMPROVEMENTS/EXPANSIONS
The Company continues to maintaincertificationsfor ISO the manufacturing 9001, ISO 14001 and ISO 45001 sites. The Company has also initiated implementation of 5S Workplace Management System and Total Productive Maintenance (TPM) System with a view to achieve higher efficiencyand productivity. The quality of products is maintained and upgraded to the applicable national and international standards through rigorous pursuit of the quality management systems. The Company continues to enjoy the reputation of a consistent and reliable quality supplier. In the year under review, your Company continued to pursue initiatives to optimise utilisation of its manufacturing facilities, launch new products and install manufacturing capacities to supply new products in domestic and international markets. The Company continues to take initiatives for introducing new technical grade products and for expanding production capacities. During the year under review, the Company introduced breakthrough technology for oomycetes disease control - Derecho? which is a proprietary active ingredient of the parent company and an innovative advance liquid formulation of Copper. The Company has plans to introduce three new patented products during the financial year 2024-25. The would continue to focus on ramping up recently launched products and on introduction of new products which is core to sustainable future growth.
6. OUTLOOK
Agriculture sector is one of the important segments of Indian economy. It contributes about 15% to country's GDP and provides source of livelihood to about 50% of the population. Share of agriculture in the country's GDP has declined over the decades as manufacturing and service sectors have grown faster.
The domestic agrochemicals market is driven by rising population, which spells the need for increasing food production. Increasing focus on quality produce continues to boost consumption of agrochemicals. Government of India has taken a number of initiatives to protect interest of farmers and improve their profitability. Providing minimum support prices for several agriculture produce, Kisan Samman Nidhi, large budgetary allocation for farming sector are some such initiatives. The Government has also extended the period for free supply of ration for the poor. These initiatives are expected to improve rural economy which in turn will help in the growth of agro-chemical industry. The commodity prices are robust and farmers are expected to continue to invest in agrochemicals to safeguard the harvest.
The India Meteorological Department (“IMD”) has predicted above-average monsoon rainfall in 2024 and hence, the industry outlook for FY 2024-25 appears reasonably good. Market prospects appear positive in the international markets as well in 2024-25. Product prices are stable and are expected to remain stable throughout the year which augurs well for the industry.
7. SAFETY, HEALTH AND ENVIRONMENT
The Company continues to work on reducing environmental load, enhance safety, improve quality and reduce cost. The Company continues to play the role of a responsible corporate citizen in the fulfillment and enriching the environment and human health and safety. The Company has also adopted Responsible Care Policy and its initiatives demonstrate its commitment towards comprehensive approach for safeguarding environment, health and safety of all stakeholders and aims at achieving and sustaining high standards of performance. The Company also reviews and monitors these Quality, Environment, Health & Safety policies and sustainability activities to ensure continual improvement.
The Company's commitment to its safety management programs follows a top-down approach towards establishing, demonstrating, sustaining and improving the safety culture and incorporating the Company's core value of safety in their daily responsibilities. Safety audit, training programs and other safety management processes are carried out at regular intervals.
The Company has adopted plastic waste management process to minimize the amount of ‘post-use plastic waste' in the environment through a plastic credit platform dedicated to collection, segregation and recycling of such waste. The green initiatives of the Company in the form of harvesting wind and solar energy and treatment of sewage water contribute to improving environment. The Company continues to work towards reduction of greenhouse gases for sustainable economic and social values. These initiatives are implemented through ‘Science Based Targets'.
8. EDUCATION, LEARNING AND HUMAN RESOURCES
Building a strong workforce through learning, development, goal setting and performance management
The Company invests in attracting right talent and skill-sets to drive its sustainability-led business strategy. Its human resource framework is built around a model designed to create a skilled and productive structure. The focus is on addressing the existing skill-gaps and attracting new and industry-relevant skills which include functional/technical and on-the-job training programs. During the year under review, as a part of the leadership training initiative, the Company undertook strength-based intervention through Gallup International for seniors and a few second line managers from sales and marketing functions to enrich their competencies. The Company has identified development of managerial capability as a key focus area for The Company has a robust goal- setting and performance-management process in place for aligning individual interests, goals, targets and achievements with the functional goals and finally with the corporate strategic goals, targets and achievements.
The employees receive real time feedback on their performance and improvement areas through a structured review process which is designed to evaluate and identify development opportunities. The Company focuses on empowering employees with skills in critical development areas identified pursuant to training-needs analysis, discussions. The Company aims at building a pool of leaders and ensuring succession planning across the organisation for critical and leadership positions.
9. INSURANCE
The Company continues to carry adequate insurance cover for all its assets against foreseeable perils like fire, flood, earthquake, etc. and continues to maintain the Liability Policy as per the provisions of the Public Liability Insurance Act.
10. SUBSIDIARY COMPANIES
On 15 December 2023, the Company acquired 85% equity shares (on fully diluted basis) and controlling stake in Barrix Agro Sciences Private Limited, a Bangaluru based company engaged in R&D innovation, manufacturing and marketing of Integrated Pest Management (“IPM”) and Integrated Plant Nutrition Management (“IPNM”) products especially pheromone traps and chromatic sheets for agricultural pest management. This acquisition is in alignment of the Company's strategy to build a more sustainable portfolio of green chemistries and offer IPM and IPNM products and solutions to farmers. Thus, Barrix Agro Sciences Private Limited has become the Company's subsidiary with effect from 15 December 2023.
Highlights of the financial performance of Barrix Agro Sciences Private Limited are as follows:
In February 2024, the shareholders of Excel Crop Care (Africa) Limited, the Company's Tanzania based subsidiary, have passed a resolution approving its voluntary winding up with effect from 31 March 2024. The winding up process for the subsidiary is underway and is subject to legal, regulatory and other processes and procedures under the laws in Tanzania. Your Company holds 99.9% of the equity shares of Excel Crop Care (Africa) Limited. This subsidiary is an unlisted ‘non-material' subsidiarywhichwasnothavinganysignificantbusiness or commercial activities and had been incurring losses for the past three years. It has no material financial liability on its balance sheet and has a positive net worth as on 31 March 2024. Its winding up is not likely to materially impact business, commercial activities or financial position of the Company.
Highlights of the financial performance of Excel Crop Care (Africa) Limited, Tanzania are as
The Financial Statements and the Reports of the Board of Directors and the Auditors of Barrix Agro Sciences Private Limited and Excel Crop Care (Africa) Limited are posted on the Company's website: www.sumichem.co.in.
11. DISCLOSURE UNDER THE COMPANIES ACT, 2013
Information is given below pursuant to various disclosure requirements prescribed under the Companies Act, 2013 and rules thereunder, to the extent applicable to the Company. Some of the disclosures have been included in appropriate places in the Corporate Governance Report which is part of the Board's Report.
a) Energy Conservation, Technology Absorption and Foreign Exchange earnings 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, is given in Annexure I.
b) Annual Return:
Annual return as on 31 March 2023 in form MGT-7 filed with the Ministry of Corporate Affairs is available on the Company's website https://sumichem.co.in/pdf/22-23/Annual%20Return.pdf.
Annual return as on 31 March 2024 in form MGT-7 will also be posted on the Company's website after the same is filed with the Ministry of Corporate Affairs.
c) Policy on Directors' appointment, Remuneration Policy and information regarding remuneration:
Particulars of the Company's Policy on Directors' appointment, Remuneration Policy and information pursuant to Rule 5(1) of the Companies (Appointment & Remuneration) Rules, 2014 are given in Annexure II.
d) Particulars of Loans, Guarantees and Investments:
The 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.
e) Related Party Transactions:
All contracts/arrangements/transactions entered by the Company duringthefinancialyear with related parties were on an arm's length basis.
All related party transactions are placed before the Audit Committee for their approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a repetitive nature. The transactions entered into pursuant to the omnibus and specific approvals are reviewed periodically by the Audit Committee.
Pursuant to the provisions of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the said Regulations”), all material related party transactions require approval of the members through a resolution. The said Regulations define the term ‘material' to mean a transaction with a related party which individually or taken together with previous transactions during a financial year exceeds ten percent of the annual consolidated turnover of the Company as per the last audited financial statement of the Company.
During the year, the Company entered into transactions with Sumitomo Chemical Company, Limited, Japan, the holding company, which are considered ‘material transactions' in terms of the said Regulations. These transactions were approved by the shareholders by an ordinary resolution passed at the previous annual general meeting held on 28 July 2023.
The Company is seeking approval of the shareholders, through an ordinary resolution at the ensuing annual general meeting, for the transactions entered into / proposed to be entered into with the holding company during the Financial Year 2024-25 up to an amount not exceeding 9,500 million.
The Company had no transactions during F. Y. 2023-24 requiring disclosure in the Form AOC-2 under the Companies Act, 2013.
The Policy on related party transactions as approved by the Board may be accessed on the Company's websitehttps:// sumichem.co.in/pdf/20220603121214.pdf?v=1.0.
f) Business Risk Management:
The Board has formed Risk Management Committee pursuant to the provisions of Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to identify and monitor risks faced by the Company. The Committee deliberates on the major enterprise and business risks identified by the management, analysis of their impact and mitigation measures for addressing the risks. The major risk areas relate to risks associated with material procurement and manufacturing operations, regulatory risks, cyber security / IT related risks, human resources related risks, currency risks, credit risks mainly relating to exports and insurance adequacy risks.
g) Evaluation of the performance of the Board, Committees of Directors and Individual Directors:
The Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual Directors, including performance of the Chairman of the Board. As a part of this mechanism, a structured questionnaire, approved by the Company's Nomination and Remuneration Committee, is used to carry out evaluation of performance of the Board, Committees of Directors and individual Directors. The questionnaires take into consideration various criteria and factors.
h) Material orders passed by the regulatory authorities or courts/material changes or commitments:
There are no significant material orders passed by regulators or courts which can impact the going concern status of the Company and its future operations. There are no material changes or commitments occurring after 31 March 2024 which may affect the financial position of the Company.
i) Internal Financial Controls and their adequacy:
The Company has adequate system of internal controls to safeguard and protect from loss, unauthorised use or disposition of its assets. All the transactions are properly authorised, recorded and reported to the management. The Company is following all the applicable Accounting Standards for proper maintenance of books of accounts and for financial reporting.
j) Performance of subsidiary companies:
Details of performance and financial position of the subsidiary companies, are given in Form AOC-1 inAnnexure III. The Company has no associate company.
k) Corporate Social Responsibility (CSR) initiatives:
The Company has formulated its Corporate Social Responsibility Policy which has been posted on its website https://sumichem.co.in/pdf/Corporate%20Social%20Responsibility%20Policy.pdf A brief outline of the Policy and the Annual Report on CSR Activities is given in Annexure IV.
l) Particulars of Employees:
The information required under Section 197 of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure V.
m) Secretarial Auditor and Secretarial Audit Report:
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules made thereunder, M/s Saraf & Associates, Practicing Company Secretaries, Mumbai (FCS:1596; CP NO.642), were appointed Secretarial Auditors to conduct secretarial audit for the year ended 31 March 2024. The Report of the Secretarial Auditors is attached as Annexure VI.
n) Secretarial Standards:
The Company has complied with the applicable ‘Secretarial Standards on Meetings of the Board of Directors - SS 1' and ‘Secretarial Standards on General Meetings - SS 2'.
12. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr Tadashi Katayama, Director, retires by rotation and being eligible, offers himself for reappointment.
The first five-year term of Dr Mukul G Asher, Mr B V Bhargava and Mrs Preeti Mehta, Independent Directors, expires in August 2024. Special resolutions proposing reappointment of Dr Mukul G Asher and Mrs Preeti Mehta for the second term as Independent Directors are included in the notice of the ensuing annual general meeting.
It is proposed to promote Dr Suresh Ramachandran, Whole-time Director, to the position of Deputy Managing Director with effect from 01 September 2024.
A special resolution proposing appointment of Mr N Sivaraman as Independent Director with effect from 01 September 2024 is part of the notice of the ensuing annual general meeting.
Mrs Deepika Trivedi was appointed Company Secretary and Compliance Officer with effect from 01 April 2023 in place of Mr Pravin D Desai who retired.
13. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors confirm that:
(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same; (b) they 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 and of the profit of the Company for that period; (c) they have taken proper and sufficient care 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) they have prepared the annual accounts on a going concern basis; (e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.
14. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
Business Responsibility and Sustainability Report prepared in the prescribed form pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in relation to initiatives taken from environmental, social and governance perspective, forms part of the Annual Report.
15. CORPORATE GOVERNANCE
Your Company is committed to the principles of good corporate governance and the Board of Directors lays strong emphasis on transparency, accountability and integrity. Your Company has complied with all the requirements of the Code of Corporate Governance contained in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and, pursuant thereto, Management Discussion and Analysis and the Corporate Governance Report are annexed and form part of the Annual Report.
16. AUDITORS AND AUDITORS' REPORTS
The Independent Auditors' Reports on Financial Statements, including Consolidated Financial Statements, of the Company for the year ended 31 March 2024, issued by M/s SRBC & CO LLP, the Auditors, are enclosed with the Financial Statements in this Annual Report. The Independent Auditors' Reports are unmodified and do not contain any qualification, reservation or adverse remark. With respect to the observations in the Independent Auditors Report relating to audit trail feature of the Company's accounting software, the same has been explained in Note 51 to the Standalone Financial Statements.
The term of appointment of Messrs SRBC & CO LLP as Auditors ends on the conclusion of the ensuing annual general meeting. It is proposed to appoint Messrs BSR & Co. LLP, Chartered Accountants, as the Auditors of the Company for a period from the conclusion of this meeting till the conclusion of the 29th annual general meeting. A resolution proposing their appointment is included in the notice of the ensuing annual general meeting.
17. COST RECORDS AND COST AUDIT REPORT
The Company prepares and maintains cost records as specifiedby the Central Government under Section 148(1) and rules made thereunder. The cost records for the year 2022-23 were subjected to cost audit by M/s GMVP & Associates LLP, Cost Auditors. The Cost Audit Report for the financial year 2022-23 issued by the Cost Auditors was filed with the Ministry of Corporate Affairs on 28 September 2023 vide SRN: F63581011.
18. ACKNOWLEDGEMENTS
Your Directors wish to place on record their sincere appreciation of the wholehearted co-operation received from the Company's Shareholders, Bankers, various authorities of the Governments and business associates.