Kothari Petrochemicals Ltd

<dhhead-BOARD'S REPORT</dhhead-

To the Members

The Directors have pleasure in presenting before you the 35^th Annual Report of the Company together with the Audited Financial Statements for the year ended 31^st March 2024.

Financial Summary of the Company (Rs in Lakhs)

Financial Highlights

The Company's Profit before Tax for the year ended 31^st March 2024 has increased by Rs 3,987.49 lakhs to Rs 9,508.41 lakhs as compared to Rs 5,520.92 lakhs in the previous year. The total revenue from operations for the year ended 31^st March 2024 is Rs 60,313.72 lakhs as against Rs 48,214.70 lakhs in the previous year. The increase in revenue is mainly due to increase in sales volume of Poly Iso Butylene (PIB) from 32,554.83 metric tons to 41,438.94 metric tons.

Status of the Plant

Your company has recorded the highest production since inception due to the recently completed De-bottlenecking project. The plant was operated for 351 days in FY 202324 without any major shutdowns except for the shutdown of 9 days during Dec'23 due to unexpected flooding in the Manali Industrial Area following heavy rainfall.

The raw material supply from the adjacent refinery is steady both in terms of quantity and quality throughout the year, barring a few occasions when the quality was below normal level momentarily. Due to a shutdown at the other Raw Material supplier, supplies were restricted during Oct & Nov'23. Continuous focus on operating excellence and more focus on domestic sales helped the Company to achieve greater operating efficiency. Other efforts put in for cost savings in energy, packing materials, logistics costs etc. also contributed to the better overall performance of the Company.

The paddy husk which is the main fuel for the Captive Power Plant, is in short supply due to restricted paddy allocation to . the hulling mills by the State Govt. On top of that, many coal

consuming Industries also switched over to husk fuel due to cost competitiveness adding to a cost of power increase.

Captive Power plant is in healthy condition and was operated for 311 days. Additional power requirements were met by the State Electricity Board Grid. Solar panels continue to generate power (247Kw) and are consumed by the plant.

The required water is supplied by the Metro Water Board from their nearby TTRO plant. Since the plant is equipped with Rainwater collection infrastructure, significant rainwater was collected and used for the plant, which has also contributed to a lot of saving on water costs. Your company has engaged NEERI (National Environmental Engineering Research Institute) to study the feasibility of going for the ZLD scheme, and the report is awaited. The outcome of the report shall be submitted to the State Pollution Control Board as per their directions and for further action.

It's a proud moment that the company has secured ISO 50001 certification in the year 2023-24 for Energy Management System apart from the existing ISO certification - 9001:2015 for Quality Management system,14001:2015 for Environmental Management system and ISO 45000 certification for Occupational Health and Safety.

All statutory requirements regarding the Petroleum and Explosives Safety Organization (PESO), and the Directorate of Industrial Safety and Health (DISH) are adhered to. All preventive and predictive maintenance are being followed systematically to keep the overall plant in good and safe condition.

Performance

Your Company has achieved 12,401 calendar days of "Accident-Free" operation since inception. The Company has been continuously imparting training to all its employees to ensure that all project execution, apart from plant operation, is "Accident-Free" and efficient. Your company crossed 10 million Safe Manhours in Aug'23.

Your Company has received the "Sustainability Champion -Merit Category from CII-TCM Award", "The Best Energy Efficient Unit-General Sector" from Cll during the year 2023-24.

Additional facilities in the neutralization sections were commissioned downstream of the process chain to reduce the shutdown time by 50% which increased productivity.

A few learnings from the recent flooding helped us take action to safeguard the plant & machineries in the future from any heavy flooding situation.

Plant automation

The first phase of Reactor operation in Auto mode using Advanced Process Control (APC) philosophy studies was carried out, and a forward action plan and scheme are under preparation. This will help the plant to operate in a steady state and optimize productivity.

Safety

To ensure the safety of the plant, all employees and contractors are continuously informed about the awareness of Near Miss incidents and Unsafe Acts. All our safety observations and "Permit to Work" are completely digitalized. Periodic training using in-house resources and external experts are conducted. General Safety Audit and QRA were conducted by an external Audit Agency. F&G study recommendations are being implemented in a phased manner from FY 2023-24.

Pollution and Environment compliances

Your Company has created all necessary facilities as per the Pollution Control Board's direction and submitted records conforming to the statutory requirements with respect to pollution norms. The Tamil Nadu Pollution Control Board has given their consent for the enhanced productivity of 48,000 MT per year, valid until 31^st March 2028. Similarly, the CTO for the CPP was also renewed until 31^st March 2028.

Research and Development

To augment the growing R&D activities, an additional space has been created for the expansion of R&D.

Around '293.00 lakhs have been spent for R&D in the Financial Year 2023-24 for various research activities and infrastructures to improve Value Addition for Co-products and for new applications. We envision a higher spend on R&D in the comming years to fullfil our growth vision.

Your company's R&D and Product Development teams continue to put in efforts for developing new applications and some of them have been commercialized and started going to market. New facilities are being created to scale up those new applications.

(a) Conservation of Energy :

During FY 2023-24, your company has implemented the Leak Deduction And Repair (LDAR) System to monitor and control Fugitive emissions and installed a Fuelsaving device in the Thermic Fluid Heater to reduce fuel consumption by 4-5%. PRDS in HP steam exchangers was also implemented to improve efficiency. Recycling dilutes the Caustic to an extent of 10% to reduce the Special Consumption. The overall investment cost of the above was around Rs 60 Lakhs and the savings was around Rs 70 Lakhs.

(b) Technology absorption: Nil

(c) Foreign exchange earnings and Outgo:

Dividend

The Board of Directors met on 16^th May 2024 to review the full year performance, various growth opportunities, and also took note of the interim dividend of '0.75 paise per equity share of Rs 10/- each declared during the year and the same was paid to the shareholders within the stipulated time. After reviewing this, the Board of Directors has decided to recommend a final dividend at the rate of 10% i.e., Rs 1.00 (Rupee One only) per equity share of Rs 10/- each for the financial year ended 31^st March 2024. If the dividend is approved by the Members at the ensuing Annual General Meeting to be held on 25^th July 2024, it will be paid on or before 22^nd August 2024 to those Members whose names appear in the Company's Register of Members as at the close of business hours on Thursday, 18^th July 2024. This together with interim dividend of '0.75 paise per share (7.5%) already paid, would aggregate to a total dividend of 17.50 % i.e., Rs 1.75 paise (Rupees one and seventy five paise only) per equity share for the year 2023 - 24.

Share Capital

The paid-up equity share capital as on March 31,2024 was Rs 5,884.64 lakhs. The Company has not issued any shares with differential voting rights nor granted stock options or sweat equity.

Board Meetings

During the year 04 Board Meetings were held, the details of which are given in the Corporate Governance Report. The intervening gap between any two meetings was within the period as prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and MCA Circulars thereon.

Directors and Key Managerial Personnel

Mr. M. Rajavel, (DIN: 08145611) Director is liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr. Arjun B Kothari, (DIN: 07117816) was reappointed as Managing Director with effect from 01^st April 2020 for a period of five years and the Board proposes to reappoint him for another period of five years with effect from 01^st April 2025 subject to approval of shareholders in this Annual General Meeting.

Mr. V. V. SuryaRau (DIN: 00010274) was appointed as an Independent Director w.e.f. 20^th May 2019 for a term of five years and based on the evaluation of his performance and the recommendation of the Nomination and Remuneration Committee, the Board is of the opinion that Mr. V. V. SuryaRau is a person of integrity and possesses relevant expertise and experience including proficiency of the Independent Director and reappointed him for a second term of 5 years as an Independent Director w.e.f. 20^th May 2024 subject to approval of shareholders in this Annual General Meeting (which is within three months from the date of re-appointment) by passing a Special Resolution in accordance with Section 149 (10) read with Schedule IV of the Act and Regulation 17(1C) of the SEBI (LODR) Regulations, 2015.

Mr. M. Rajavel, (DIN: 08145611) was appointed as Whole Time Director on 01^st August 2021 and the Board proposes to re-appoint him for a further period of three years with effect from 01^st August 2024 subject to approval of shareholders in this Annual General Meeting of the Company.

Mr. Arjun B. Kothari, Managing Director, Mr. M. Rajavel, Whole Time Director, Mr. S. Sivamahesh, Chief Financial Officer and Mrs. K. Priya, Company Secretary are the Key Managerial Personnel of the Company as per section 203 of the Companies Act, 2013.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 and Regulation 16 of the SEBI (LODR) Regulations, 2015 that the Independent Directors of the Company continue to meet the criteria of their Independence laid down in Section 149(6) and continue to be included in the Data Bank maintained by the Indian Institute of Corporate Affairs and the online proficiency self-assessment test requirement pursuant to Rule 6(4) of Companies (Appointment and Qualification of Directors) Rules, 2014.

During the year under review, the Independent Directors met on 26^th March 2024 without the presence of Non - Independent Directors and members of the Management to evaluate the peformance of the Non - Independent Directors & Board as a whole.

Composition of Audit Committee

During the year 04 Audit Committee Meetings were held, the details of composition of Audit Committee is provided in Corporate Governance Report of this Annual Report. The Board has not rejected any proposal / recommendations of Audit Committee during the year. The intervening gap between any two meetings was within the period as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management and their remuneration. The salient features of the Remuneration Policy details are stated in the Corporate Governance Report. The Remuneration Policy approved by the Board of Directors is posted on the website of the Company www.kotharipetrochemicals.com

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named "Whistle Blower Policy" to deal withany genuine concerns raised by the Directors / Employees. The details of the Vigil Mechanism / Whistle Blower Policy are explained in the Corporate Governance Report and also posted on the Company's website www.kotharipetrochemicals.com. There were no incidents / concerns reported during the year under review.

Particulars of Loans, Guarantees or Investments

The Company has not given any Loans or Guarantees covered under the provisions of section 186 of the Companies Act, 2013. The details of investments made by the company are given in the notes to the financial statements.

Related Party Transactions

All related party transactions entered into during the financial year were on an arm's length basis and were in the ordinary course of business and there were no ‘material' contracts or arrangement or transactions not at arm's length basis and thus disclosure in form AOC-2 is not required.

All related party transactions are placed before the Audit Committee and the Board for approval. Prior omnibus a

approval of the Audit Committee is obtained for the transactions which are foreseen and repetitive in nature. For all the transactions entered pursuant to the omnibus approval so granted, a statement giving details of all such transactions is placed before the Audit Committee for their review on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is posted on the Company's website www.kotharipetrochemicals.com

Prevention of Insider Trading

The Company has adopted a Code of Prevention of Insider Trading with a view to regulate trading in securities by the Promoters, Directors and Designated Persons of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company's shares by the Promoters, Directors and the designated persons while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed.

Directors' Responsibility Statement

In terms of Section 134(5) of the Companies Act, 2013, the Directors would like to state that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

(b) the directors had 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 and loss of the company for that period;

(c) the directors had 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;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

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

Material changes and commitments

There is no change in the nature of business of the company during the year. There is no material change or commitment affecting the financial position of the company that has occurred since 31^st March 2024 to the date of this report.

Annual Return

As required under Section 92(3), copy of Annual Return is placed on the Company's website.

The web link to access the annual return is https://www.kotharipetrochemicals.com/investors/annual-reports/

a) Statutory Auditor

The Statutory Auditor of the Company M/s. P. Chandrasekar LLP, Chartered Accountants (Registration No.: 000580S/S200066) was reappointed for the second term by the Shareholders at the 33^rd AGM held on 02^nd August 2022 to hold office till the conclusion of the 38^th Annual General Meeting of the Company.

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. There are no qualifications or observations or any adverse remarks made by the Auditors in their Report on the Financial Statements for the year 2023 - 24 and no fraud was reported by auditors under Section 143(12) of the Companies Act, 2013.

b) Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Cost Audit Records are maintained by the Company in respect of its Poly Iso Butylene (PIB) unit which are required to be audited. Your Directors, on the recommendation of the Audit Committee, appointed M/s. P. RajuIyer, M. Pandurangan & Associates, Cost Accountants in practice for conducting the audit of cost records of the Company and the remuneration payable to the Cost Auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s. P. RajuIyer, M. Pandurangan & Associates, Cost Accountant is included in Item No. 4 of the Notice convening this 35^th Annual General Meeting.

c) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mrs. Vasumathy Vasudevan, V. Vasumathy & Associates, Company Secretary in Practice, Chennai as Secretarial Auditor of the Company. The Secretarial Audit Report is forming part of this Annual Report and does not contain any qualifications or observations.

d) Internal Auditor

Pursuant to the provisions of Section 138 of the Companies Act, 2013 and the Companies (Accounts) Rules, 2014, the Company has appointed M/s. R. Subramanian & Co. LLP, Chartered Accountants, Chennai as Internal Auditor of the Company.

Deposits

The Company has not accepted deposits either from members or public falling within the ambit of Chapter V of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014 during the year. There were no outstanding deposits during and end of the financial year 2023 - 2024.

Significant & Material orders passed by the regulators

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.

Internal Control Systems and their Adequacy

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Audit function is carried out by independent firm of Chartered Accountants. The scope and authority of the Internal Audit is defined by the Audit Committee. The Internal Audit Reports are placed before the Audit Committee on quarterly basis for its review and the Internal Auditor attends the Audit Committee meetings.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures of the Company based on the report of internal auditor, the Company undertakes corrective action in their respective areas and thereby strengthens the controls.

Risk Management

Pursuant to the requirement of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has laid down the procedures to inform Board Members about the risk assessment and minimization procedures. Accordingly, the Company periodically submits the Risk Management Report to the Board for their review.

Corporate Social Responsibility Policy

Pursuant to the provisions of Section 135 and schedule VII of the Companies Act, 2013, Corporate Social Responsibility Committee (CSR) was formed to recommend

(a) the policy on Corporate Social Responsibility (CSR) and (b) implementation of the CSR Projects or Programs to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors. The policy on Corporate Social Responsibility as approved by the Board is posted on the Company's website www.kotharipetrochemicals.com. A detailed report on CSR activities in the prescribed format is forming part of this Annual Report.

Annual Performance Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board has carried out the Annual Performance Evaluation of the Board, its committees and of the individual Directors in the questionnaire format prescribed by the Nomination and Remuneration Committee of the Company.

The structured questionnaire covers various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance etc. The performance evaluation of the Directors (without participation of the relevant Director) was carried out by the entire Board. The Directors expressed their satisfaction with the evaluation process.

Disclosure about Cost Audit

Separate Meeting of Independent Directors

The Independent Directors of the Company had met during the year on 26^th March 2024 to review the performance of Non-Independent Directors and the Board as a whole, reviewed the performance of the Chairperson of the Company and also assessed the quality, quantity and time liness of flow of information between the company management and the Board without the presence of the Non-Independent Directors and members of the Management.

Listing with Stock Exchanges

The Company is listed in The National Stock Exchange of India Limited (NSE) and the Stock Code is KOTHARIPET and ISIN: INE720A01015. The Company confirms that it has paid the Annual Listing Fees for the year 2024 - 2025 to NSE where the Company's shares are listed.

Management Discussion and Analysis Report

A detailed discussion on the industry structure as well as on the financial and operational performance is contained in Vthe ‘Management Discussion and Analysis Report' that forms an integral part of this Report.

Disclosure under the Insolvency and Bankruptcy Code, 2016

There was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the financial year.

Corporate Governance and Shareholders Information

Your Company has taken adequate steps to adhere to all the stipulations laid down in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A report on Corporate Governance forms part of this Annual Report. Certificate from the Practising Company Secretary confirming the compliance with the conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this report

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013

The Human Resources Department created an "Internal Complaints Committee" for the prevention and redressal of sexual harassment of women at workplace as per the requirement of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013. There were no incidents of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Company (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided elsewhere in the Annual Report.

Particulars pursuant to Section 197(12) and the relevant Rules

(a) The ratio of the remuneration of each director to the median employee's remuneration for the financial year and such other details: Except Mr.Arjun B.Kothari, Managing Director and Mr.M.Rajavel, Whole Time Director of the Company, no director was in receipt of remuneration except sitting fees.

(b) The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

(c) No increase was reported in the median remuneration of employees in the financial year 2023 - 2024.

(d) The number of permanent employees on the rolls of company as on 31^st Mar 2024:177

(e) Increase of remuneration for employees varies between 6% to 20% and for KMP, the increase in remuneration was 12% for the year.

(f) We affirm that the remuneration paid during the period under review, is as per the Remuneration Policy of the company.

Compliance with Secretarial Standards

The Company complies with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion and Analysis as describing the Company's objectives, projections, estimates and expectations may constitute ‘forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ from those either expressed or implied in the statement depending on the circumstances.

Acknowledgement

Your Directors thank the Banks, Customers, Financial Institutions, Government Authorities, Suppliers and Shareholders for their continued support. Your directors also place on record their appreciation for the services by the employees of the Company.