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Updated:12 Dec, 2019, 15:58 PM IST

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Updated:12 Dec, 2019, 16:01 PM IST


Dear Members,

Your Directors are pleased to present the 23rd Annual Report and the Audited Financial Statements of Accounts for the financial year ended 31st March, 2016.

State of Affairs

Your Company is engaged in research, development, manufacturing, commercializing, and marketing of specialty chemicals and blends which are used in a wide array of food, feed, animal and pet nutrition and industrial products. Our business is categorised into three key verticals namely:

i) Shelf–life Extension Solutions; (ii) Aroma Ingredients; and (iii) Performance Chemicals. We have recently added animal nutrition products to our portfolio pursuant to our recent acquisition of 65% stake in Dresen Quimica SAPI De CV, Mexico (Dresen) and going forward we expect this to complement our Shelf–life Extension Solutions portfolio. We market our products globally including in Europe, Asia Pacific, India, South and Central America and North America.

Shelf–life Extension Solutions include a range of antioxidant solutions used to increase the shelf life of oils and fats, which in turn is used in processed food products like bakery, confectionery, fried snack foods, dairy, animal feed and pet food. We also manufacture antioxidant blends ("Blending Business"), which we market under brands "Xtendra" and "NaSure".

Aroma Ingredients vertical primarily includes production of Vanillin and Ethyl Vanillin ("Vanillin Products") which are marketed under the brands "Vanesse" and "Evanil." The key raw materials used to manufacture Vanillin Products are Guaiacol and Guethol, respectively, which in turn are derived from Catechol. Vanillin Products are used to give food and beverages a flavour of vanilla, to enhance other flavours or to mask unwanted flavours and are used in food, flavour and fragrance, incense sticks, pharma and cattle feed segments.

Performance Chemicals vertical includes production of amongst others, Guaiacum, Veratrole, TBC and MEHQ, which are derivatives of either Catecholor Hydroquinone and have wide application in sectors such as food flavoring, pharmaceuticals intermediate, agrochemicals, dyes and pigments and fragrance industry.

Dresen manufactures and markets a range of animal nutrition products, antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitor.


During the year under the review, the Company has transferred Rs. 130.00 Lacs to the General Reserve from the amounts available for appropriation.


Your Directors are pleased to recommend payment of dividend at the rate of Rs. 0.45 per equity share (i.e. 45%).

The Company had transferred a sum of Rs. 0.99 Lacs during the financial year to the Investor Education and Protection Fund established by the Central Government. The said amount represents Unclaimed Dividend for the financia year 2007–2008 with the Company for a period of 7 years from the due date of payment.

Employee Stock Option Scheme

During the year under review, the Company allotted 7,77,700 Equity Shares of Rs. 1/– each upon exercise of stock options by the eligible Employees/Directors under the Employee Stock Option Schemes of 2008, 2012 and 2014 respectively.

The applicable disclosure as stipulated under SEBI Regulations as at 31st March, 2016 is given in "Annexure A" to this report.


During the year under review, your Company neither accepted nor renewed any fixed deposits falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014. The total unclaimed Fixed Deposits as on 31st March, 2016 were Rs. 4.00 Lacs.


The Company has the following overseas subsidiaries (including step down subsidiaries) as on 31st March, 2016:

• CFCL Mauritius Private Limited

A 100% owned subsidiary of the Company incorporated for acquisition of CFS Europe S.p.A. in Italy.

• CFS Europe S.p.A.

A step down 100% owned subsidiary of the Company engaged in manufacture and sale of key raw materials required by the Company.

• CFS do Brasil Indûstria, Comércio, Importaçâo e Exportaçâo de Aditivos Alimentfcios Ltda.

A 100% owned subsidiary in Brazilto manufacture and market customized blends to cater to the Latin American market. Besides, it also handles distribution of bulk antioxidants and vanillin.

• Solentus North America Inc.

A 100% owned subsidiary in Canada engaged in sales, marketing and distribution of antioxidants, food ingredients, blends, formulations etc. in USA and Canada.

• CFS North America LLC

A 100% owned subsidiary in USA engaged in sales, marketing and distribution of antioxidants, food ingredients, blends, formulations etc. in North America.

• CFS Antioxidantes De Mexico SA De C.V.

A 100% owned subsidiary of the Company incorporated for acquisition of Dresen Quimica SAPI De C.V. in Mexico.

On 15th April, 2016, a 100% owned subsidiary CFS International Trading (Shanghai) Ltd. was incorporated in China (shanghai) pilot free trade zone to manufacture and deal in specialty chemicals.

On 04th May, 2016, our subsidiary CFS Antioxidantes De Mexico S.A. De C.V., Mexico acquired 65% stake in Dresen Quimica SAPI De C.V., Mexico along with its group companies viz. Industrias Petrotec De Mexico, S.A. de C.V., Mexico; Nuvel, S.A.C., Peru; Britec, S.A., Guatemala, Inovel, S.A.S., Colombia and Grinel, S.A., Dominican Republic.

The statement containing the salient features of Company's Subsidiaries and Associate Companies under the first proviso of section 129(3) forms the part of the financial statements.

As decided by the Board of Directors at its meeting held on 23rd May, 2016 the copies of Audited Financial Statements of the Subsidiaries have not been attached to the Annual Accounts of the Company. These documents will, however, be made available upon request by any member of the Company and also shall be available for inspection at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting.

The Policy for Determining Material Subsidiaries is disclosed on the Company's website and the weblink for the same is <>.


As the present term of appointment of Mr. Dattatraya R. Puranik, Executive Director & Chief Financial Officer, ends on 31st July, 2016, resolution for renewal of his appointment for the period 01st August, 2016 to 31st July, 2019 is being placed before the members for approval at the ensuing General Meeting.

Mr. Ajit S. Deshmukh and Mr. NirmalV. Momaya are retiring by rotation and being eligible offer themselves for re–appointment. You are requested to re–appoint them.

Mr. Atul R. Pradhan and Mr. Nicola A. Paglietti are being re–appointed as the Independent Directors of the Company from the ensuing Annual General Meeting for a term of 5 years. You are requested to re–appoint them.

As required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR 2015), particulars of Directors seeking reappointment at the ensuing Annual General Meeting have been given under Corporate Governance Report.

None of the Directors are disqualified from being appointed as Directors, as specified in Section 164 of the Companies  Act, 2013.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013.

The details of familiarisation programmes held for the directors are disclosed on the Company's website and the weblink for the same is <>.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and other Committees.

The board's performance for the current year was assessed on the basis of participation of directors, quality of information provided/available, quality of discussion and contribution etc. A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering the aforesaid aspects of the Board's functioning. The overall performance of the Board and Committee's of the Board was found satisfactory.

The overall performance of Chairman, Executive Directors and the Non–executive Directors of the Company is satisfactory. The review of performance was based on the criteria of performance, knowledge, analysis, quality of decision making etc.

Nomination and Remuneration Policy and Evaluation criteria of Independent Directors

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration and evaluation criteria for performance evaluation of Independent Directors. The Nomination and Remuneration Policy and evaluation criteria of Independent Directors have been provided under Corporate Governance Report.

Details in respect of adequacy of internal financial controls with reference to the Financial Statements

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Interna Auditor reports to the Chairman of the Audit Committee of the Board.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of statutory auditor and the internal auditor, corrective actions are undertaken in the respective areas and thereby strengthening the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Directors' Responsibility Statement

Pursuant to the requirement u/s 134(3)(c) of the Companies Act, 2013 (the "Act") with respect to Directors' Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) 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 ended 31st March, 2016 and of the profit and loss of the Company for the year ended on that date;

(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

(e) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

(f) 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.

Meeting of Board and Committees of Directors

During the year 5 (five) Board Meetings and 5 (five) Audit Committee Meetings were convened and held. The details of the same along with other Committee's of Board are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

Approval of resolutions through Postal Ballot

During the year under review, the Company has sought approval of the Members for amending main objects and other objects clause of Memorandum of Association, issue of securities upto Rs. 150 crores, increase in authorized share capital and alteration of capital clause in Memorandum and Articles of Association of the Company. The results of the postal ballot were declared on 04th December, 2015. All the resolutions were passed with requisite majority.


M/s. B. K. Khare and Co., Chartered Accountants (FR No. 105102W), retire as Statutory Auditors at the conclusion of the ensuing Annual General Meeting and are eligible for re–appointment. The Company has received a letter from the retiring Auditors to the effect that their appointment as Statutory Auditors, if made, would be within the limits prescribed u/s 141 of the Companies Act, 2013.

Members are requested to consider and re–appoint M/s. B. K. Khare and Co., Chartered Accountants, as the Statutory Auditors of the Company from the ensuing Annual General Meeting till the conclusion of next Annual General Meeting.

Auditors' Report

The observations made in the Auditors' Report are self–explanatory and do not call for any further comments u/s 134(3)(f) of the Companies Act, 2013.

Reporting of Frauds

There have been no instances of fraud reported by the statutory auditors under Section 143(12) of the Act and Rules framed there under either to the Company or to the Central Government.

Secretarial Audit

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 Messrs J. H. Ranade & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as "Annexure B". The findings of the Secretarial Audit were entirely satisfactory.

Cost Audit

As per the Companies (Cost Records and Audit) Rules, 2014, the requirement for cost audit is not applicable to a Company whose revenue from exports, in foreign exchange, exceeds seventy–five per cent of its total revenue.

Since, the Company's revenue from exports, in foreign exchange, exceeds seventy–five per cent of its total revenue, Cost Audit is not applicable to the Company.

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, will be provided upon request. In terms of Section 136 of the Act, the Report and Financial Statements are being sent to the members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary in this regard.

Corporate Social Responsibility (CSR)

Company operates CSR Policy in the areas of promoting healthcare, education including special education and employment enhancing vocation skills especially among children, the differently abled, tribal communities and measures for reducing inequalities faced by socially and economically backward classes.

The projects identified and adopted are as per the activities included and amended from time to time in Schedule VII of the Companies Act, 2013. The Company endeavors to make CSR a key business process for sustainable development and welfare of the needy sections of the society.

During the Financial Year 2015–16, the Company has spent entire amount of Rs. 63.57 Lacs towards CSR activities through various trusts and NGO's operating in the said areas.

The Annual Report on CSR activities forming part of this Board's report is annexed herewith as "Annexure–C".

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The objective of the Policy is to explain and encourage the directors and employees to raise any concern about the Company's operations and working environment, including possible breaches of Company's policies and standards or values or any laws within the country or elsewhere, without fear of adverse managerial action being taken against such employees.

The Whistle Blower Policy is disclosed on the Company's website and the web link for the same is <http://www>. <>.

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 to the Financial Statements.

Related Party Transactions

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. There are no materially significant related party transactions made by the Company with Promoters, Directors, and Key Managerial Personnel which may have a potential conflict with the interest of the Company at large. Accordingly, the disclosure of related Party Transactions as required under Section 134 (3) (h) of the Companies Act 2013 in form AOC–2 is not applicable to your Company.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website and the weblink for the same is <>.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

As required by the Companies (Accounts) Rules, 2014, the relevant information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgoings respectively, is given in the "Annexure–D" to this report.

Risk Management Policy

The Company is aware of the risks associated with the business. It regularly analyses and takes corrective actions for managing / mitigating the same.

Your Company has institutionalized the process for identifying, minimizing and mitigating risks which is periodically reviewed. Some of the risks identified and been acted upon by your Company are: Securing critical resources; ensuring sustainable plant operations; ensuring cost competitiveness including logistics; completion of CAPEX; maintaining and enhancing customer service standards and resolving environmental and safety related issues.

Significant and Material Orders passed by the Regulators/Courts, if any

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

Sexual Harassment of Women at Workplace:

The Company is an equal opportunity employer and consciously strives to build a work culture that promotes dignity of all employees. During the year under review, no case of sexual harassment was reported.

Corporate Governance

As required under SEBI LODR 2015, a detailed Report on Corporate Governance is given as a part of Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Certificate of the compliance with Corporate Governance requirements by the Company issued by the Practicing Company Secretaries is attached to the Report on Corporate Governance.

Management Discussion and Analysis

A 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 a part of this report.

Extract of the annual return

Pursuant to section 92(3) of the Companies Act, 2013, the extract of the annual return in Form No. MGT – 9 forms part of this Board's report and is enclosed as "Annexure– E".


The Board wishes to place on record its appreciation of sincere efforts put in by the employees of the Company, in helping it reach its current growth levels. Your Directors place on record their appreciation for the support and assistance received from the investors, customers, vendors, bankers, financialinstitutions, business associates, regulatory and governmental authorities.

For & On behalf of the Board

Ashish S. Dandekar

Executive Director & Chief Financial Officer

Dattatraya R. Puranik

Managing Director

Place : Mumba'

Dated : 23rd May, 2016